Viewing cable 06VILNIUS1111
Title: SALE OF LITHUANIA'S REFINERY NEARS COMPLETION

IdentifierCreatedReleasedClassificationOrigin
06VILNIUS11112006-12-14 14:18:00 2011-08-30 01:44:00 CONFIDENTIAL Embassy Vilnius
VZCZCXRO5323
PP RUEHAG RUEHROV
DE RUEHVL #1111/01 3481418
ZNY CCCCC ZZH
P 141418Z DEC 06
FM AMEMBASSY VILNIUS
TO RUEHC/SECSTATE WASHDC PRIORITY 0862
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUEHCV/AMEMBASSY CARACAS PRIORITY 0026
RHMFISS/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RHEHNSC/NATIONAL SECURITY COUNCIL WASHINGTON DC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 02 VILNIUS 001111 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EUR/NB, EUR/NCE, EB/ESC 
STATE PLEASE PASS TO FEDERAL TRADE COMMISSION 
DOE FOR HARBERT 
DOC FOR 4231/IEP/EUR/BOHIGIAN 
NSC FOR GRAHAM, MCKIBBEN AND COEN 
TREASURY FOR LOWERY, LEE AND COX 
 
E.O. 12958: DECL: 12/13/2021 
TAGS: ENRG EPET PREL LH RS PL VE NL
SUBJECT: SALE OF LITHUANIA'S REFINERY NEARS COMPLETION 
 
REF: VILNIUS 1017 AND PREVIOUS 
 
Classified By: Political/Economic Chief Rebecca Dunham for reasons 1.4 
(b) and (d) 
 
¶1. (C) Summary: The official closing of the sale of 
Lithuania's Mazeikiu Nafta (MN) oil refinery to Poland's PKN 
Orlen should occur on December 15.  The GOL will receive 
nearly USD 852 million and Yukos International USD 1.5 
billion for its majority stake.  MN will also fire six 
high-level managers accused of embezzlement and other 
malfeasance just before the closing.  End summary. 
 
The light at the end of the tunnel 
---------------------------------- 
 
¶2. (U) The sale of MN, a drama that has stretched for more 
than 20 months, should reach its conclusion on December 15, 
when the Polish oil company PKN Orlen buys Yukos 
International's entire majority stake in MN (53.7 percent of 
MN's shares) and most of the GOL's shares (30.7 percent). 
The GOL will retain a 10 percent stake in MN.  According to 
press reports, the GOL will receive USD 851.8 million.  PKN 
will transfer USD 1.49 billion to bailiffs of the Dutch 
courts, where Yukos International is involved in a bankruptcy 
case. 
 
Management shakeup at MN 
------------------------ 
 
¶3. (C) MN's Amcit General Director Nelson English told us on 
December 12 that he plans to fire six of his Lithuanian 
deputies at 14:30 (local) on December 14.  English said that 
he has long wanted to fire these individuals because of their 
malfeasance, but was unable to get concurrence from Yukos 
International.  English said that Yukos International 
executives told him that firing these executives could create 
unnecessary complications and uncertainty for the deal with 
PKN and could possibly even threaten English's personal 
security. 
 
¶4. (C) English said that both he and PKN's head of Upstream 
and Crude Procurement Cezary Filipowicz wanted to wait for a 
month or two before firing these executives so that PKN's 
team would have enough time to get comfortable at MN before a 
major personnel change.  PKN President and CEO Igor Chalupec, 
however, wanted these individuals gone as soon as possible, 
according to English.  The main risk with firing these six on 
December 14, said English, is that the January supply 
contracts will not be ready for signing before December 18, 
which will not leave much time for their replacements to get 
up to speed so that they can complete the contracts. 
 
¶5. (C) English has complained repeatedly to us over the last 
several months about these individuals, particularly Redas 
Kristanavicius, MN's Deputy General Director for Logistics of 
Crude Oil and Petroleum Products.  English said that he 
suspects Kristanavicius of malfeasance that, he believes, 
benefits Russian energy interests.  As circumstantial 
evidence of Kristanavicius' improper connections, he claimed 
that Kristanavicius has recently been in direct contact with 
Vladimir Yakunin, head of Russia's Railway Company. 
 
Still looking for Venezuelan supplies 
------------------------------------- 
 
¶6. (C) English said that Venezuela's recent presidential 
election and related political intrigue had delayed his 
hoped-for deal to secure supplies of crude from Venezuela. 
He would keep working on the deal, he said, because the 
anticipated price makes that crude extremely advantageous for 
MN. 
 
Comment 
------- 
 
¶7. (C) Finally, the end of the long process to sell MN is in 
sight.  Putting MN into the growing PKN empire may reduce 
some of MN's vulnerability to supply disruptions, but it is 
not a panacea.  With its supply pipeline from Russia cut off 
 
VILNIUS 00001111  002 OF 002 
 
 
indefinitely, the bulk of MN's crude still needs to come via 
its Baltic Sea terminal at Butinge.  This terminal relies on 
a solitary single-point mooring (SPM) buoy to offload 
tankers.  An accident or bad winter weather could easily 
render the buoy inaccessible.  PKN's ownership of the 
refinery will do nothing to change this vulnerability. 
 
¶8. (C) The deal may herald the beginning of a new era in 
Polish-Lithuanian cooperation, especially on energy issues. 
In the wake of PKN's announcement in May that it would 
purchase MN, Vilnius and Warsaw made important progress on 
long-dormant plans to connect their electrical grids.  The 
two countries have also reached a political agreement (along 
with Latvia and Estonia) to cooperate in the construction of 
a new nuclear reactor in Lithuania. 
CLOUD