Viewing cable 06VILNIUS962
Title: LITHUANIAN REFINERY FIRE LOOKS LIKE ACCIDENT

IdentifierCreatedReleasedClassificationOrigin
06VILNIUS9622006-10-20 14:06:00 2011-08-30 01:44:00 CONFIDENTIAL Embassy Vilnius
VZCZCXRO5838
OO RUEHDBU RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHVL #0962/01 2931406
ZNY CCCCC ZZH
O 201406Z OCT 06
FM AMEMBASSY VILNIUS
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0695
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RHMFISS/DEPT OF ENERGY 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 000962 
 
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: 10/19/2016 
TAGS: ENRG EPET PREL LH RS PL
SUBJECT: LITHUANIAN REFINERY FIRE LOOKS LIKE ACCIDENT 
 
REF: VILNIUS 944 AND PREVIOUS 
 
Classified By: POL/ECON Section Chief Rebecca Dunham for reasons 1.4 (b 
) and (d) 
 
¶1. (C) Summary:  There is no evidence yet to suggest that the 
October 12 fire at Lithuania's oil refinery was anything 
other than an unfortunate accident.  Five different 
investigations into the blaze continue.  The fire will delay 
finalization of the purchase of the refinery by Poland's PKN 
Orlen, probably until January.  PKN will also likely re-open 
its negotiations over both price and closing date with Yukos 
International, the majority shareholder of the refinery. 
While no physical evidence yet suggests that the fire was a 
deliberate act of sabotage, investigators have also not ruled 
it out.  End Summary. 
 
Fire looks like an accident, at least for now 
--------------------------------------------- 
 
¶2. (C) Saulius Specius, adviser to the Prime Minister on 
economic and energy issues, told us on October 20 that the 
October 12 fire at Lithuania's Mazeikiu Nafta (MN) oil 
refinery appears to have been accidental, although at least 
five separate investigations are still evaluating the 
evidence.  Those carrying out investigations include the 
Interior Minister; the local prosecutor; the fire department; 
the GOL Energy Agency; and MN itself.  Specius said that the 
Interior Ministry's investigation would conclude on December 
1, and the others would likely conclude by mid-November. 
 
¶3. (C) Nerijus Eidukevicius, chair of MN's Board of 
Directors, told us on October 20 that the investigations had 
so far not turned up anything to suggest that the fire was 
the result of deliberate sabotage.  He admitted that the 
timing of the accident, so close to the potential 
finalization of the deal to sell MN to Poland's PKN Orlen, 
was unfortunate, but that these kinds of accidents sometimes 
happen at refineries, especially those with 20- year-old 
equipment. 
 
¶4. (C) MN's General Director (and Amcit) Nelson English told 
us in an October 20 telephone call that his investigation 
continued, but had so far not turned up a "smoking gun" that 
suggested deliberate sabotage. 
 
PKN's purchase postponed 
------------------------ 
 
¶5. (C) Specius told us that the fire would postpone the 
closing of PKN's deal to purchase MN, previously set for 
November or December, most likely until January.  (Prior to 
the fire, the biggest hurdle for the deal was believed to be 
gaining the approval of EU competition authorities, which 
Specius expects to happen in early November.)  He said that 
the fire actually gave PKN a legal reason to get out of the 
deal if it wanted to -- on the grounds that Yukos did not 
meet its obligation to maintain the value of the asset as 
required by the terms of the contract.  That said, he 
believes that PKN still wants to go through with its purchase 
of MN.  Specius, who said he has daily telephone 
conversations with PKN's chair Igor Chalupec, said that he 
was sympathetic to PKN's desire to learn more about the 
causes of the fire, its effects on MN's production capacity, 
and how much compensation MN's insurers will pay for the 
damage before completing the purchase, and that this delay 
made good business sense for PKN. 
 
¶6. (C) Specius said that PKN would almost certainly 
renegotiate the terms of the purchase with Yukos 
International, MN's majority shareholder.  This negotiation 
will probably involve the price that PKN will pay for Yukos's 
shares and the closing date -- under the current contract, 
PKN is required to finalize it purchase of Yukos's MN shares 
by December 31.  Specius emphasized that PKN's negotiations 
with Yukos would not affect the price that PKN will pay for 
the GOL's MN shares.  He said that the GOL's agreement with 
PKN precludes the possibility of PKN paying any less for the 
GOL's shares than it agreed to pay last May.  He also said 
that the GOL's arrangement with PKN already allows for a 
closing date as late as March 31.  Specius said that the 
GOL's focus right now is on facilitating a constructive 
 
VILNIUS 00000962  002 OF 002 
 
 
discussion between PKN and Yukos International so that they 
reach mutually agreeable terms. 
 
Thwarted MN coup plot? 
---------------------- 
 
¶7. (C) MN's Board of Directors will meet on October 21. 
English told us that he had apparently disrupted an attempt 
by some of the Yukos-appointed Board members to oust him as 
MN's general manager.  He said that he learned earlier this 
week that the Yukos Board members planned to introduce 
English's ouster as a surprise agenda item during the October 
21 meeting.  English said that he then sought the support of 
Yukos shareholders and PKN, who both weighed in heavily in 
his support, apparently forcing the Yukos Board members to 
promise not to raise this issue during the meeting. 
 
¶8. (C) Specius told us that he had also heard about this 
"attempted coup," and said that it was not entirely clear who 
was influencing the Yukos-appointed Board members.  He said 
that they seemed to be freelancing, rather than responding to 
the will of the shareholders, and that it was difficult to 
understand their behavior.  He also said that he found their 
attempt to oust English "very troubling." 
 
¶9. (C) Eidukevicius, one of the three GOL-appointed directors 
on MN's Board, skillfully avoided discussing this issue with 
us directly, but said that he expected an "energetic" meeting 
on October 21. 
 
Comment 
------- 
 
¶10. (C) Prior to the fire, we passed messages to both the 
President's and Prime Minister's offices encouraging the GOL 
to ensure the physical security of MN and its management.  We 
also warned these offices about possible attempts to 
undermine MN's management (particularly Nelson English) 
through slander or trumped-up legal charges.  The fire may 
well turn out to be a simple industrial accident; no physical 
evidence yet uncovered suggests otherwise.  The fact that the 
blaze occurred within a few weeks of the planned finalization 
of PKN's purchase of the refinery, however, coupled with the 
June "accident" that cut off MN's piped crude supply and the 
vague but serious-sounding threats we've heard against MN and 
its management, suggest that there may be more at work here 
than mere coincidence. 
KELLY