Russia Pressures Latvia to Gain Control Over Oil Transit

The Russian government has ordered state-owned Transneft to halt exporting oil through the Latvian port of Ventspils, reports RFE News Service (1/10/03). Ventspils is the biggest oil terminal in the Baltic countries. The Latvian port will largely be without crude oil at least for first quarter of 2003.

Analysts say Russia is putting pressure on Latvia on the eve of the privatization of Ventspils Nafta, the company that owns the port’s oil terminal. Nicholas Redman of the Economist Intelligence Unit in London told RFE/RL that Russia is putting political pressure on Latvia: “I think it’s quite ironic that in the year that Latvia received the NATO invitation, [we] see fairly naked economic-political pressure from Russia. But look at the motive here. The motive is to gain control of Ventspils Nafta and with it, the pipeline running between Russia and Latvia.”

According to a New York Times article (1/16/03), quoting Latvian officials and executives, Moscow wants to replace its lost military control over Latvia with a new energy-based economic control. “Russia has started to understand that they can influence many things in business life, and one of those things is the oil business,” Ainars Slesers, Deputy Prime Minister for Economic Affairs told the NYT reporter. “They are willing to accept losses just to show who the real decision maker is.”

Dr. Taras Kuzion writing in Jane’s Intellingence Digest (20/12/02) notes that threats to halt supplies means the oil refineries either go into liquidation or are forced to accept Russian control. Russia’s main targets have been oil refineries in Lithuania and Latvia. In Lithuania Gazprom has pressured the authorities to agree to it taking a 34 percent share in the privatized Lietuvos Dujos gas company. Gazprom is also purchasing the Kaunas thermal nuclear plant while United Energy Systems is bidding for control over Lithuania’s electricity distribution grids.

Latvia’s Foreign Minister Sandra Kalniete has complained about the Russian boycott to the European Union and is considering filing a complaint with the World Trade Organization of which Latvia is a member (AFP 1/21/03).

In a letter to the EU’s External Affairs Commissioner Chris Patten, the Foreign Minister expressed her concerns about the possibility that the Russian Federation may be exercising undue political influence on decisions regarding the transit of energy resources from Russia through Latvia’s ports. “In our view it is incompatible with Russia’s aspirations to become a member of WTO, Ms. Kalniete said in the letter. She reaffirmed Latvia’s wish to resolve these issues jointly with the EU and to become actively involved in the EU-Russia energy dialogue, which could serve to facilitate cooperation among all countries of Northern Europe.

“Russia is taking its last chance to get influence, to be in control,” said Guntis Krasts, former Prime Minister and Chairman of the European Affairs Committee in Latvia’s Parliament.