Former US Ambassador Keith C. Smith: No one wanted Mažeikių Nafta and Russians tried to take it for free

We asked the ambassador what, if it had been up to him, he would have done with Mažeikių Nafta.

“I don’t think there was an alternative, because every other company that was approached turned it down,” says Keith C. Smith when asked what he would had done with Mažeikių Nafta, had it been up to him.

“The Italians were approached on Mažeikių Nafta, BP from Britain was approached. Nobody really wanted it because it was an old refinery that required a lot of modernization.”

Back in the 1990s, when Lithuania was selling off state-owned industry assets as part of its transition from centralized economy to free market, Mažeikių Nafta was deemed a company of strategic importance and the government was particularly cautious about who should own it. The main concern was that it did not fall into the hands of Russia.

However, the Russians were the only ones interested in the Lithuanian refinery, recalls the former ambassador. “Ant they wanted it for free.”

“One Russian official told me: We built it, it was ours and it doesn’t belong to Lithuania, it belongs to Russia,” Ambassador Smith says. “But I disagreed with that point of view.”

Eventually, Mažeikių Nafta was sold to the American company Williams in 1999, a deal that did not go down without controversy. The then Prime Minister of Lithuania, Rolandas Paksas, resigned over the sale.

Unfortunately, the refinery did not stay in the American hands for long, as had been Lithuania’s intention. Williams, pressed by financial difficulties, sold it to Russian Yukos several years later.

Founded by the oligarch Mikhail Khodorkovsky, it was considered one of the most transparent Russian companies at the time. However, the Lithuanian government felt cheated by Williams and was very uncomfortable about having Mažeikių Nafta owned by a Russian, albeit private, company.

Indeed, the Lithuanian refinery narrowly escaped being taken over by the Kremlin. In 2003, Khodorkovsky, an active supporter of Moscow’s political opposition, ran afoul with the Russian authorities and was made to pay billions in taxes.

Yukos sold Mažeikių Nafta to Poland’s PKN Orlen just before being declared bankrupt and having its remaining assets divided up by Russian state-owned oil companies.