Strategic Analysis: Russian Business Activity in Lithuania (Abstract)

An estimated 90% of Lithuanias imports from Russia consist of the supply of energy (imports that account for 46% of the countrys electricity, 98% of the countrys crude oil and, prior to the recent arrival of the floating LNG terminal, 100% of the countrys natural gas). That said, Lithuania has been one of the most compelling success stories over the past five years with regard to demonstrating the speed and efficiency with which a country can withdraw itself from energy dependency on another country, when politically committed to doing so.

Vilnius moved forward on its own to bring a floating LNG terminal to its port at Klaipda to diversify the countrys supply away from its current dependency on Russian gas. Notably, however the Klaipda terminal involves the Baltic states also leveraging Latvias Inukalns Underground Gas Storage Facility, which continues to be owned and controlled by Russian state-owned enterprises. The facility permits these countries to store their gas needs over time and avoid having to purchase all of their gas during the winter season, which would drive up costs and possibly lead to shortages.

Although Russia is Lithuanias largest single trading partner, its portion of the countrys FDI is far less significant. In 2013, Finland supplanted Russia as the eighth biggest investor in Lithuania, with total Russian FDI of 518 million, putting Russia fairly low down the list of investors. Given the governments openly circumspect view of Russian investment and other activities in the country, it is not surprising that such investment would be somewhat modest.


Excerpted Deals and Transactions:

  • Russia has used the tactic of denying border crossings to commercial and other vehicles emanating from Lithuania on several occasions (similar to what occurred in August 2013 on the Ukrainian-Russia border in the run-up to the annexation of Crimea). Trucks have been blocked from crossing the border in 2009, 2013 and 2014.
  • In 2006, Lithuania moved to privatize its Orlen Lietuva oil refinery, originally built in the Soviet era to receive oil via the Druzhba pipeline. When Lithuania sold the refinery to Polish company, PKN Orlen, instead of Transneft (or some other Russian entity), Russia retaliated by cutting the flow of oil through the pipeline to the refinery. The refinery has been unprofitable ever since, relying on more expensive oil shipped in to be processed and exported. PKN Orlen reportedly wishes to sell the refinery, while Russia clearly has attached a de facto veto authority over its use by entities it deems unfriendly (which likely means any entity that is not Russian).
  • It is increasingly believed that Russia had a hand in pushing Lithuanians away from pursuing the joint $6.1 billion Visaginas nuclear power plant project, which it has principally accomplished by mobilizing and funding artificial environmental opposition and exploring construction of its own nuclear power plant for the region in neighboring Kaliningrad.
  • In March 2014, it was reported that Russia was instructing certain Western suppliers of goods not to ship through the Lithuanian port of Klaipda (the location of the floating LNG terminal that became operational in December 2014). Moscow reportedly waged a quiet campaign to force its state-owned enterprises to refuse delivery of imports via that port.