Identifier
Created
Classification
Origin
05VILNIUS1190
2005-11-04 14:39:00
CONFIDENTIAL
Embassy Vilnius
Cable title:  

LITHUANIA'S PM FACES CHALLENGE TO HIS INTEGRITY

Tags:  PGOV PREL LH 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L SECTION 01 OF 02 VILNIUS 001190 

SIPDIS

STATE FOR EUR/NB

E.O. 12958: DECL: 11/03/2015
TAGS: PGOV PREL LH
SUBJECT: LITHUANIA'S PM FACES CHALLENGE TO HIS INTEGRITY
AND TO HIS CONTROL


Classified By: Pol/Econ Officer Gregory L. Bernsteen for reasons 1.4(b)
and (d)

-------
SUMMARY
-------

C O N F I D E N T I A L SECTION 01 OF 02 VILNIUS 001190

SIPDIS

STATE FOR EUR/NB

E.O. 12958: DECL: 11/03/2015
TAGS: PGOV PREL LH
SUBJECT: LITHUANIA'S PM FACES CHALLENGE TO HIS INTEGRITY
AND TO HIS CONTROL


Classified By: Pol/Econ Officer Gregory L. Bernsteen for reasons 1.4(b)
and (d)

--------------
SUMMARY
--------------


1. (C) Allegations that Prime Minister Brazauskas's wife
benefited from a sweetheart deal with Russian oil giant
Lukoil are prompting new strains in Lithuania's ruling
coalition. Coalition leaders reined in an anti-Brazauskas
movement November 2, but confrontation is brewing with the
opposition over whether to investigate the charges.
Brazauskas threatens to resign if such an investigation goes
forward. The controversy takes place on the eve of
politically charged negotiations to transfer the Mazeikiu
Nafta oil refinery -- Lithuania's largest industrial
enterprise -- from Yukos to a new investor. Brazauskas has
significantly distanced himself from Lukoil in the
pre-negotiation jockeying, but widespread suspicion that he
secretly supports its interests remains. The coalition will

SIPDIS
survive for at least the short term. But Brazauskas's
curious volatility on the scandal -- he unsuccessfully
threatened the leader of the opposition with criminal charges
for raising it -- has aroused a sense of vulnerability that
will likely provoke continuing assaults on the coalition from
without and within. END SUMMARY.

-------------- --
The "old man" of Lithuanian politics under fire
-------------- --


2. (U) Charges emerged in late September that Brazauskas's
wife in 2004 had purchased a 38 percent share in Vilnius's
Crown Plaza Hotel, in which she already had a controlling
interest, on ridiculously favorable terms from an investor
linked to Lukoil. Mrs. Brazauskas's growing ownership of the
hotel since its privatization early in the decade and her
marriage to the Prime Minister in 2002 had long been the
subject of jokes and intrigue on the Vilnius political scene.
Opposition Conservative Party leaders cited the latest
charges as evidence that the Brazauskas family is secretly
tied to Lukoil's interests, even as the firm jockeys to
acquire the Mazeikiu Nafta refinery. The Conservatives
demanded a parliamentary ethics investigation and quickly won
the 36 necessary signatures that the rules of parliamentary

procedure required to launch such an investigation.


3. (U) Brazauskas responded defiantly on October 19 that he
would refuse to cooperate with such a commission, and later
went on to say that he would resign if the Parliament
launched the investigation. Upping the ante even further, he
called on Lithuania's Prosecutor General to charge the three
Conservative members of Parliament who launched the drive for
an investigation with criminal slander. When the Prosecutor
General refused, Brazauskas then initiated civil suits
against his opponents.


4. (U) Smelling blood, other members of the coalition began
to pile on. Labor Party leader Viktor Uspaskich, who rarely
criticizes his coalition partners, even after a parliamentary
commission forced him to resign from Government and the
parliament, suggested on October 28 the PM follow through
with his threat to step down. He said such a step would
dissolve the coalition agreement and open up the premiership
to others. Members of other coalition parties also began
questioning the PM family's business dealings and signaled
they would support an investigation.

--------------
Mending fences and shoring up fortresses
--------------


5. (U) Brazauskas convened a special meeting of the
four-party coalition council November 2 to restore
discipline. Brazauskas's supporters argued that the goals of
the proposed commission are political and have nothing to do
with government work; that the business affairs of his wife
of only three years have nothing to do with the PM; and that
establishing a commission was a vote of no-confidence and
will obstruct the business of Government. Coalition leaders,
including Uspaskich, renewed their support for the
coalition's continuation with Brazauskas as Prime Minister
and vowed to defeat a motion to form the commission when it
comes to a vote November 8.

--------------
Confrontation Brewing
--------------


6. (U) Opposition leaders and Parliamentary Ethics
Commission Chairman Algirdas Monkevicius, however, insist
that parliamentary rules of procedure require the
establishment of a commission whenever 36 members of
Parliament request it. As more than 40 have requested the
commission, they argue that an investigation must go forward
regardless of any parliamentary vote. Speaker of the
Parliament Arturas Paulauskas stuck to the coalition line in
insisting November 3 that a majority vote in the Parliament
can block the investigation. Thus the stage is set for a
major confrontation that could end up in the courts for
resolution.

--------------
Oil Politics Looming
--------------


7. (U) The political conflict is playing out in the broader
context of the negotiations that will shortly begin over
control of Lithuania's largest industrial asset, the Mazeikiu
Nafta oil refinery. Yukos, the refinery's current majority
owner, is seeking to sell its control of the refinery back to
the government, which in turn will sell it to a new investor.
Lukoil is seeking to purchase the controlling shares in the
refinery in partnership with ConocoPhillips. In an obvious
move to deflect charges that he is secretly promoting the
interests of Lukoil, Brazauskas recently declared that the
government favors the joint bid of British Petroleum and
another Russian oil company TNK and would begin negotiations
with the two companies during the week of November 7.
Further, he said he would not pursue any deal with Lukoil
without the Parliament's explicit approval.


8. (C) Opposition leader Andrius Kubilius told the
Ambassador November 2 that the Conservative Party had raised
the concerns about Brazauskas family business dealings in
order to derail a Lukoil bid to acquire Mazeikiu Nafta. He
noted that Lukoil's close ties to the Kremlin, and its
history of political meddling in Lithuanian politics, raised
concerns that a successful Lukoil bid would threaten
Lithuania's national security. "If our efforts bring about
the collapse of the governing coalition, so much the better,"
he said.

--------------
COMMENT
--------------


9. (C) The Prime Minister's vitriolic response to what at
least superficially seems fair game for an ethics
investigation has raised widespread suspicion that Brazauskas
has something to hide. Though he has succeeded in reining in
his coalition behind him, the ugly confrontation that is
looming over the parliamentary rules governing ethics
investigation will guarantee this issue remains on the front
pages for at least the next week. That in turn will prompt
continuing efforts to seize advantage, both within and
without the coalition. Regardless of the outcome of the
issue, it will be much harder now for Brazauskas to sign
Maziekiu Nafta over to Lukoil -- a significant achievement
for the opposition's efforts to keep Lukoil out of Lithuania.
MULL