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. Last Updated: 07/27/2016

Kazakhs Fume Over Lithuanian Oil Deal

The Kazakh government on Sunday slammed Russia's national pipeline monopoly Transneft for refusing to sign an agreement to transport Kazakh oil to Lithuania, a deal the Central Asian state hoped would strengthen its position in the battle for control of the Baltic states' sole refinery.

KazMunaiGaz, one of the four bidders for the majority 53.7 percent stake in the Mazeikiu Nafta refinery currently owned by Yukos, was hoping to ship 7 million to 12 million tons of crude annually for the next 10 years to Lithuania.

"In our view, Transneft's position is not in line with open market principles and the agreement between the government of the Russian Federation and the government of Kazakhstan on the transit of oil signed June 7, 2002," Kazakh Minister of Energy and Mineral Resources Vladimir Shkolnik told Interfax Sunday.

Transneft currently transports some 16 million to 17 million of Kazakh oil per year -- none of which goes to the Baltic states -- and signed a tentative agreement on Sept. 30 to increase transit volumes with an eye to starting shipments to Lithuania. But the agreement was unexpectedly scrapped last week, when Transneft president Semyon Vainshtok said that the Kazakh side "did not fulfill its obligations in [arranging] the signing of an additional protocol to an intergovernmental agreement between Russia and Kazakhstan," Interfax reported.

The move by Transneft comes as the Lithuanian government and Yukos are finalizing the bidders' list for the embattled oil company's stake in Mazeikiu.

"The Lithuanian government has completed the collection of bids for the 53.7 percent stake in Mazeikiu Nafta. And KazMunaiGaz offered the largest sum for the stake -- over $1 billion," Shkolnik said.

Yukos chief financial officer Bruce Misamore confirmed Saturday after meeting with Lithuanian authorities that four bidders submitted offers for the refinery assets, without disclosing their names, the Baltic News Service reported. Besides KazMunaiGaz, Polish oil company PKN Orlen, TNK-BP and LUKoil have been reported to be interested.

Misamore also said that Yukos did not exclude the possibility of selling its shares directly to the Lithuanian state -- which would then sell the stake on to a strategic investor -- and was waiting for the Lithuanian government's proposal on how to proceed with the sale.

Yukos is mulling the sale of its Mazeikiu assets, which are currently frozen by an Amsterdam court, as proceeds could help the company to pay off some of its tax debt. The Dutch court is expected to deliver a ruling on the temporary freeze, which has been placed upon request of Rosneft, on Nov. 24.

Lithuania is hoping to convince the current majority owner of Mazeikiu to sell its shares back to the state, avoiding a direct deal between Yukos and the future strategic investor. By handling the sale directly, the state would hold more sway over the terms of sale, including ensuring the future oil supply.

Staff Writer Aiste Skarzinskaite contributed to this report.