Professor Michael Roe
Anastastia Liliopoulou
Irma Pasukeviciute
University of Plymouth, Institute of Marine Studies, United Kingdom

The future for the logistics and maritime sector of Lithuania looks extremely promising in the context of a number of changes that have taken place in recent years and the developments which are planned for the coming decade. Lithuania has a tradition within the sector including a major international trucking industry, a significant transit port in Klaipeda with the great advantage of ice-free status, good road and rail links to the east and the enormous markets of Russia, Belarus and the other Baltic States, the prospect of EU membership and all the market advantages that this will bring in the next few years and last but not least, its strategic location between the EU and the countries of the Former Soviet Union which provide an opportunity for Lithuania to become the Netherlands of Central and Eastern Europe – a dynamic, fast growing and prosperous country acting as the pivotal point for trade within the region, far in excess of its physical size and population.
Lithuania’s future role as the transit hub for the east and the link between the dynamic markets of Germany and Scandinavia and the growing significance of Russia and its neighbours has attracted attention in western Europe, not least at the University of Plymouth in the United Kingdom where the Institute of Marine Studies is the largest and most significant teaching and research institution concentrating on transport, shipping and logistics in Eastern and Central Europe. The research group consists of ten staff members plus a large group of researchers of which two are actively involved in research into logistics and transport in Lithuania at this time. These two projects are being undertaken by two young women from Lithuania and Greece, examining respectively the transit of crude oil and the transit of containers by rail from Russia, central Asia and the Far East, both through Lithuanian outlets. The former project has attracted sponsorship from the European Union Phare fund whilst the latter has been funded by Lloyds of London. The quality of these sponsors reflects the seriousness with which the issues are considered within Europe and also the importance that the Lithuanian role in transit is considered. Both researchers graduated recently from the Institute in Plymouth in Maritime Business and Law and bring with them analytical (and linguistic) skills that are appropriate and notable.

This project provides an economic analysis of the Lithuanian crude oil sector in the light of the period of transition following the break-up of the Former Soviet Union (FSU) and the moves being made towards European Union (EU) accession. Lithuania emerged from the FSU as one of the three independent Baltic States which under the old Soviet regime had always been significant as transit countries for both imports and exports to the USSR, offering ice-free access to the Baltic all year round. As a consequence, a large quantity of the USSR’s international trade passed through the ports of Riga and Ventspils in Latvia and Klaipeda in Lithuania including substantial quantities of Soviet crude oil.
Following the break-up of the USSR, the economic and political situation for these oil movements has changed considerably and the newly independent Lithuania has inherited both a powerful position (in that Russia has only limited ice-free access to the Baltic from its own territory through the Kaliningrad enclave, which in turn is only accessible across Lithuanian territory), and a weak position in that its sole source of oil has always been Russia (and the FSU) and the infrastructure inherited (pipelines, refineries, terminals etc) was all designed uni-directionally for this source of oil. Lithuania thus finds itself both reliant upon, and one of the few providers for, Russian crude oil. This in turn has highly significant economic consequences - for example, some 30% of Lithuania’s GDP can be associated with the only oil products refinery in the Baltic States at Mazeikiai, but until very recently, this facility has been totally reliant upon Russian crude imports. In late 1999, these were interrupted by Russian suppliers during disputes over the refinery’s ownership plans and its partial sale to US interests. As a consequence, since independence in 1991, crude oil trade in Lithuania has been fundamental both to the country’s economic health and political stability.

As a consequence, the research project has the following objectives:

To achieve these objectives, the project consists of the following methodology;

Before transition, Lithuania’s sole source of crude oil was the USSR much of which was located in Russian Siberia. A comprehensive pipeline system was developed over many years for the USSR oil export industry which focused upon three main directions - the Black Sea, the Druzba Pipeline towards allies in Poland and the DDR and Western Europe, and the Baltic Sea and in particular the facilities at Ventspils (Latvia) for direct crude oil exports, and Maziekiai (Lithuania) as the only oil refining facility located in the Baltic States region.
The infrastructure that supported these facilities was designed solely for the use of Soviet crude which meant that upon independence, Lithuania inherited a large refining facility that was the single largest generator of GDP in Lithuania by far and yet relied entirely upon Russian co-operation in providing piped imports of crude oil. This has been a continued problem for Lithuania, particularly since Russia has alternative outlets - not least Ventspils in neighbouring Latvia - and also their own refining facilities, thus negating any need to depend upon Lithuania and its demand. Much of what has happened in Lithuanian oil strategy since 1991 has been driven by this dependence upon Russia and this includes the development of new import/export facilities for crude oil and products at the Butinge oil boom on the Lithuanian coast which has provided some seriously desired, if expensive, flexibility.

As we have seen already, Russian influence in the oil industry in Lithuania has been substantial and there have been deliberate moves by Lithuania since 1991 to reduce this but with limited and controversial success. The main moves have involved the sale of 33% of Mazeikiai Refinery, Butinge Oil Import/Export Facility and associated infrastructure to Williams International of the USA. This was completed in competition with Lukoil of Russia.
The sale of the fundamentally important Mazeikiai complex along with the new Butinge facility to an American company, at a low cost has created a number of economic and political problems.
The research project concentrates upon the most significant of all industries within Lithuania and the Baltic States region, and provides a detailed analysis of the economic and political factors.
The output from the research would be of fundamental relevance to policy-makers within Lithuania and those working upon accession in the region and with the European Union. Crude oil in Lithuania is of vital importance to the country’s economic health and its progress towards EU accession is dependent upon resolving a strategy to deal with the complex set of issues noted above. There has been no fundamental research carried out on the industry up to now. The results will be of wide interest to the industry, policy-makers, practitioners and academics.

• to review the current role of the Trans Siberian Railway (TSR) in the movement of containers from Russia, the Far East and countries of the FSU to Europe and for export elsewhere;
• to assess the potential of the network for further development and the need for infrastructural and logistical improvements to achieve this;
• to analyse the role of the ports of the Baltic States (and in particular Klaipeda) in providing an inter-modal link with shipping services in the Baltic Sea in competition with alternative port facilities in Russia and Finland;
• to assess the future of container movements by the TSR through the Baltic States in the light of their impending accession to the EU;
• to identify and recommend major policy initiatives for Lithuania in terms of transit policy for potential container traffic by the TSR.