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Tuesday, October 19, 1999 Published at 14:08 GMT 15:08 UK

World: Europe

Lithuania in political crisis

The crisis was sparked by a disagreement over the oil industry

Two government ministers in the former Soviet republic of Lithuania have resigned following disagreement over what to do with its oil sector.

Finance Minister Jonas Lionginas and the Minister for Economy Eugenijus Maldeikis submitted their resignations when the cabinet approved the sale of the country's oil complex to an American corporation, Williams International.

The Prime Minister, Rolandas Paksas, is also opposed to the sale of a 66% stake in the state-owned Mazeikiai Oil, a deal two years in the making.

[ image: Mazeikiai Oil is a cornerstone of the Lithuanian economy]
Mazeikiai Oil is a cornerstone of the Lithuanian economy
The two ministers had supported Mr Paksas, who said on Monday he would not sign the investment agreements with Williams, which would give the Americans operational control over Lithuania's only oil refinery, oil pipeline and oil export terminal.

The prime minister said the US company had been pressing Lithuania to accept liabilities which were too large and which could put the country's economy in danger.

Mr Paksas said the country was already struggling with a national budget deficit.

Mazeikiai Oil is a cornerstone of the Lithuanian economy, and backers of the deal had hoped the American investment would revitalise the loss-making complex.

Decision unpopular

Speaker of the Parliament, Vytautas Landsbergis, and President Valdas Adamkus strongly backed the deal.

[ image: Lithuania's parliament is divided over the sale]
Lithuania's parliament is divided over the sale
Mr Landsbergis, a Conservative, cut short a trip to France and returned home as soon as he learned of the prime minister's decision.

They were determined to have the agreement with Williams signed by the set deadline of 29 October.

The company is located in the city of Mazeikiai, some 300 kilometres (185 miles) northwest of Vilnius, the Lithuanian capital.

Reuters reported that the country's share index dropped 3% in the wake of the resignations.

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