Hungary's MOL Group has violated the rules of propriety by negotiating over Croatian oil group INA Group via the press, a Croatian minister complained to media on December 5. The claim reflects the frustration between Zagreb and Budapest over the impasse in talks over control of INA, while the increasing bad blood makes a happy ending all the more unlikely.
Economy Minister Ivan Vrdoljak made the complaint in response to INA-related remarks by Sandor Csanyi, a MOL board member, who told Forbes magazine that the Hungarian company - 25% state owned - in principle has no desire to sell its 49% stake in INA, and is interested in putting it on a profitable footing. However, Cysani, who is also head of the country's largest bank OTP, and was previously seen as close to Hungarian PM Orban, added that MOL will sell if it must.
If there is no other way, Csyani said, "then we want to be fair, we know that this is a very important company for Croatia, part of the national identity, that's why we offered to the Croatian state to buy it.
"This would meet the interests of both parties," he added. "If they don't want to or cannot buy our INA stake, then we intend to offer it to a third party."
That is a clear threat to Zagreb, with a large Russian company the only likely bidder. Russian strategic energy interests in the region are in conflict with those of Croatia, particularly its control of refineries in neighbouring Serbia.
Vrdoljak, who is in charge of the deadlocked talks with MOL on behalf of the government, which holds 43% in INA, insisted that the Hungarian company's communication with Zagreb through interviews and media statements has recently gone "beyond a decent level", according to Reuters.
"I have no intention to communicate using media channels," the minister told the newswire, apparently without irony. "They will probably inform us when they have a concrete offer for us and then we will let the public know what it is all about."
The two has been fighting over the company for most of the time since MOL increased its interest in INA and acquired management rights in 2009. Talks to resolve the impasse have become bogged down as both sides appear increasingly entrenched.
Croatia insists the 2009 deal was crooked. Former prime minster Ivo Sanader was jailed for 10 years for collecting a bribe from MOL to push it through. In a clear bid to raise its leverage ahead of the restart of talks, Croatia issued an arrest warrant for MOL's chairman, Zsolt Hernadi, in October.
Meanwhile, MOL claims that Zagreb has failed to live up to conditions of privatization, and has circled the wagons around the executive. It has spent the last few weeks repeating that it is ready to sell rather than lose management rights, safe in the knowledge that cash-strapped Zagreb can't afford the €2bn or so that the stake is estimated to be worth.
At the same time, INA is an important asset for both MOL and Hungary. The Croatian company offers growth potential due to ongoing oil and gas exploration, while it also holds strategic assets on the Adriatic coast. That infrastructure has only grown in importance as the EU and Russia tussle over control of oil and gas supplies into Europe.
Claiming it has responsibility to its shareholders, MOL said on November 26 that it has launched an arbitration case over its claim that Croatia has "breach[ed] certain of its obligations and undertakings in relation to MOL's investments in Croatia".
Tamas Pletser of Erste Bank told bne in November that he expects long drawn-out negotiations for some time yet. However, he also pointed out that the situation risks reaching the point of no return, with MOL likely to find it difficult to reverse course on its threats to quit the stake the more it makes such claims.
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