VISEGRAD: Hungary to address Mol dispute with Surgut

By bne IntelliNews May 7, 2010

bne -

The new centre-right, and slightly nationalist-tinged, government in Hungary said it's prepared to step up efforts to end the stand-off between Mol Group and the murky Russian oil concern Surgutneftegaz, which owns a 21% stake in Hungary's energy champion.

Emboldened by the two-thirds majority his Fidesz party received in the general elections at the end of April, the incoming prime minister, Viktor Orban, said the current situation where Mol finds itself battling over the stake that Surgutneftegaz surreptitiously acquired from Austria's OMV in March 2009 doesn't serve the interests of "Mol, the Russian company with an unpronounceable name, or the two nations."

Asked whether the government would buy out Surgutneftegaz's stake, Orban obliquely responded by saying the new government would strive to protect the country's strategically important companies, of which Mol is considered the main one. So much so, in fact, that the previous Socialist government actually formulated in 2007 a strategic companies law, dubbed "Lex Mol", that investors and the EU complained was designed purely to protect the oil company from what was effectively a hostile takeover by OMV. As part of that attempt, OMV built up the 21% stake that it then sold on to Surgutneftegaz when it became clear the merger wouldn't go through.

However, Orban takes over an economy whose finances are in a mess and hasn't anything like the €1.4bn that Surgutneftegaz paid OMV for those shares. The government is already battling to keep the budget deficit down to a level that satisfies the International Monetary Fund and others, which lent Hungary €20bn in the depths of the crisis to keep the country afloat.

An outline of the deal, say analysts, could involve Surgutneftegaz remaining a financial investor, but not a strategic investor, through its 21% stake. "This would imply Surgut earning profit and voting in shareholders' meetings - in accordance with the 10% voting cap - but not participating in strategic decisions or in management," says Vladimir Socor of the conservative think-tank The Jamestown Foundation.

In a conciliatory gesture, Mol invited an observer from Surgutneftegaz to sit in on the 29 April annual general meeting (AGM), to which the Russian oil firm was barred for the second year in a row. Hungary's financial and energy regulators are preventing Surgutneftegaz from joining Mol's shareholders' register and taking up its voting rights and representation on the board until the company lays out its ownership structure and the circumstances of its acquisition of the 21% stake in Mol.

Surgutneftegaz appears unwilling to do that. It is murky even by Russian standards; the only known shareholder being the Bank of New York, which holds more than 5% and so under Russian law must declare its holding, while its top management enjoy cosy relations with Prime Minister Vladimir Putin's closest associates. One of those, Vladimir Bogdanov, Surgutneftegaz's chief executive, agreed to a rare interview with the Financial Times a day before the AGM in which he denied the Russian firm wanted to take over Mol and suggested a partnership whereby Surgutneftegaz would use some of Mol's oil-refining capacities located on EU territory.

Bogdanov said he expected Surgutneftegaz would eventually be able to reach an agreement on co-operation with Mol. "There is a Russian proverb: water cuts stone, as time goes on," he was quoted as saying.

Related Articles

UK demands for EU reform provoke fury in Visegrad

bne IntelliNews - The Visegrad states raised a chorus of objection on November 10 as the UK prime minister demanded his country's welfare system be allowed to discriminate between EU citizens. The ... more

Erste claims Hungary is breaking peace deal with banks

bne IntelliNews - Hungary will breach its February agreement with Erste Group if it makes the planned reduction in the bank tax conditional on increased lending, the Austrian lender's CEO ... more

Austria's Erste rides CEE recovery to swing to profit in Jan-Sep

bne IntelliNews - Erste Group Bank saw the continuing economic recovery across Central and Eastern Europe push its January-September financial results back into net profit of €764.2mn, the ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.