Croatia extends INA fight as it indicts MOL CEO

By bne IntelliNews April 1, 2014

bne -

Croatia’s anti-corruption agency said on March 31 that it has indicted MOL CEO Zsolt Hernadi in connection with the Hungarian oil and gas company’s acquisition of Croatia’s INA. The charge is a further blow by Zagreb in the resumed shareholder fight with the Hungarian oil and gas giant over fuel's group INA.

"The indictment accuses the head of MOL's management”, says a statement published on the website of Croatia's Office for Suppression of Corruption and Organised Crime (USKOK), which identifies Hernadi only by his initials. The CEO is accused “of striking a deal for Croatia's [then] prime minister, Ivo Sanader, to do everything possible for the amount of €10m to change the shareholders' agreement in INA,” says the USKOK statement.

Sanader was jailed for 10 years in 2013, after he was found guilty of taking the bribe in return for handing MOL operational control of INA, despite the Hungarian company holding a stake of 49.1%. Both the former PM and MOL deny the claim.

Croatian police issued an international warrant for Hernadi's arrest in the autumn. However, his name was recently removed from Interpol's wanted list, in a move that it was speculated may have been connected to efforts in Zagreb and Budapest to calm the issue during efforts to sell off INA. However, on March 21, as tensions re-escalated, the Zagreb County Court rejected an appeal by Hernadi against Croatia’s graft investigation. The MOL executive filed the appeal through his Croatian lawyer, claiming that the investigation entailed major violations of criminal law and factual errors.

"Mr. Hernadi has demonstrated already to the MOL board's full satisfaction why the assertions are unfounded and why the case is without merit," MOL said a statement emailed to Reuters following the announcement from USKOK. "We would therefore expect Mr. Hernadi to appropriately defend himself against any future accusations as he has successfully done in the past."  

Fight still on

"The fight is still on between MOL and Croatia and it seems that the case against Mr. Hernadi is still important for Croatian politics," Erste analysts write in a note.

MOL has been at odds with Zagreb over IMA, which is 44.8% owned by the Croatian state, for several years. While Croatia claims MOL illegally secured its management rights over the company, MOL has accused Zagreb of not honouring its commitments under the privatisation contract.

Recent hopes of resolving the issue through the potential sale of a majority stake to Rosneft or Gazpromneft were dashed after the Russian annexation of Crimea, ruling out the sale of the company to either of the Russian oil and gas majors.

That appears to have put things back to square one, with the pair resuming hostilities. The latest legal action against Hernadi appears part of that drive.

Zagreb has hit out at MOL by stripping INA of its status as a domestic gas supplier, and ordering the company to sell part of its production to its replacement at a reduced price. On March 19, the Croatian government also moved forward by a year the planned doubling of the royalty rate for hydrocarbon production on existing fields to 10%, which is expected to cost MOL/INA around HRK400m (€52.3m) a year.

From its side, MOL is understood to be considering suing Croatia for damages. Accusing the Croat government of violating its energy charter, MOL is threatening to launch the highest value litigation in Croatian history, local daily Vecernji list reported in March. According to, MOL argues it could be looking for damages of up to HRK10bn.


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