Hungarian energy group MOL took the latest shot in the standoff over control of Croatia's INA late on November 26 as it announced it has launched an arbitration case against the government in Zagreb. However, the move is thought unlikely to break the deadlock.
Claiming it has responsibility to its shareholders, MOL said in a statement to the Budapest Stock Exchange that it has applied to the International Centre for Settlement of of Disputes seeking arbitration over its claim that Croatia has "breach[ed] certain of its obligations and undertakings in relation to MOL's investments in Croatia".
The pair has been fighting over the company for most of the time since MOL - in which the Hungary state owns a 25% stake - increased its interest in INA to 49.1% and acquired management rights in 2009. Talks to resolve the impasse have become bogged down as both sides become increasingly entrenched.
Croatia, which owns 43% of INA, insists the deal over management rights was crooked; former Croatian prime minster Ivo Sanader was jailed earlier this year 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. The Hungarian company's main tactic has been to threaten to sell its stake in INA. Knowing Zagreb does not have the cash to buy it out, that would leave a major Russian group as the only likely buyer, which would not be welcomed by Croatia.
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.
Hence the standoff. In its statement, MOL says it has legal obligations to shareholders "to pursue good faith negotiations" and insists that it "remains open to further explore a negotiated resolution to the dispute." However, it stresses that it's "also under legal obligations to commence legal action to enforce its rights."
MOL's share price in Budapest fell 4.6% on November 26 ahead of the statement. At the time of writing, it had recouped close to 2% in trading the following morning. A spokesman for the Croatian economy ministry declined to comment on MOL's announcement when contacted by Bloomberg.
Tamas Pletser at Erste Bank suggests the move from the Hungarians is unlikely to break the current deadlock. "MOL is trying to use other tools to strengthen the pressure on the Croatian government to move the wrecked negotiations ahead," he says. "The situation is unlikely to be solved in the short term. The arbitration court is likely to decide in favor of MOL, even though Croatia may dispute it claiming that this was a rigged deal, as bribery was involved."
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