Published in Nacional number 605, 2007-06-19

Autor: Mislav Šimatović


Russians to enter Ina instead of MOL

DUE TO A CONFLICT WITH the Government of the Republic of Croatia around the price of energy-generating products has resulted in the Hungarians making their official decision to pull out of Ina and sell their 25% shares to state-owned Russian company Gazprom Neft, who will enter this operation together with Lukoil.

The entrance of Russian companies into Ina will define the energetic future of Croatia; that is the reason why a political agreement is expected, which should be concluded during the meeting between Russian President Putin and the Croatian political leaders on 24 JuneThe entrance of Russian companies into Ina will define the energetic future of Croatia; that is the reason why a political agreement is expected, which should be concluded during the meeting between Russian President Putin and the Croatian political leaders on 24 June According to unofficial information, the Croatian government and Hungarian petroleum company MOL are in serious negotiations about the sale of MOL’s 25% share in Ina to a Russian state owned company, most likely Gazprom Neft, the petroleum sector of the Gazprom energy giant. Since information was leaked to the public stating that MOL had made a pre-agreement on the takeover of the Tifon gas station chain with Hague defendant Ivan Čermak, an agreement worth €150 million, common gossip in petroleum circles is focussed on the fact that the Hungarians will pull out of Ina and sell their share to the Russians. Because this is a move which will, in many ways, define the energy-producing future of Croatia, a political agreement is expected, which should be achieved during Russian President Vladimir Putin’s visit to Zagreb on Sunday 24 June for the Energy Summit of Southeast European countries.

The Agreement between MOL and Čermak is being kept in total secrecy and still has not been finalized. MOL cannot, without agreement from the Government of the Republic of Croatia, purchase competitor’s companies in markets where Ina is present. As Nacional has discovered, the Croatian side gave the Hungarians the green light to negotiate with Ivan Čermak on the takeover of Tifon. The main condition for MOL’s purchase of Tifon is the obligation to purchase gasoline from Ina when the refineries are modernized. This totals 250,000 tons of petroleum derivatives annually, which Tifon has purchased from foreign countries until now.

Vagit Alekperov and Aleksej Miller, leaders of Lukoil and Gazprom, agreed to establish a joint companyVagit Alekperov and Aleksej Miller, leaders of Lukoil and Gazprom, agreed to establish a joint companyDespite this approval, MOL is seriously considering pulling out of Ina. A highly positioned source at Ina announced for Nacional that this turn of events is very certain because MOL is extremely unsatisfied with the treatment of the Government towards Ina. This is related to the Government’s pressure to keep the price of energy-generating products at a low price to secure social peace, damaging the company’s profits. The Government’s calculation here is clear as day, but MOL, logically, is unsatisfied with such business policy. With regard to the ownership share, for example, for every 100 million kuna in decreased profits, 25 million kuna are lost by MOL. MOL is aware that they are not able to do anything without majority ownership over Ina. They began to consider withdrawing from Ina when they realized that they will not easily attain a majority ownership over the Croatian company. In the long term, the 25% share does not interest them.

This is the reason why they have begun to look for new opportunities, which they have discovered in Tifon. Tifon holds 8% of the Croatian retail market of petroleum derivatives, has 33 very well located gas stations, and is the only company in Croatia which sells the Euro V quality gasoline, still to be prescribed in EU countries as of 2009. Apart from that, Tifon is in various phases of construction for 25 new gas stations. With 58 gas stations, Tifon will become a more substantial player in Croatia than Austrian OMV, which holds the second market position. Last year, Tifon created profits of 1.4 billion kuna, a 26% increase than in the previous year.

TOMISLAV DRAGIČEVIĆ, Ina’s Executive President, has excellent cooperation with the HungariansTOMISLAV DRAGIČEVIĆ, Ina’s Executive President, has excellent cooperation with the HungariansBy selling the 25% shares of Ina, MOL will create huge earnings which will be used for the repayment of a majority of the loan used to finance strong expansion over elapsed time. One-quarter of Ina’s shares were purchased by MOL four years ago for $505 million USD. Today, according to the current price on the Zagreb Stock Exchange, this share is worth $1.3 billion USD.

It is assumed that the political platform for Russian entrance into Ina could be agreed during President Putin’s stay in Zagreb. This would result in the continuation of a strong penetration of Russian petroleum companies in the Balkans, which would radically change the power share in the petroleum business in the region. Currently, Russian shares in the region have been led by Lukoil, which has begun to establish a joint regional company with Slovenian Petrol. If cooperation is created between Lukoil and Petrol, this will significantly reflect the position of the Slovenian company in Croatia, as well as in other markets in the former Yugoslavia. In the past, Lukoil has already purchased former Ina assets in Serbia; it is a large supplier of crude oil to MOL, especially after the fall of Yukos; and in the past two years, it has become the largest individual distributor of petroleum derivatives in this part of the Mediterranean from its refineries in Bulgaria and Romania.

Gazprom, the largest gas producer in the world, got involved in the petroleum business in the Balkans six months ago; this is Putin’s weapon for political pressure. Gazprom signed a letter of intention with the Serbian government on future cooperation; apart from the realization of large gas pipe line projects, the target of Gazprom is the Naftna industrija Srbije (NIS), which will soon be privatized. Of course, NIS is strategically less interesting for Gazprom. The main motive of the Russians is the realization of the Blue Stream gas pipe line, which should replace the European Union gas pipe line project called Nabucco. The setback in negotiations around this project was used by the Russians who are lobbying in the Balkan countries to connect to the Blue Stream gas pipe line, a part of which is already constructed at the bottom of the Black Sea and should bring Russian gas to western Europe through Turkey, Bulgaria, Serbia and – depending on the combinations – Croatia or Hungary. Gazprom purchased the Jugoros gas company in Serbia, and has signed a memorandum which states that Serbia will construct the gas pipe line to Gulgard, as well as further pipe lines towards the EU, either via Hungary or Croatia.

PREMIER SANADER has purchased social peace while sacrificing a loss in Ina’s profit, which the Hungarians no longer want to toleratePREMIER SANADER has purchased social peace while sacrificing a loss in Ina’s profit, which the Hungarians no longer want to tolerateUnder these circumstances, Russia’s interest for Ina is not surprising. This was recently confirmed by a plenipotentiary delegate of the Russian President, Georgij Poltavčenko. He recently discussed the privatization of Ina in his recent stay in Zagreb. He commented that there was discussion on the possibility of participation by the Russian companies Lukoil and Gazprom Neft in the privatization and that ˝it is no longer only a desire; discussions were led on the amplitude of participation˝.

Russian interest in Ina was even apparent in the first privatization phase of the Croatian petroleum company in 2003 when Rosneft, another company controlled by the Russian government, competed in the tender against MOL and Austrian OMV. At that time, Rosneft stated that their main interest was Ina’s terminal for petroleum export on the Adriatic Sea, by which Rosneft could deliver petroleum to the United States. The terminal in Omiš was supposed to be the first step in Rosneft’s Agreement with the American petroleum group Marathon to begin direct Russian supply to the United States. ˝The Omiš terminal fits perfectly in our Agreement. Ina has two refineries, while Rosneft lacks the capacity for refinement”, Rosneft announced at that time.

There also exists the possibility that Lukoil and Gazprom Neft enter Ina together. Three weeks ago, those two companies began to establish a mutual company for research and exploitation of petroleum fields. With this Agreement, Lukoil, which is only 15% state owned, while 20% of the capital is controlled by Americans, is actually aiding Gazprom, the leading gas producer in the world, for stronger developments of its petroleum business. In the field, Gazprom took a strong step forward in 2005 with the purchase of Sibneft, the fifth largest Russian petroleum company, from billionaire Roman Abramovič for $13.1 billion dollars, now called Gazprom Neft.

Recently, MOL has strengthened its cooperation with Gazprom, and there is talk that the two companies could merge. In St. Petersburg this June, Zsolt Hernádi, the CEO of Hungarian MOL, met with Gazprom’s Deputy Chairman Aleksander Medvedev to discuss the international gas pipe line project. The analysts that Nacional spoke with foresee that the Russians will take complete control over MOL over the next several years.

Gazprom had over $37 billion USD profit last year and Europe is largely dependent on the company’s gas supply. With a Russian share in ownership, Ina would secure a cheaper supply of essential crude oil. It is most probable that large infrastructure projects would easily be realized, which have been obstructed until now, as was the case with the DružbAdria pipe line. However, on the other hand, Croatia would have an unfavourable position with Russia, in terms of total dependency in the supply of energy-generating products. Europe, which is dependent on Russian gas, has been developing construction projects for years now to secure new supply directions in order to decrease this dependency, which proved to be a dangerous task on several occasions. One of these projects is the construction of a LNG terminal, through which vessels would attain natural liquid gas from other sources. In that case, it will be interesting to see how the possible Russian co-owners of Ina would treat the LNG terminal project on the Adriatic Sea.

Hungarians obstruct the construction of LNG terminaIt is well known that the relations between the Government and MOL have been quite strained for a while. The Government even accused MOL of obstructing the realization of the international LNG terminal project on the Adriatic Sea, which Ina was supposed to participate in, together with HEP and Plinacro. A source from the Government told Nacional in February that in the shadow of the events surrounding the LNG terminal, a silent war is developing between Ina and the Croatian government due to the price of natural gas which, based on the opinion of certain groups in Ina, is too low and does not maintain the market value. The Government even accused MOL that they fabricated the story about the withdrawal of foreign partners from the LNG project in order to place additional pressure on the government. Hungarian Management Board member in Ina, Zalán Bács, even announced that Croatia was very arrogant in their request to have a veto in the LNG consortium with only 25% shares, at the same time ignoring the fact that the Hungarians own 25% plus one share in Ina so they should have a right to veto in strategic decisions

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