Hungary's MOL to Discuss Selling Croatian Oil Firm

   By Veronika Gulyas 

BUDAPEST--Hungary's oil and gas company MOL Nyrt. (MOL.BU, MGYOY) will do as told by the government and discuss the sale of its asset in Croatia amid an intensifying diplomatic spat between the neighbors only three months after Croatia joined the European Union.

MOL bought a 25% stake in Croatia's INA d.d. (INA.ZG) in 2003 and subsequently bought more to hold 49.1%, part of its drive to expand regionally and search for natural gas. A decade later, Croatia, which has a 44.8%% stake in INA, is increasingly uncomfortable about the tie-up.

It said bribes had been given to enable MOL to buy INA, and convicted its former prime minister, Ivo Sanader, of accepting the money. A Croatian court wanted MOL's chief executive, Zsolt Hernadi, for questioning and issued an arrest warrant after he'd chosen not to show up. MOL has said Mr. Hernadi was not to blame for any wrongdoing.

Hungary's government offered an angry reaction, calling Croatia's moves "pressure with means outside the realm of economy" that Hungary cannot leave unanswered. It also said MOL, in which it holds 24.6% of shares, should consider selling its controlling stake in INA.

MOL said Thursday it would oblige and consult with the Croatian government as a potential buyer. The Croatian government owns 44.8% of INA, while MOL holds 49.1% and management rights. The Croatian cabinet has expressed several times its wish to be back in control.

"MOL Group recognizes the international and political relevance of its Croatian investments and the significance of related events over recent period," MOL said in the statement, adding it will reconsider "the nature of any involvement with INA in the near future."

From a market point of view, MOL's sale of its stake in INA would be badly timed, Equilor analyst Gergely Gabler said. He noted MOL has made significant investment in INA, nearly 3 billion euros ($4.06 billion), and hasn't seen any returns yet.

The Hungarian government complained this week MOL had fulfilled its investment obligations toward INA, while the Croatian government had not. Croatia has disputed those assertions.

Ivo Josipovic, Croatia's current prime minister, said despite Hungary's accusations neither he nor his government is putting pressure on the country's jurisdiction. If the Hungarian government decides that MOL indeed needs to sell its stake in INA, the Croatian government will aim to have a fair relationship with the new owner, Mr. Josipovic said.

He said Hungary's and Croatia's diplomatic relationship shouldn't be hurt because courts in both countries are independent from the executive branch. Still, Hungary decided this week that its Foreign Minister Janos Martonyi wouldn't attend a summit in Croatia on Thursday.

Write to Veronika Gulyas at [e-mail]

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