Croatia Wants Law to Block Energy Firms' Sale to Non-EU Buyers

Croatia plans to pass a law enabling the government to block the sale of a stake in its energy companies to buyers outside the European Union, Prime Minister Zoran Milanovic said on Friday.

The law, which the Social Democrat-led cabinet has yet to draft, could prevent Hungarian oil group MOL from selling its 49 percent holding in Croatian oil firm INA to Russian oil companies, should it try to do so.

Relations between MOL and Croatia, which owns close to 45 percent of INA, have been strained in recent years. Talks over future management rights and investments in INA started last September but have made little headway.

MOL has repeatedly said it is ready to sell its stock if no agreement with Zagreb is reached within a reasonable time. Local media have reported that Russian oil firms like Rosneft or Gazprom could be interested, but this has not been officially confirmed.

"We shall work on proposing a law to protect national interests, under which the government can oppose, or question, the intention of a buyer from outside the EU to get a stake in a (Croatian) energy company, that is to say in INA," Milanovic said in a government statement.

"In this way we can control, though not necessarily forbid, the sale of shares, in this case INA shares, to someone outside the EU."

Croatia and Hungary are EU members and their prime ministers are currently attending an EU summit in Brussels.

MOL declined to comment on Croatia's plans on Friday, saying it must first see the proposal, but repeated its stance on INA.

A spokeswoman said in an email MOL wanted "either an agreement with the Government of Croatia that can lead to value creation for INA, or MOL will sell its stake in INA".

Zagreb accuses MOL of failing to make agreed investments in its biggest utility. MOL complains about red tape and the government's failure take over INA's loss-making gas-trading business as promised.

Both sides last year began separate arbitration procedures through international courts.

Earlier this month, Croatia's Supreme Court confirmed a guilty verdict against former Prime Minister Ivo Sanader for taking a bribe from MOL in exchange for allowing it a dominant position in INA.

The ruling may serve as a legal basis for Zagreb to start a new court process to render a 2009 INA shareholders' agreement null and void.

Croatia also wants a bigger say in INA's decision-making, but MOL has said it does not want to waive its management rights.

(By Zoran Radosavljevic; Additional reporting by Krisztina Than in Budapest; Editing by Andrew Roche)