US Offers Mediators for INA-MOL Energy Row

Croatia government, MOL at odds over INA for years; USA proposes international mediators, cites energy concerns. Both sides launched arbitration suits last year.

Washington has offered to help resolve a long running dispute between Croatia and Hungary's MOL over their jointly-owned oil firm INA by proposing international mediators to steer the talks on INA's future.

"We have given to the Croatian government and to MOL a list of four names of people of various nationalities, who are experts at mediation ... in the hope that having a mediator at discussions will help the discussions move forward," U.S. Ambassador to Croatia, Kenneth Merten, told Reuters this week.

Merten said he was "still waiting to hear from the Croatian government", while MOL said it was in favour of the proposal.

The two main shareholders in Croatia's biggest utility have been at odds over management rights and investment policy for four years, and the row has hurt the company's business and soured relations between the two European Union member states.

Merten said the issue was gaining wider implications beyond the future of INA, which employs some 13,000 people and posted revenues of 27 billion kuna ($4.5 billion) last year.

"Another concern, which has become of more interest to us in the last four to five months, involves energy security for all of Europe, but particularly for central and eastern Europe and for south-east Europe. Here too, having a good relationship between Hungary and Croatia we see as key," Merten said.

MOL is INA's biggest shareholder with just under 50 percent, while the Croatian government holds nearly 45 percent. Several rounds of talks since September 2013 have yielded no results. A Croatian government source told Reuters another round of talks with MOL should take place in November.

Croatia wants the management rights in INA redefined so that the government has an equal say in strategic decision-making. It has tried and sentenced former Prime Minister Ivo Sanader for taking a bribe from MOL in exchange for giving it wide management rights.

MOL has refused to give up management control and said it was prepared to sell its stake in INA if no agreement was reached relatively soon.

Media have reported in the past year that Russian oil majors such as Gazprom may be interested in buying the stake from MOL, but this has never been confirmed by either MOL or Moscow.

The head of Gazprom, Alexei Miller, visited Croatia in July to discuss energy issues, but details were never publicized. Gazprom already owns Serbian oil company NIS, while another Russian oil firm controls a refinery in neighbouring Bosnia.

Contacted by Reuters, MOL said it was committed to reaching an agreement with Zagreb but repeated that "selling the stake in INA is a valid option". It declined to comment on whether it had held any talks with investors interested in INA.

The row intensified last month, when MOL proposed to shut down one of INA's two refineries, saying the plant in Sisak was dated and losing money.

The government and the Croat members of INA's management board opposed the plan, and the issue remains unresolved, effectively paralysing INA's further investment plans.

"I think the continuing upheaval and discussion about the future of INA creates a lot of uncertainty for the company and the workers," Merten said.

Both Zagreb and MOL are also pursuing separate arbitration procedures before international courts.

By Zoran Radosavljevic