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US offers to mediate in INA-MOL dispute

There have been five failed attempts at negotiations over the past 13 months between the Hungarian firm and Croatian authorities

Offers of US mediation and a possible further share purchase that leaves Hungarian energy firm MOL within a whisker of a majority shareholding in INA indicates a solution to the bitter dispute over ownership of the Croatian energy firm may be in sight.

The past 13 months have seen five sets of failed negotiations between MOL and the Croatian authorities in an attempt to end of the dispute over who controls INA, in which the Hungarian firm holds 49.08% and the Croatian state 44.84%. The dispute became public in July when the Croatian authorities decided to try MOL's chief executive, Zsolt Hernadi, in absentia over allegations that he paid former Croatian prime minister Ivo Sanader a bribe to gain management control of INA. In mid-June, Croatia's Supreme Court confirmed a 2013 guilty verdict against Sanader for taking a €10 million ($12.7m) bribe from MOL in exchange for handing control of INA to the Hungarian company.

On 7 October, Croatian media reported that MOL is close to clinching a deal to buy 80,000 shares, or 0.8%, of INA from Raiffeisen Bank International's mandatory pension fund in Croatia for around €42m. That would leave MOL just shy of a 50% stake.

MOL's inching towards a minority will alarm Zagreb, which would like to retake control of INA, but does not have the financial resources to do so. INA will spearhead Croatia's efforts to develop its newly discovered offshore Adriatic reserves; a survey by Spectrum, a Norwegian seismic-imaging company, has estimated that Croatia's offshore reserves could total up to 3bn barrels of oil, though some see this as overly optimistic.

Since the middle of September, relations between the two sides have even worsened as the fate of INA's two refineries is being questioned. The refineries are struggling in the face of low margins and MOL is pushing to close one of them down; the Croatian government, already under pressure over the parlous state of the economy, is fighting to protect jobs.

Both the Croatian government and MOL suggested earlier this year that they could sell their stakes as a way to resolve the situation. However, the assets are strategic for both sides: Croatia wants energy security and to protect a key industry; MOL has few assets offering such strong upstream potential such as INA's exploration activities.

In January,  Russia’s deputy prime minister Deputy Premier Arkady Dvorkovich indicated Russian firms, including Gazprom and Rosneft, could be interested in INA if it was put up for sale. Russia potentially gaining a foothold in an emerging European producer spurred the US into action.

On 11 October, Croatia's economy minister Ivan Vrdoljak revealed that the US had offered to help mediate talks between Croatia and MOL in an effort to find an amicable resolution to the dispute. "Yes, we have received the State Department's offer to help us in the mediation of the talks between Croatia and MOL. Every offer of this kind is welcome. The offer has been neither rejected nor accepted, we are currently talking about conditions under which the mediation may be conducted. The government will make the relevant decision," Vrdoljak told national broadcaster HRT.

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