United States and Russia Compete for Croatian National Oil Company INA

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Castleton Commodities International has sent a letter to the government about the purchase of INA’s shares from MOL after Russian company Rosneft showed interest.

The US company Castleton Commodities International (CCI) expressed interest in March to participate in the repurchase of INA’s shares currently owned by MOL, offering its capital market knowledge and financial potential. The letter of intent sent to the prime minister says that the American company currently has a credit potential of about 3.6 billion dollars, reports Večernji List on June 26, 2018.

It is a company which trades with about two million barrels of oil a day, as well as with other commodities. These volumes make it one of the most serious traders in the global markets. It is indisputable that they do have the financial strength to take part in the 1.5 billion dollar transaction. However, it is also evident that its knowledge cannot boost INA’s core business, namely oil production, and exploration.

The US diplomacy, led at the time by then US Ambassador to Croatia Julieta Valls Noyes, announced last year that a western company is interested in INA, shortly after the CEO of Russia’s Rosneft Igor Sechin announced that they were interested in the purchase of the Hungarian part of INA, the Croatian national oil company. He also said that Rosneft would keep both refineries currently operating in Croatia.

Just like in the case of Agrokor, the interests of the two major global powers are clashing in the Croatian economy, and some players in the local oil market believe that the latest US offer is a product of politics, rather than pure business interests. But whatever the motives, CCI is a serious company, financially powerful and in that context, it could be a good potential partner. However, it is doubtful how much it would be interested in investing in INA’s production operations. On the other hand, Rosneft is one of the world’s largest oil producers and its investment would bring about a serious increase in production capacity and new exploration, as well as in refinery operations.

The government is expected to base its selection between the Russian and the American offer on a recommendation of consultants which have recently been chosen after months of search. The advisory consortium consists of Morgan Stanley, Intesa Sanpaolo Group, and Privredna Banka Zagreb. For eight million euro, they should determine the real value of INA and collect statements of interest for potential strategic partners.

However, the prerequisite for anything to be done is that the Hungarian oil company MOL, which currently holds a bit less than half of INA, really wants to sell its stake, and there has been no firm confirmation of its willingness. MOL’s representatives have repeatedly indicated that they are ready to negotiate about the sale, but at the same time, they are trying to implement business decisions to adapt INA to their strategic goals. In order to avoid potentially harmful decisions, the Croatian government should sit down with MOL as soon as possible and agree on future cooperation framework.

A year and a half has passed since Prime Minister Plenković announced on Christmas Eve 2016 that the government would buy back MOL’s share in INA, but it is assumed that the consultants will not complete their part of the job before the end of this year, so the final decision is not expected for some time yet.

Translated from Večernji List (reported by Marina Šunjerga).

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