COMMENTARY: Lame Duck Government Stunts Progress of Strategic Projects

89666_sjednica_vlade_republike_hrvatske7 April 2015, LPJ Croatia Issue 127

Last week, the Hungarian oil and gas company MOL pushed through the appointment of Supervisory Board (SB) members to Croatia’s oil & gas company INA to an uncharacteristic one year mandate of INA.  Given the current government’s well known battle with MOL over managerial rights in INA, with negotiations over the issue unsuccessfully lasting since 2013, Economy Minister Ivan Vrdoljak (HNS) said the SB’s decision implied that the Hungarian petrochemical and gas company MOL (which controls 49% of INA) was betting on reaching a better deal with a future HDZ-led government, implying after the parliamentary elections to be held no later than February 2016.

The current government has stable support in the Sabor, meaning that their executive power is not in question and, therefore, cannot be considered a “lame duck” government in the classical government relations sense.  However, with the stable public opinion polls in favour of the Croatian Democratic Union (HDZ) led conservative coalition and unpopularity of Prime Minister Zoran Milanovic (SDP), this government is clearly nearing the end of its mandate with an uncertain chance to remain in power, which will logically also complicate the finalisation of various state projects that are in the pipeline (i.e. LNG Terminal, offshore exploration contracts, INA negotiations, Kupari resort concession, Plomin C power plant).

Government Uncertainty Increases Corporate Risk

Minister Vrdoljak has accused the MOL management of hedging their bets that the HDZ will come into power, essentially alluding to their intention to come to another “corrupt” deal, such as was done by the former HDZ government led by former Prime Minister Ivo Sanader.  However, the situation is likely more practical and less sinister, especially since their negotiating positions are not anywhere near resolution.  Therefore, from a corporate standpoint, any compromise resolution at this stage with Vrdoljak and the current government would likely result in an unfavourable result, and the best option is to wait 6 to 10 months and renew negotiations with the next government…

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