Russians gone with IMF cash

Russians gone with IMF cash

State considers EUR 1.88 bn purchase of MOL shares a strategic investment

Hungary has inked a deal to buy back a 21.2 per cent stake in the national oil and gas firm MOL from Russian peer Surgutneftegas, Prime Minister Viktor Orbán announced last Tuesday. The move was an "important step towards creating a strong Hungary", Orbán said.
 
 
Unused IMF cash

Economy Minister Tamás Fellegi revealed shortly afterwards that the share package will cost the state EUR 1.88 billion. It will not increase the national debt, Fellegi said, because unused cash drawn down from an IMF rescue loan and sitting in the Hungarian National Bank will be used to finance the deal.

"This was more than a purchase, it was a hard struggle," Orbán said. "We have succeeded in securing from the national strategic point of view one of our most significant corporations, one which also plays a significant role at the European level." Rumours of a market-changing acquisition had been rife since lunchtime when MOL requested that trading in its shares on the Hungarian Stock Exchange be suspended.
 
 
IMF: it’s your money

"The government is free to use its FX deposits according to its priorities," the IMF's local representative told Reuters news agency last Wednesday. Iryna Ivaschenko acknowledged Fellegi's announcement that the government plans to use its foreign exchange reserves to pay for the MOL stake. "These deposits include the drawn but not used funds from the IMF-EU stand-by arrangement which expired last October," Ivaschenko said. Hungary was offered a 20-billion-euro standby loan in late 2008 as it looked set to default on bond repayments, but harsh austerity measures restored confidence in its bonds and not all the money had been drawn down before Orbán's new government allowed the loan arrangement to expire last year.

A new beginning ofrelations with Russia
 
 
Left, liberals unimpressed

The opposition Hungarian Socialist Party (MSZP) slammed the deal, saying it came at a time when the government is imposing austerity measures on the population. Tibor Szanyi, a member of the party’s executive, said the government had agreed on a price that is 40 per cent more than Surgut paid for the share package. He noted that the Russian firm’s stake was not large enough to secure it a place in the firm’s AGMs and described the move as “a borderline criminal and senseless waste of money”.

The green-liberal LMP demanded to know what behind-the-scenes deal may have been made to persuade the Russian firm to part with a stake in MOL that it had hitherto shown no inclination to give up. “We hope this compromise did not come at the price of having Russian firms build the new block at the Paks nuclear power station,” the green MP Benedek Javor said. He said the move would not, as Orbán (pictured right, making the announcement) had claimed, increase Hungary’s energy security. Furthermore, it would increase national debt by HUF 500 billion (EUR 1.85 billion), Javor said.
 
 
Jobbik cheers ‘talking to the Russians’

The far-right nationalist party Jobbik welcomed the deal. Nationalist MP Tamás Hegedûs said the state acquisition “amends the earlier irresponsible privatisation practices” and proves that it is “worth talking to the Russians”. Hegedûs said his party found it acceptable to use IMF funds to finance the deal. “At least we know where the credit is going,” he said.

The day after the announcement, prime minister’s spokesman Péter Szijjártó said that settling the ownership of MOL would open the way for a “truly 21st-century partnership” with Russia. Speaking on breakfast television last Wednesday, Szijjártó said the conflict between Surgut and MOL had been “causing everyone difficulties” and had become an obstacle to “dynamic growth” in relations between Hungary and Russia.
 
 
Long fight

The share package in question had earlier been acquired by MOL’s regional competitor, Austrian firm OMV, during a hostile takeover bid. The bid failed, largely due to a piece of 2007 legislation dubbed “Lex Mol” that limited foreign state ownership of Hungarian companies said to be of “strategic” importance. OMV sold its stake to the Russian firm Surgut in March 2009 for EUR 1.4 billion. Surgut enjoyed a frosty relationship with MOL, which from the off had described the acquisition by its Russian peer as “unfriendly”.

The Russian firm was barred from taking part in shareholder meetings, with MOL refusing to enter Surgut onto its books unless it was prepared to clarify its ownership structure. Orbán’s government has been holding on-off talks with Russia since taking office a year ago, while Surgut had indicated that it wanted to hold on to its stake in MOL.
 
 
The Budapest Times
 
 
07.06.20111
 
 
 

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