Croatian and Serbian energy sector inside the Kremlin network

07. March 2022.
Croatian and Serbian energy sector inside the Kremlin network 1

The energy sector in Croatia and Serbia has been captured by foreign capital, predominantly Russian, is the conclusion of Gong and the Independent Association of Journalists of Vojvodina’s regional analysis "Energy Sector in Croatia and Serbia Caught Up in Interest Networks". Even in the latest case of the invasion of Ukraine, Russian companies and Kremlin are trying to keep Europe in check.

In Gong and NDNV’s analysis, investigative journalists - following financial flows, politically exposed persons, important decisions and contracts related to the operations of companies in the gas and oil sector crucial for the functioning of the Croatian and Serbian economies - mapped external influences that compromise formal decision-making processes, that is, they "capture" prominent individuals and institutions in order to act in their particular interest, thereby undermining fragile democracies and harming public interest.

Croatia has been a member of the European Union since 2013, having passed the test of accession negotiations and formally establishing itself as a consolidated democracy, but we are witnesses to an impressive series of corruption scandals in various sectors (including the use of EU structural and investment funds), which testify to the existence of parallel, opposite trends that prevail beneath the polished democratic surface. As an example, the case of the oil company Ina speaks for itself, where even after an extremely long process, where a final judicial decision was passed against former Prime Minister Ivo Sanader for corruption, the Hungarian co-owner MOL is still in a superior position in Ina, which it secured through a corruption deal.

The first part of the study focuses on Croatia, titled "From gas capture to capital capture", presenting and analysing available data on management and political-business decisions of major actors that have determined the fate of four large domestic companies, and ultimately the wider conditions in which the Croatian economy develops, throughout the mandates of several governments.

An analysis of the case of Petrokemija, a Kutina-based fertiliser producer that has long been considered a strategic company of special state interest, shows how public policy has been instrumentalized for private interests. The government has been negligent towards state property, and the new majority owners, who are also its gas suppliers (Terra Mineral Fertilizers, a company jointly founded by Ina and the Prvo plinarsko društvo) - all in a few years after the orchestrated takeover of Petrokemija, when they announced that they seek an investor, i.e. strategic partner.

Then the analysis deals with Ina, a Hungarian-Croatian oil company, pointing out that the company is weakened and that MOL is not a strategic partner, but rather a predator who corrupted the executive branch, with the problematic practice still continuing, as evidenced by examples. In particular, the analysis deals with the fate of the two refineries, and the effects of the 2018 silently signed Memorandum of Understanding, eventually leaked to the media, that had sealed the fate of the refinery in Sisak and enabled, with the "blessing" of the corresponding Minister, an investment where crude oil is exported to Hungary for refining, instead of Rijeka. The investment was made by the state-owned company Janaf (Jadranski naftovod, also a co-owner of Petrokemija), and it is the focus of the next case of the analysis, especially due to the clientelistic network anchored around it. When Janaf’s head Dragan Kovacević was first arrested in 2020 due to a series of suspicions of favouritism and bribery, and then promptly fired, the case practically confirmed the thesis of a frightening set of private interests affecting state-owned companies in Croatia, while their heads are selected for political reasons.

In the end, the focus is on the modus operandi of increasingly powerful companies in the Croatian economy: private companies Prvo plinarsko društvo (i.e. the system within which it operates, Energia Naturalis). Initially engaged only in trade and gas supply, after Gazprom selected it for a local partner in 2017 and signed a 10-year contract, it grew into the country's gas lord and jumped dramatically on the ranking of the largest companies in the country. Its owner, meanwhile, relying on the huge capital that began to flow from the gas business, and with carefully selected staff, strongly tied to politics (where even he himself has important acquaintances in the political milieu), set out to win shares in new segments of the economy, from ports to rail transport, all the way to tourism and the giant Fortenov, in which two Russian banks hold significant stakes.

It is therefore noticeable that the PPD has initiated its complex transition, in which elements of an advanced version of the Kremlin Handbook (research on ways to spread Russian influence in Central and Eastern Europe) strategies could be detected, and there could be talk of a new phase, called "capital capture".

In the second part of this regional analysis, entitled “Russian Energy Noose and Political Criminal and Corruption: Go Gas!”, NDNV investigative journalists dealt with several interconnected energy companies in Serbia, and the actions of politically exposed individuals who have brought companies and the state to dependence on Russia, that is, to a state of "captive state."

"Russia's energy noose is wrapped around Serbia's neck: Gazprom holds 51 percent of the ownership in the Oil Industry of Serbia (NIS), and the Russians have a monopoly on the gas transport through Serbia. The Srbijagas Public Company is also headed by an openly pro-Russian man, Dušan Bajatović, a politician from the Socialist Party of Serbia, the party of the late Serbian President Slobodan Milošević. The noose in question has been voluntarily put around Serbia and its citizens by the state leadership. The argument for selling NIS well below the market price was political: to "preserve Kosovo" with the help of Russia. The Russians also promised to build the South Stream gas pipeline. Kosovo is where it was in 2008 - therefore, independent, and South Stream was never built. In the words of Russian President Vladimir Putin from the end of 2014, they gave up the construction of the gas pipeline due to the EU's refusal to support the project. And the noose around the neck of the state and the citizens of Serbia is ever tightening", it is stated in the analysis.

The authors of the analysis, Miloš Katić, Darko Šper, Veljko Milić, and Dinko Gruhonjić, all state that it is clear that the energy issue is not only an economic issue, but also a first-class political and geostrategic issue. Although Serbia is officially a candidate country for joining the European Union, Serbia is violating not only European regulations, but also its own laws - just to keep Russia's monopoly on energy.

"Although Plenković, unlike Vučić, clearly condemned the Russian invasion of Ukraine, both Croatia and Serbia are significant importers of Russian gas, and the energy sector of both countries is dominated by foreign influences. If public policies were aimed at strengthening strategic companies instead of marginalising or capturing them, the gas strike would be much smaller, "said Oriana Ivković Novokmet at the presentation of the study and films" Gas Masters" and "Ide Gas" in Novi Sad.

The regional analysis has produced a series of recommendations for Croatia and Serbia.

Croatian and Serbian energy sector inside the Kremlin network 2