I think I ought to emphasize that MOL is not truly a Hungarian company, at least not in the sense that the Orbán government is trying to make the population believe. The announcements portrayed the Hungarian government’s purchase of a 21.2% stake in MOL as a tremendous coup by which Hungary managed to wrestle a big chunk of MOL’s stock out of the Russian bear’s paws. I’ll bet that most Hungarians still think that MOL is a state enterprise, which of course it isn’t. MOL is listed on the New York, Budapest, and Warsaw stock exchanges where it is freely traded. It is a company with a diverse and ever-changing ownership. Until now a bit less than 80% of its shares were owned by various investors, Hungarians as well as foreigners. However, the owner of 21.2% of MOL shares was Surgutneftegas, a Russian company that purchased the stake from OMV, the Austrian oil company, in 2009.
From the beginning the Hungarians didn’t like the fact that a Russian company owned a sizable stake in MOL because they claimed that the ownership of Surgut wasn’t clear. They suspected the Russian state of being behind Surgut. The Gyurcsány government made serious efforts to curb any possible influence of Surgut on MOL’s affairs. The Hungarian parliament actually passed a piece of legislation (jokingly called the Lex MOL) according to which Surgut was deprived of its shareholder right to vote on matters pertaining to MOL’s business. Surgut sued several times and the Hungarian courts always ruled in the government’s favor. The latest ruling, again against Surgut, was on April 7. I didn’t agree with Gyurcsány’s decision concerning Surgut and MOL because I didn’t think that the Hungarian government had the right to deprive Surgut or anyone else for that matter of its shareholder rights in a publicly traded company.
During the Gyurcsány and Bajnai governments there were vague talks about trying to purchase Surgut’s stake in MOL, but no serious attempt was made. The government wasn’t exactly flush with cash; indeed, it needed IMF assistance in order to survive. Shortly after the new government was installed in Budapest, however, it was becoming clear that extensive negotiations were taking place between Moscow and Budapest that included the possible purchase of the Surgut stake. It was on November 30, 2010, after Viktor Orbán’s visit to Moscow, that the Russians announced that Putin and Orbán had indeed talked about the Surgut stake in MOL and that negotiations would continue. Only a month earlier Putin was actually asking the European Union to help because MOL was violating accepted rules when it prevented Surgut’s participation in business decisions. My feeling is that Putin had had enough and decided to convince Surgut to sell.
In the last six months or so one heard practically nothing about the continuing conversations between Russia and Hungary concerning MOL. But then came yesterday’s announcement that Hungary had purchased Surgut’s 21.2% stake for 1.88 billion euros ($2.7 billion) or about 500 billion Hungarian forints. The deal was definitely good for Surgut: it got a 40% return on its 2009 investment. On the Budapest stock exchange, after an initial pop, MOL sold off. Right now MOL is trading at 22,660 forints, less than what Hungary paid Surgut.
Here is the current breakdown of MOL ownership:
Some help with the Hungarian: Külföldi befektetők = foreign investors; Magyar állam = Hungarian state; Hazai intézményi befektetők = domestic institutional investors; Hazai magánbefektetők = domestic individual investors; Mol sajátrészvény = MOL’s own stake. The rest are clear. As you can see, as a result of the deal, the Hungarian state became the largest single owner of MOL shares.
The deal was originally announced by Viktor Orbán, but about an hour later Tamás Fellegi gave a press conference where he was asked how the Hungarian government will pay for these MOL shares. To everybody’s astonishment the answer was that the money will come from that portion of the IMF loan that has not been used by either the Bajnai or the Orbán governments. The first reaction was disbelief. Surely, the IMF didn’t give Hungary the loan to “play with it on the stock market.” This must be a misunderstanding. But no, the IMF after all is not such a harsh lender as some people would like to portray it. Iryna Ivaschenko, resident representative of the IMF in Budapest, confirmed Fellegi’s announcement: Hungary is free to use that money in any way it wishes.
Viktor Orbán tried to convince the population that Hungary’s energy security is strengthened by this purchase. This is not true. MOL is an oil refiner and distributor of mostly Russian natural gas. “Someone” put it well: “It is like buying the tap, when you have no control over the water-pipe.” The decision to buy these MOL shares in my opinion is more a political than a sound financial move. In fact, it is most likely financially disadvantageous to the taxpayers. But politically it sounds good: “We saved a good old Hungarian company from the Russians.” Some pro-Fidesz analysts act as if these 500 billion forints really didn’t add to the Hungarian national debt. But surely, this is not so. The IMF loan will have to be repaid sometime fairly soon, and new bond issuances carry much higher interest rates.
LMP criticized the deal. Its economic expert, Benedek Jávor, mentioned the real possibility that given Surgut’s reluctance to sell, Hungary perhaps offered something else to the Russians by way of an enticement. LMP, being a green party, is especially worried about commitments to the expansion of the Paks Atomic Power Plant.
According to MSZP buying the stake is “a mindless waste of money, bordering on a criminal act.” An MSZP member of parliament also noted that in 2012 there is a planned saving of 550 billion forints as a result of the very severe austerity program thrust upon the population. And now the government spends almost the same amount of money to buy shares in a publicly-traded company. According to some analysts investors on the whole are not keen to see a large government stake in a company. Therefore MOL shares may drop in value, especially if it turns out that the Hungarian government is too involved in the everyday running of MOL, which is not outside the realm of possibilities. The CEO of MOL is a close friend of Viktor Orbán and a great supporter of Fidesz.