MOL’s CEO, the Croatian courts, and Viktor Orbán

It’s time to turn our attention to the woes of MOL, the Hungarian oil refining company, in Croatia where the company owns 49.1% of INA (Industrija Nafte), its Croatian equivalent, and has management rights. MOL acquired this holding in 2009.  A couple of years later, in the summer of 2011, the leading Croatian paper, Večernji list, reported that MOL’s CEO, Zsolt Hernádi, was accused by the Croatian prosecutor’s office of bribery in connection with the privatization of INA. According to the paper, Hernádi paid Ivo Sanader, Croatian prime minister at the time, €5 million for a favorable deal. As a result, MOL received a 47.47% stake in INA while the Croatian government held on to 44.85%. Sanader abruptly resigned on July 1, 2009 and fled to Austria from which he was eventually extradited. Following a long legal procedure he was sentenced to a ten-year jail term, which he is currently appealing.

Several times Croatian prosecutors tried to question Zsolt Hernádi, to no avail. Eventually the Hungarian prosecutors decided to investigate on their own but found no grounds for the charges. It is a long story, which I tried to summarize back in November 2012.

A few days ago the case took a much more serious turn. HVG reported already in July that the Croatian authorities planned to issue an international arrest warrant that would force the Hungarians to hand over Hernádi to the Croatian prosecutors. It took a little while, but on September 27 Hungarian papers reported that Hernádi’s picture is the first among several Hungarian nationals who are being sought by Interpol. Hernádi was supposed to appear at a Zagreb court on September 25 and, when he didn’t show, the judge ordered his arrest. Hungarian legal experts on international law, by the way, cannot decide whether or not Hungary is obliged to hand Hernádi over to the Croats.

It was at this point that Viktor Orbán decided to interfere. With that interference the longstanding feud between MOL and its business partner, the Croatian government, moved to a political level. The Hungarian government pointed out that “the developments of the past few days … made it clear to the [Hungarian] government that the dispute is no longer an economic conflict between co-owners and shareholders.” It noted that there is a concerted Croatian effort “to exert pressure [on MOL] outside the economic sphere.” The communiqué added that “these methods are unacceptable in the European Union and therefore Hungary cannot leave these measures unanswered.” For good measure the government cancelled Hungarian participation in a summit organized for October 3 in Dubrovik and asked MOL’s management to review the company’s portfolio and if necessary prepare the sale of its INA shares to the Croatian government or a third party. The cabinet also authorized “the Minister of Justice and the management of the Hungarian Asset Management company [that handles state assets] to examine what civil and criminal action would be possible to resolve the damages to MOL and Hungary.” Viktor Orbán showed that he is a tough guy who doesn’t allow anyone to treat an important Hungarian company this way.

The answer of Croatia’s prime minister, Zoran Milanovic, was conciliatory, but he pointed out that “Croatia’s government has no influence over the decisions taken by the country’s judicial bodies.” The Croatian president, Ivo Josipovic, was less charitable, saying that Orbán doesn’t seem to realize that Croatia is not Hungary where the government can instruct the judiciary.

Orbán is not changing his stance on the issue. Today during his usual Friday morning interview he reiterated that “coercion outside the economic realm does not make it possible and justified [for MOL] … to remain in the Croatian energy market.” He gave advice to the Croats: the state should get their energy sector back. Buy the MOL shares just as Hungary bought the gas storage facilities from E.On. That’s the civilized way, he added.


As far as the Croatian government is concerned, the solution is not that simple. According to Croatian papers, the government doesn’t have the €7.8 billion necessary to buy MOL’s stake at market value. But who else would be foolish enough to buy into INA given the murky purchase of the MOL stake? If it turns out that Hernádi is implicated, the entire original agreement of 2009 might be deemed null and void and the ownership of the MOL shares might be transferred to the Croatian government.

I’m also not at all sure whether MOL would consider selling its rather large holding in INA at this juncture. Apparently in the last three years the company invested a great deal of money into INA, and it is unlikely under the circumstances that MOL would receive a fair price for its stake. INA is a large chunk of MOL’s total wealth: about a third of all its assets. MOL’s importance as the region’s largest oil refinery would be jeopardized, especially if we consider Croatia’s access to harbors and pipelines necessary for MOL’s future expansion.

Orbán’s interference might also impact the price MOL can get for INA as a “state-ordered decision doesn’t bode well, even if selling the stake would be the economically reasonable step for MOL.” Meanwhile, MOL stock has dropped 4.6% in the past three days and is heading for its lowest close in sixteen months.

Sooner or later one will have to ask what actually happened in 2009 when MOL acquired its INA holding and its management. Until now no one in Hungary questioned Hernádi’s innocence, but lately there are more and more voices raising the issue of possible wrongdoing. As the argument goes, if Hernádi is innocent why isn’t he ready to face his accusers? Why does Viktor Orbán insist on MOL’s divesting its Croatian business? Is it perhaps because this way the Hungarian government hopes that the case against Hernádi will be dropped and therefore Hungary will not be obliged to extradite him to the Croatian authorities? There are just too many questions and at the moment no answers.


  1. Dear Eva,

    Mol’s stake in INA is not worth €7.8 billion.

    Here is the calculation. Today, its share price ended at 3820.28 kunas (HRK). One kuna is worth 0.1313 euros. Mol’s owns 49.08%. There are exactly 10^7 shares.

    3820.28 *0.1313 *0.4908 *10^7 = €2,461,866,000

    So the shares MOL owns are worth less than a third, just below €2.5 billion.

  2. So by market capitalization, MOL is just slightly larger than INA,

    €5.446 billion vs €5.016 billlion

  3. If the Russians or Chinese badly wanted to buy MOL’s stake in INA, the maximum they would pay is, say the historical maximum. Investors would pay a premium only if they were able to obtain everything, i.e. the Croatian State would also sell its 44.84%.

    Nobody would pay 3 times the market value for just 49% of a company.

  4. Other thing MOL did nor really advertise although it made public: they are closing down the refinery in Mantova and as they say they make a logistics centre out of it. Normally a logistics centre is not much more than a glorified warehouse.

    The refinery cost EUR 800 million for MOL 6-7 year ago.

    Now, because there is too much overcapacity in refining all over Europe and the demand for refined products don’t seem to increase and anyway Mantova was a low-tech operation, it is no longer needed.

    This is a loss of 200 billion forints, although accounting-wise they may have amortized it since the acquisition.

    I wonder when the Slovaks will want their Slovnaft back.

  5. Tappanch:

    please forget the EU, it is a bunch of amateurs and self-serving burocrats. They are absolutely irrelevant as far as member state politics or power are concerned.

    The EU is just a redistribution institution, takes in Germany’s money (who will finance anything so that they are liked and could not be criticized reasonably, after all you are not expected to bite the hand that feeds you) and send it to Hungary and other countries (Spain, Greece, Cyprus, Slovenia etc.).

    The EU has no influence otherwise, it is the laughing stock of people like Kövér, Lázár or Orbán and it will always remain just that because that is in the interest of Germany, UK and France. The Hungarian leftists, should they ever get to power, will of course do whatever the EU expects from them, but they are weak conformists, while Fidesz is a true revolutionary and anti-colonialist party.

    Deal with it.

  6. “Fidesz is a true revolutionary and anti-colonialist party”

    if raping of the Hungarian people by a mafia is revolution…
    if converting public money into private profit is anti-colonialism…


    Orban has assigned anti-Semites to conduct the 70th anniversary of the 1944 Holocaust in Hungary.

  7. @Szunyi
    “Fidesz is a true revolutionary and anti-colonialist party”

    if raping of the Hungarian people by a mafia is revolution…
    if converting public money into private profit is anti-colonialism…


    Orban has assigned anti-Semites to conduct the 70th anniversary of the 1944 Holocaust in Hungary.

  8. Hmmm….
    I just a tiny bit curious, that how much MOL shares has been bought recently by the prominent members of that true “revolutionary and anti-colonialist party” now, that they managed to induce a fall, as they used to do in similar cases.

    Remember those times, when the Kósa-Szijjártó duo made out the Forint?

    So, I expect the crisis going to be handled in a few days, and the share prices back to normal, as it nothing happened.
    Besides those in the know have quite a bit fatter wallet.
    Oh, well.

  9. “The EU has no influence otherwise, it is the laughing stock of people like Kövér, Lázár or Orbán and it will always remain just that because that is in the interest of Germany, UK and France”

    That is a completely nonsensical statement.
    Germany and France of course care about the future of the EU, the UK (by and large doesn’t).

    But that is beside the point.

    The political pigmies (aka Orban ,Kover and Lazar) are presently treated with quiet contempt and general nonaction in Brussels because there are bigger fish to fry. But be under no illusiions- the EU decides to cut off funding then Fidesz’s fascist state grinds to a halt as of, like yesterday.

    The very next day Orban and Co will be licking Barroso’s shoes; on their knees with their begging bowls held out- witness the recent panic from Lazar when the EU withheld funding on various infrastructural programmes.

    Orban and his mafia know exactly who their true masters are.

  10. 1.
    THere was an interesting article about the background of the chairman of the brand new
    “National Electional Committee”.

    Basically, he can decide the elections at the counting of the mailed-in votes from Romania,
    Serbia and the Ukraine, and by fining newspapers, by rejecting pesky foreign observers.

    Mr Patyi was a

    Communist (MSzMP) party member in the 1980s, then he

    helped to build the Nazi “turul” memorial of district 12 in 2005, then

    helped to create the Fidesz New Order at the Courts after 2010.

    Orban has assigned possible anti-Semites to conduct the 70th anniversary of the 1944 Holocaust in Hungary.

    “Fidesz is a true revolutionary and anti-colonialist party”
    This a good joke….

    repeated raping of the rights of the Hungarians != revolution

    converting public money into private profit != anti-colonialism

  11. Interesting that MOLs trading activity is all done by a separate company which no-one knows who owns it. Also the treasury activity is done by an independent law firm. Sucking the beast dry.

  12. oneill, I think there is a misunderstanding here. The EU will continue to exist, operate nicely and it is a great project. But no real political power will ever be given to the EU because it would naturally mean less power and influence for the governments of currently influential countries.

    Do you know the president of La France as someone who likes his power taken away? So, no, real political power will remain vested in the member states. The EU will deal with agriculture, distribution of development monies and the like. They will never interfere in so-called domestic matters because the member state themselves would not want that. So – it is time to face this – the EU could not care less about what Kövér or Orbán does with or in Hungary.

    Kövér and Orbán and the Hungarian right long ago realized one thing:

    the West does not really care unless oil (or something important to it) is directly concerned.

    The West did not care about Hungary in 1945, they did not care about it in 1956 (or in 1968 about the Czechs, or about Cambodia under the Khmer Rouge etc.) and contrary to anything Western politicians say from time to time the West doesn’t care about it now.

    I mean this is not news, but Fidesz uses the EU out and the EU lets it because deep down it knows that it is not nice that they are so rich, so they let the Hungarians do what they want. Check what happened with the African countries with all the aid and promises of democracy and the like. Nothing, because the West is ultimately OK with getting ripped off. The EU will never cut the finding, it will never dare to get tough about anything.

    And Fidesz – unlike the European gentlemen/women – does not care that they are treated as the untouchables, That is their real power, that they have no shame. Orbán is king at home, he is worshipped like no other politician in the EU. In addition, he sees himself as the smart dude, who takes advantage of the fat and slow Europeans, which is, well, kind of the case. So Fidesz and Orbán are satisfied.

  13. Klaas :
    Do you know the president of La France as someone who likes his power taken away?

    They may not ‘like’ it, but that’s what they’ve been doing since 1957, and on a significantly larger scale since the Maastricht and Lisbon treaties. Trade tariffs and agreements, competition rules, monetary policy are exclusive EU areas – at this stage already, any French politician of the 1930s would have hanged himself. Then, there’s the very long list of ‘shared competences’ where the EU actually has the first shot : energy, transportation, research, justice etc.

    You’re of course free to pretend this isn’t ‘real power’, but you’ll be plain wrong. Most French theories of statehood list four equal pillars of sovereign power: defence, police, law/justice and money. Clearly, 1.5 out of 4 have been willingly transferred to the EU – but you know what, I don’t feel I’ve been dispossessed as a citizen because I’m actually part of the EU…

    Klaas :The West did not care about Hungary in 1945, they did not care about it in 1956 (or in 1968 about the Czechs, or about Cambodia under the Khmer Rouge etc.)

    And now for the victimization tune… did Hungary ‘care’ about Czechoslovakia in 1968? I thought they sent troops there until the end of October, perhaps it was to comfort the people?

    Klaas :… and contrary to anything Western politicians say from time to time the West doesn’t care about it now.

    Sure, if you say so. Can I get that part of my French taxes back?

    But of course you’re free to go on antagonizing Hungary and ‘the West’ – actually echoing your populist brothers in Western Europe. After all, it lead the country to huge disasters twice in the past, why not a third time?

  14. MarcelDé, great answer! When I read Klaas’ ideas, I was thinking where to start.

    (I expect now to read from Klaas that the fact that competences were transferred is actually proof of the “weakness” of the EU and all politicians, or something like that.)

  15. “So – it is time to face this – the EU could not care less about what Kövér or Orbán does with or in Hungary”

    The countries in the EU, or to be more exact their taxpayers, care what kind of joke national systems their money is subsidizing.

    Greece (Ireland, Spain, Portugal to an extent) have learnt that fact.

    EU cuts Orban’s funding tomorrow and he is joining the homeless in the Varosliget by the end of the week.

    You know that, I know that, the Fidesz fascist bumpkins know that. They are allowed to continue at this moment because, as I said previously, the EUcracy has bigger problems than a wannabe Hitler hovering around its eastern borders.

    But make no mistake, when they turn their attention to him he is as much history as Horthy or Rakosi.

  16. Klaas did actually hit the nail on the head.

    One thing that may be missing from his/her analysis is that the EU is giving in to Mr. Orban also because of the fear that if the EU would actually stand by its (advertised) core values and take appropriate actions, such as to cut funding, the Hungarian economy may promptly collapse and the political discourse here would become much more hysterical.

    If the economy collapses and the EU is or is perceived to be responsible, it is unlikely that this country’s democratic forces (and that may well be an oxymoron) could overcome the hate campaign that would be unleashed and which may very well reinforce this government, Jobbik, and potentially lead to an exit from the EU. The EU believes, rightly or wrongly, in engagment and that they would have more influence in the end if they are accommodating.

    Since our friends are for all practical purposes in control of the popular media, and a large chunk of the Hungarian population for many reasons, including lack of a foreign language, would not have access to other narratives, it does not take much brain power to anticipate the outcome of a one-sided anti-EU campaign blitz. We should add to this the propensity of the people in this country to blame others for the consequenses their own shortcomings, et la boucle est bouclée!

    So any hope that the EU would do the job of the Hungarian people is delusional.

    Moreover, the EU is not in the business or overthrowing a government of the Union.

  17. qaz: “it does not take much brain power to anticipate the outcome of a one-sided anti-EU campaign blitz.”

    And then what? Do you think that other EU countries would not expect the furious Hungarian “citizen” to find Article 50 of Lisbon Treaty? In case I will be told that the Hungarian average citizen has never heard of the Lisbon treaty or of any “law” including international that might govern him, I attach:


    Click to access st06655.hu08.pdf

    Saját alkotmányos követelményeivel összhangban a tagállamok bármelyike úgy határozhat,
    hogy kilép az Unióból.
    A kilépést elhatározó tagállam ezt a szándékát bejelenti az Európai Tanácsnak.

  18. O’neill, Kristen:

    I contend that is not important why the EU does not deal with Hungary or Greece. There always exists a multitude of problems to deal with. It is deeply flawed, shall I say naive, to say that but for this and that problem the EU would interfere. No, they would not.

    The EU will not deal with what may be deemed even remotely as party politics and ideology, that is rule number one. Second, like it or not, the burocrats know exactly that their competences are limited.

    See the EU’s relevance in the Hungary’s media policy or the judiciary reorganization (both resulted in a strong one-party influence) or the abandonment of the judicial review of the special Hungarian telecom taxes. The EU could not do anything and the EU knows that Orbán and others know that the EU is toothless.

    I understand the the EU funds could be cut off, but again, they will never be. It was already mentioned here that a weapon to remain a deterrent must be 100% effective. This is not the case. The EU knows and Orbán knows and he knows that the EU knows that to cut off funding would take a complicated procedure which the EU does not even dare to initiate because it may well lose it (as it already happened when Hungary’s vote was not suspended, similar issue). Therefore the EU will not even initiate it for fear of losing face and thus this weapon for all practical purposes has lost its deterrent value. Orbán can do whatever he wants, no funding will ever be cut off.

    Again, Qaz, has a point here, do you know the EU as a country which will enter into contentious political games like cutting off funds so that Orbán would fire up the already dissatisfied Hungarians to wage a war against the bloodsucking post-Moscovite Brussels burocracy (never mind the absurdity, he would do it and believe me 100,000 people would march tomorrow if he called them). Because I don’t think so, Brussels wants policy not politics, they don’t want to get into real politics and therefore will never use any of the tougher measures.

    The bottom line is that ultimately it does not matter what political fear or limited competence or other problem is the reason why the EU does not act, the important issue is that it will not do so ever.

    (I also think that even contemplating acting tough would give rise to existential fears because entering a political game on the home turf of a member state, as a cutting of funds would be, will lead the EU a down a path that the EU fears it cannot control and you have 27 other states as well, with all sorts of problems, a can of worms.)

    Sorry, but that is the reality and you better face it because Orbán will act accordingly, and soon perhaps others as well.

  19. OT:

    Always check what the Republicans are doing and how they are doing it, because Fidesz is their best pupil in every sense of the word.

    There is no party in the “Western world” which would be as unrelentingly aggressive and ruthless and single-minded in its quest for power as the Republicans — except for Fidesz.

    I wonder what Obama will do, he told last time (if I remember correctly already the second time he was taken advantage of re the debt limit) that he was not gonna negotiate next time, that is now.

    Nevertheless, the Republicans are tough and united and don’t seem to back down. They never accepted the Obamacare and have been fighting it every step of the way.

    Similary, Fidesz never accepts anything it does not like and will always destroy it one way or another, sooner or later, unlike the left which always accepts everything (i.e. the Fidesz constructed constitution). The left hates to be tough or oppose anything consistently.

    So, I wonder what Obama will do. Fold again as is usual in his domestic policy? (He is tough on leakers and journalists, but on Republican politicians he is pretty lame).

    Anyway, just a reminder. This is how professionals work and Fidesz is a bunch of professionals ready to learn from the best.

    No EU politicians can conceivably understand the manic energy of the Republicans, nor that of Fidesz.

  20. Kirsten, Oneill:

    If you wanna know how tough the EU really is and how passionate it is about a core and indigenous EU liberty then please follow what happens with the new data protection regulation.

    You have no idea how diluted it will be.

    After all, nobody lobbies better than Facebook and Google and the American government (which is essentially a salesman for these and Apple and Microsoft and the US IT business), and the EU is again open to any and all kinds of lobbying. Because at the EU we are so generous and open (transparency!) and kind and friendly. And dumb and weak and divided and naive.

    Core values, well, who cares. We need cloud computing, the people want to use their IPhones and Facebook, we can’t regulate them! Regulation would be against business, against innovation, against efficiency, competitiveness and development! My, oh my, the EU is a sucker for all these empty arguments, which even I can come up in two minutes.

    Orbán knows this well and uses the EU out. Thank you very much.

  21. “The bottom line is that ultimately it does not matter what political fear or limited competence or other problem is the reason why the EU does not act, the important issue is that it will not do so ever. ”

    No, the bottom line is that Orban needs EU funds to keep his dictatorship up and running.
    More importantly his business mafia profit very well from the EU.

    The EU does not always need to publicly wield the big stick, cut one or two strategic funding streams here and there. That is all it takes, might even be happening at the moment.

  22. Klaas, indeed, it was stated here a number of times, the EU will not remedy what is not right in Hungary – in particular because OV has won in free elections, AND he is likely to get sufficient support also in the next elections, AND the broad public actively or passively accepts OV. You are reminding us of the many people who are willing to support him no matter what he does. So what kind of interference do you actually expect? Hungarians apparently consider OV a strong man – but he is not. He is so strong because the society has so willingly accepted him either as a saviour or as the omnipotent evil man. As Oneill writes, the EU is busy with problems that are more pressing than a nation that indulges in some fantasy world of national “sovereignty” financed by EU funds. But instead of some long-term growth strategy, Hungarians are ruining their own country. Hungary will in a few years depend on EU support even more than now and then we will see how “weak” the EU will turn out dealing with it. So this whole fabulation about who is strong and who is not has some rather distorted idea of Hungary’s strengths. Yes, OV is ridiculing the EU, yes, the EU is not answering “properly”. But he will not be able to continue for long, while I am quite confident that the EU will still be standing in a few years.

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