Croatia wants influence in INA's upstream segment in MOL row

Relations between Croatia and Hungarian oil and gas group MOL have been strained in recent years with Zagreb accusing MOL of failing to make agreed investments, and MOL complaining about red tape and the government's failure take over INA's loss-making gas trading business as promised.

Croatia controls close to 45 percent of INA, while MOL owns almost a 50 percent stake.

"The investments in INA fell from 4.4 billion kuna ($798 million) in 2009 to 974 million kuna in 2012. In the last five years INA's business was harmed and I reproach our colleagues in MOL for declining to talk about corporate management in INA", Vrdoljak said.

He said that Croatia was determined to participate in decision-making in INA, notably in its upstream segment.

MOL said Vrdoljak's comments were a tactical move to deflect attention from bad regulation that had caused significant financial damage to INA.

In an emailed statement to Reuters, a MOL Group spokesperson also said the authors of the study cited by the minister "can hardly be regarded independent or without partial interest."

"...the Minister found it necessary to share specific details of the study with the public without any expert oversight and consultation - although without being familiar with the study MOL's Negotiation Team immediately indicated the absurdity of certain cited figures and their inconsistency," MOL added.

A Croatian court sentenced former prime minister Ivo Sanader to 10 years in prison for allegedly taking bribe from MOL in 2008 for allowing it a dominant position in INA. Sanader and MOL deny the charge and the Croatian Supreme Court is now considering Sanader's appeal.

MOL has so far rejected giving up management control in INA and said last November it might sell its stock if no agreement with Zagreb was reached.

Talks between the shareholders on improving their partnership started in September, but no progress has been achieved so far. The next round of talks is tentatively scheduled for the end of May.

"We have lost several billion U.S. dollars because INA's business plans have not been implemented. If the level of production in INA stayed at the same level in 2013 as in 2009 Croatia would have had economic growth of 0.9 percent in 2013 instead of a decline," Vrdoljak said.

Croatia, the newest European Union member, suffered five recession years in a row and most analysts forecast another contraction this year. Last year its gross domestic product fell one percent year-on-year.

INA operates at home, in the Middle East and Africa and has both upstream and downstream segments. It had to suspend its gas production activities in Syria because of the civil war in that country. ($1 = 5.5138 Croatian Kunas)

(Reporting by Igor Ilic; Editing by Toby Chopra)