Looting 2.0 supporting state capture at the Krk gas terminal Written by Re:Common Introduction It is a crisp morning in Zagreb. Streets, coffee places and restaurants are busy and people’s buzz accompanies morning activities. Behind a window, at a corner table of a restaurant, sit two men. Ivo Sanader, the at the time Croatian Prime Minister, is laying back on his chair, looking around and talking to his interlocutor with an annoyed and circumspect look. An envelope slips over the table Omisalj view on bay and Dioki industrial site. Photo ©Re:Common into his hands, he looks inside, then puts it into the inside pocket of At the core of Sanader’s story is company’s most strategic assets. This his jacket. The conversation goes an alleged EUR 10 million bribe deal has been under the scrutiny on, even if the two interlocutors that Ivo Sanader took from the of the Croatian anti-corruption are hardly looking at each other. Hungarian energy company MOL to authority (USKOK), and almost ten Sanader is tapping on the table facilitate a favourable deal for the years later the corruption trial has while saying something along the purchase of the majority stake in the been re-opened and is ongoing. lines of “yes, good, this will be Croatian energy company INA, as a enough for the coffee, you can’t part of its privatisation process. The re-opened trial against expect it to be enough at all”. Sanader refreshes the memory of Why is this relevant today? Because a system where the abuse of power This scene was filmed by a hidden the Croatian government is taking camera. It became viral after Sabor, determined the outcome of the steps to fast-track a major energy country’s strategic choices, ending the Croatian parliament, agreed to investment – a two-phase LNG plant remove Sanader’s parliamentary up fostering the benefit of a few, – on the island of Krk. The project rather than the actual needs of the immunity in December 2010 –criticised for its environmental 1 Croatian people. A story that is and authorities arrested him . A impact – is located at the Dioki corruption trial that shook Croatian repeating today with the proposed petrochemical complex in Omišalj, a construction of a Liquefied Natural politics started shortly after, and property at the core of the Sanader at the time of writing this is still Gas (LNG) and regasification corruption scandal. Indeed, plant on the property of the Dioki ongoing. Several other ministers of according to the accusation, half of Sanader’s government have been petrochemical complex in Omišalj: the Sanader bribe allegedly transited a project that has been on the table arrested and sentenced for money through the bank account of a laundering, abuse of power, illicit for over ten years, and that may be Swiss-Croat entrepreneur named responding to the private interest financing of the HDZ political Robert Ježić, who - during INA’s party2. of a few, rather than to the “energy privatization process - became the security” of the country. And its main shareholder of the Dioki construction can still be stopped, for 1 http://www.editfiume.info/archivio/la- petrochemical complex, one of the the benefit of the Croatian people voce/2010/101210/politica.htm and the people of Europe. 2 https://www.ilpost.it/2010/12/10/ex-pre- mier-ivo-sanader/ January 2019 2 What is the Krk LNG project The Krk LNG terminal is an industrial energy project aimed to regasify and re-export liquefied gas arriving on the island of Krk via ships towards Hungary and other countries in Europe. LNG Carrier Fuji Lng, Photo Ken Hodge, CC BY 2.0, Wikimedia Commons The project, advertised by the Croatian government as a flagship initiative, also enjoys a strong support of the European Union The proponent of the project is The recently approved “LNG and is featured among the so- the Croatian government through law” - aimed at fast-tracking the called EU “projects of common a publicly controlled company construction – is being challenged interest” (PCI). The latter are large set up for the purpose, LNG as unconstitutional5. infrastructure projects that should Hrvatska / LNG Croatia d.o.o.4. serve the interests of the European The proposal is presented as a Union, and that can benefit from two-phase project, consisting of the political and financial support an offshore (floating) terminal of the European Commission and an on-shore terminal which through the Connecting Europe would be completed in the second Facility (CEF), the European phase of the construction. The Fund for Strategic Investments terminal is expected to deliver 2,6 (EFSI) and European financial billion cubic meters of natural gas institutions like the European in the first stage of the project. Investment Bank (EIB). For Critical voices among media, civil example, the EIB is considering society and experts claim that the project for financing, as the the two phases are rather two project status appears to be “under incompatible, separated projects. 3 appraisal” at the Bank . The Both projects are being challenged proposed financing is significant: from an environmental, economic EUR 339 million. and administrative point of view. 5 https://dnevnik.hr/vijesti/hrvatska/ zlatko-komadina-i-mirela-ahmetovic-pro- 3 http://www.eib.org/en/projects/pipe- jekt-plutajucega-lng-terminala-neodrziv-i- lines/pipeline/20140627 4 https://www.lng.hr/en/about-us nezakonit---543798.html Looting 2.0: supporting state capture at the Krk gas terminal 3 of the International Consortium But the restructuring of INA 1.The tortuous of Investigative Journalism7, had continued, and in October 2004 plans to develop a gas regasification Dioki was privatised. DIOKI plant in Omišalj, precisely in the Holding AG, headquartered in history of a industrial site owned by INA, named Switzerland, became the majority DINA. Later, when the project owner of Dioki d.d. In parallel, the controversial started to shape up in 2008-2009, project of a regasification plant in the French oil major Total and the Omišalj – designed to be an onshore project German energy company RWE8 also plant and within the property of joined the offshore company9. Dioki - started to get traction among decision-makers in Zagreb. The LNG project on Krk In 1993 INA became a joint stock island has been discussed company10 and in July 1995, it But who was the beneficiary owner for almost 20 years now. started an internal re-organisation. of Dioki Holding AG? A still at Subsequently, the DINA the time unknown Swiss-Croat Since the deep crisis petrochemical plant of Omišalj entrepreneur named Robert Ježić. of the petrochemical was merged with two other plants Media reported about him that he 11 industry in the 1980s in from Zagreb into a new company: had been the president of the Rijeka Dioki d.d. The company’s basic football club since 2000 and that he the former Yugoslavia, activity stated in the public registry had made his fortune in oil trading there have been several is the production of polymers and in Milan, moved to Switzerland 12 plans to relaunch the petrochemicals . and then come back to Croatia to assist the economic recovery of the petrochemical facility From Malta to Switzerland country. The project that he was of Omišalj – facing presenting to investors aimed to relaunch the petrochemical plant Why did INA, still a public company, unemployment – in in Omišalj, including import and need to set up an offshore vehicle order to contribute to the export of gas to foreign clients. to build a regasification plant in a recovery of the local and facility of its property? national economy. Corrupt roots come to This question remains unanswered. surface An offshore vehicle to build The public registry in Malta does not say much about Adria LNG, neither Along the perfect storyline of the so local gas infrastructure about the identity of its board called “crony capitalism” eventually members, nor about the beneficial something went badly wrong. Before In April 1995, while the dramatic owners of the company. construction started, the LNG Yugoslavian war was still ongoing in project was hit by the collapse of its many places and the Dayton Treaty financial and political pillars. hadn’t been signed yet, a number 7 https://offshoreleaks.icij.org/ of oil and gas majors including the nodes/55009251 Robert Ježić and the Croatian Prime Yugoslavian State company INA, 8 Adria LNG Study Company Limited record Minister Ivo Sanader were hit by a the Austrian energy company OMV on Malta company registry massive corruption scandal in 2010, and the Ljubljana-based group 9 At a session of the Croatian government after the publication of internal Geoplin Doo6 came together to set held on September 30th 2008, Prime Minister intelligence reports on Wikileaks13. up an offshore company in Malta: Ivo Sanader explained why Dina Petrokemija The scandal is connected to a the “Adria LNG Study Company industrial site was the best location for the construction of this “strategically important bribe that Prime Minister Sanader Limited”. The company, whose facility”. allegedly took to favour the existence was revealed only recently 10 Orbis database, INA acquisition of the majority share through the offshore leaks database 11 INA-OKI d.d. and INA-Naftaplin’s Ethyl- of INA by the Hungarian energy ene Production Unit 6 Adria LNG Study Company Limited record 12 Dioki d.d. record on Croatian company 13 https://www.ilpost.it/2010/12/10/ex- on Malta company registry registry. premier-ivo-sanader/ January 2019 4 company MOL, that allegedly transited through a bank account on the name of Ježić. This story ended up also involving the Austrian bank Hypo Alpe Adria, the main creditor of Robert Ježić for Dioki and other investments.