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Russia’s efforts to control Europe’s gas supplies through Croatia ǀ View

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Croatia’s biggest trial of the decade has just heard startling testimony from a Hungarian businessman, oil industry consultant Imre Fazakas. In yet another twist, his testimony, in my view, completely contradicts the case brought by Croatian government prosecutors.

The prosecution’s case is that former Croatian Prime Minister Ivo Sanader agreed to accept a €10 million bribe from Zsolt Hernadi, chairman of the Hungarian state-owned oil company, MOL, to gain control over Croatia’s national energy firm, INA, and to spin off INA’s gas trading company to the Croatian government (which ultimately never happened).

These increasing efforts to integrate into the EU system represent a serious danger to the bloc. Colossal corruption in the Croatian judiciary, in my view, has provided an opening for Putin to accelerate his grand strategy to encircle Europe via the weapon of energy.
Dr Theodore Karasik
Non-Resident Senior Fellow at the Lexington Institute

Since the case, Russia has intensified its efforts to replace MOL’s share with its own energy companies. The year after Croatia accused Hernadi of bribery, Gazprom offered to buy MOL’s shares in INA. In 2017, INA received a similar offer from Russian oil giant Rosneft.

But the entire bribery story rests on the testimony of a single witness, Croatian tycoon Robert Jezic, whose reliability I questioned previously in an opinion article for Euronews.

Now Imre Fazakas, who has a long history of working for Russian oil companies including Yukos, has told the court that Jezic’s claims do not stack up.

In his own testimony, Jezic claimed to be the intermediary in the transfer of the alleged bribe money. He admitted to receiving half of the €10 million through his company Xenoplast, with the help of Xenoplast director and Swiss tax advisor Stephan Hurlimann, a partner at the Swiss law firm of Wenger & Vieli. He claimed that Fazakas had agreed with Hurlimann on the transfer of the rest of the €5 million.

But according to Fazakas, who testified in court at the end of April and last Friday, the money did not come from MOL and had “nothing to do with Sanader or Hernadi.” Moreover, the second instalment of €5 million was never sent.

On the contrary, according to the Croatian daily Jutarnji List, Fazakas told the court that the money came from two Cypriot companies owned by Russian billionaire oligarch Mikhail Gutseriev, in part to buy land in Omišalj on the island port of Krk, as part of a lobbying effort for the Družba Adria project.

The Družba Adria project is a longstanding Russian plan to connect two existing pipelines, Družba and Adria, so that they can be used to transport Russian energy to Europe. Russian energy would be pumped via Hungary and Croatia to the Omisalji port of Krk, where it could then be supplied to global markets.

Fazakas corroborated previous court testimony given by Gutseriev himself, who founded Russian oil giant Russneft and who is on a US Treasury list of Russian oligarchs with ties to the Kremlin. As I wrote previously for Euronews, Gutseriev himself had complained that Jezic had “stolen” his €5 million. Jezic admitted he used the sum to benefit his own companies and never passed any of it on to Sanader.

It is sometimes assumed that interest in the Družba Adria project lapsed, but in my view the evidence shows that Russia wants to keep it alive. In 2010, Putin met with his then Croatian prime minister Jadranka Kosor in Moscow precisely to discuss resurrecting the project. Discussions to revive the project between lower-ranking Russian and Croatian officials had started as early as February 2009, just a few months before the transactions between Xenoplast and the Cypriot companies owned by Gutseriev. Russian oil majors Gazprom, Lukoil and Transneft participated in the talks along with Janaf, the company running Croatia’s transit Adria pipeline.

Earlier this year, the Russians indicated support for a new LNG terminal in Krk on grounds that it would still need Russian gas. “The cheapest gas is still Russian,” said Anvar Azimov, Russia’s ambassador to Zagreb. In this scenario, the Krk terminal could allow Russian gas to be supplied to European markets instead of US shale.

Fazakas’ new testimony reinforces my suspicions that Croatia’s star witness Robert Jezic had served as a Trojan horse for Russian geopolitical and energy ambitions. Fazakas pinpointed both Jezic and Hurlimann as intermediaries of the Russian gambit in Krk – the central pivot in the Družba Adria project.

In fact, Gutseriev is not the only Russian connection. Jezic’s business partner Hurlimann, who facilitated the €5 million payment to Xenoplast, has direct ties to another Russian billionaire oligarch through his legal firm Wenger & Vieli. The firm’s partner, Dr Wolfgang Zurcher sits on the Board of Directors of Zublin Group, majority owned by Viktor Vekselberg, who is reputedly close to Putin. I believe that this relationship raises the urgent question of how deep Putin's influence extends over this Swiss law firm and the activities of its partners, such as Hurlimann.

As the evidence of Croatia’s alarming vulnerability to Russian geopolitical influence deepens, Croatia is angling to join the EU’s Schengen area for free movement. The country also wants to join the Eurozone and will bear the presidency of the European Council next year.

These increasing efforts to integrate into the EU system represent a serious danger to the bloc. Colossal corruption in the Croatian judiciary, in my view, has provided an opening for Putin to accelerate his grand strategy to encircle Europe via the weapon of energy.

Dr Theodore Karasik is a Non-Resident Senior Fellow at the Lexington Institute and a national security expert. He worked for the RAND Corporation and is widely published in international media outlets.

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