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Watch as Russia Descends on New EU Member Croatia

Bottom Line: Now that Croatia has joined the European Union, Russia will work hard and fast to get its foothold in the Balkan country’s energy market, where location gives it better access to Central and Southeastern Europe.

Analysis: Croatia joined the European Union on 1 July, but already in January Gazprom and other Russian energy companies were busy trekking back and forth to Zagreb with energy overtures. Gazprom’s head honchos Aleksei Miller, Aleksandr Medvedev and Aleksandr Dyukov were in Croatia earlier this year, and last month Rosneft CEO Igor Sechin led a delegation to Zagreb to hold talks with the highest levels of Croatian government. There’s a good connection, too. Rosneft’s vice-president is Croatian-born Zeljko Runje. Sechin is also Putin’s energy commission chief, and while he was technically visiting Croatia on behalf of Rosneft, he was in reality there on behalf of Russia’s state-owned companies.

The short version of this story is that Russia appears to be eyeing Croatia as a new hub for its Central European and Southeastern European energy operations. Basically, it is eyeing Croatia as a more convenient bridge to other countries in the region—now that it is a full-fledged EU member. Croatian media downplayed the extent of the talks, but did mention that Rosneft was considering buying a stake in Croatia’s INA oil and gas company, the country’s largest business in any sector. And later in June, Croatia signed a joint statement of interest with Rosneft that could see Rosneft invest in Croatian energy projects in the areas of transportation, transportation infrastructure and storage. At the same time, both GazpromNeft and Rosneft are interested in exploring for oil and gas in Croatia--onshore in the east and offshore in the Adriatic—for which we expect tenders soon. Gazprom is also eyeing the potential for an LNG terminal on Croatia’s Adriatic coast because of the easy access to Central European and other Southeastern European markets. If someone else gets their hands on a terminal in this area it would hit at Russia’s control over the European gas market.

Croatian Energy

Recommendation: Look to GazpromNeft and Zarubezhneft to make a play for the Croatia’s refineries and possibly some deals to build pipelines and export terminals. In short, look to Russia to attempt to win the Croatian market as it has the Serbian market.  Also keep an eye on Croatia’s new oil and gas legislation, which is still in parliament. Once this passes it will only be a short time before we see tenders for exploration blocks and we expect Rosneft to be first in line.




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