ECONOMY

Shifty ground under ELPE’s investment in OKTA seems to have undermined prospects

It is an open secret that in most Balkan countries the implementation of investment plans does not always follow legal channels. The growth of collateral state mechanisms and the entanglement of political and economic interests are often cited as adverse factors by Greek businesspeople active in the area. It may be true that the use of illicit tactics helps get things done faster but it has also been proven that they can just as well lead to traps, delays, serious complications and litigation, not only within the country of investment but also before international courts. By all indications, public firm Hellenic Petroleum’s (ELPE) investment in a 70 percent share in the Former Yugoslav Republic of Macedonia’s (FYROM) OKTA refinery did not follow the most prudent route. The ongoing standoff with the FYROM government, which has set out to abolish what it claims are OKTA’s monopolistic privileges granted by its predecessor, is now threatening to overturn ELPE’s investment planning and overall Greek economic interests in the area. According to reliable sources in Skopje, one man played a key mediating role in the troubled deal – his name is Manolis Malelis. Malelis had early on developed a very good personal relationship with former FYROM Prime Minister Ljubco Georgevski – well before his ascent to the post – and is said to have offered his services in a number of Greek investment schemes in the country. The proposal for the OKTA deal was laid on the table by ELPE prospective partners and was immediately adopted. «Malelis managed to pull it off, with benefit not only to himself but also to those FYROM officials who gave the green light to the deal,» says a well-informed source. Unsafe deal To be sure, the deal contained no protection clauses for ELPE. It said, for instance, that the liberalization of the local market would apply as of 2004, but did not contain any provision for the event that this was unilaterally overturned, which has happened automatically with the signing of the EU-FYROM association agreement. OKTA’s first Greek managing director, Athanassios Karahalios, holds the same post in the parent company (ELPE) today. Malelis – to no one’s surprise – was appointed marketing and public relations manager. The Georgevski government came under strong fire from the opposition and the press. Its subsequent shilly-shallying on the deal, which was complicated by the construction of a crude oil pipeline running from Thessaloniki to Skopje, came as a surprise to ELPE. They did not expect such a thing from their «own man.» Last spring, Skopje-based Mak Petrol was granted a license to import petroleum products when OKTA already more than covered local requirements and the pipeline was expected to open later in the year. As a result, OKTA was forced to reduce refined quantities and suffer a revenue cut. It reported losses of 1.7 million euros in 2002, and is not expected to go into the black this year. Meanwhile, opposition leader Branko Crvenkovski, in view of upcoming elections in September last year – which he eventually won – warned he would «oppose any criminal economic activities, no matter where the related investments originate.» Under pressure from Georgievski, Karahalios consented to a new deal for Mak Petrol which is now described as being mistaken; the local company was compensated by ELPE, through OKTA, with the sum of $4 million, in return for being exclusively supplied by OKTA-finished products at agreed-upon low prices. At the same time, ELPE agreed to put on hold its contractual right to develop its own gas station network in the country, so that this would not put competitive pressure on Mak Petrol, which was in financial trouble and was bailed out in this way. Crvenkovski stuck by his pre-election pledges: In December of 2002, FYROM’s Constitutional Court annulled the law ratifying the bilateral agreement for the Thessaloniki-Skopje pipeline and the right of OKTA to import petroleum products from Greece by paying custom duties of only 1 percent, compared to 20 percent for other importers. Pressures on OKTA continued (based on the likely problems that would ensue from a war in Iraq) to increase its strategic reserves, under threat that more importing licenses would be granted to third parties. This materialized quite recently, while impediments were placed on OKTA’s efforts to acquire an exporting license to Kosovo and its bank accounts were frozen from time to time. To crown it all, the plan for a pipeline to carry finished products to Kosovo – with possible extensions to southern Serbia – has also been halted. By now, things are also getting uncomfortable for Malelis: He faces possible arrest in FYROM and has received threats to his personal safety. According to sources, he notified ELPE management that his prosecution or other threat to his person would «drag many others along in Greece.» It seems to have worked, because he has remained in his post. Karahalios was moved to ELPE – Greece’s biggest company in terms of sales – more than a year ago, and a second successor is now in place in the person of Apostolos Rafailidis. On April 8, the Greek group announced the appointment of Giorgos Halvatzoglou to the post of OKTA chairman, which was hitherto held by a FYROM government appointee. Officially, the change aimed at increasing flexibility in the face of the mounting attack. It was accompanied by Malelis’s replacement. The dispute has naturally also involved the Greek government. Development Minister Akis Tsochadzopoulos held talks with Crvenkovski in Athens last month and has said he planned to reciprocate by the end of this month. It is apparent that what Athens should aim for now is a comprehensive review of bilateral economic relations – rather than a focus on the OKTA affair itself – as part of more general considerations of the country’s presence in the Balkan neighborhood.