JULY 27 2016 (The Conway Bulletin) — A legal battle between Kazakhstan’s KMG International and the Roma- nian government risks stalling a $680m deal to sell a majority stake in the Kazakh company’s refinery to China’s CEFC.
KMG International, formerly known as Rompetrol, is preparing to lodge a lawsuit against the Romanian government over the seizure in May of its assets, according to the FT.
The Romanian government has said the Petromidia refinery, the largest in the country, was illegally privatised in the early 2000s before Kazmunaigas bought Rompetrol.
KMG International has now submitted a legal note to the Romanian government that will escalate the dispute.
“Romania is using its governmental power to undermine that transaction and re-nationalise the assets,” the FT quoted KMG International as saying in a letter to the government.
KMG International had to delay finalising the deal with CEFC, which in December agreed a $680m fee to buy 51% of the refinery.
Robert Cutler, Senior Researcher at the Institute of European Studies at Carleton University, Montreal, said that Romania was looking to block the sale.
“Kazakhstan is about to find out what it is like to be on the receiving end of ‘resource nationalism’, which it [Kazakhstan] has successfully used against foreign investors over the last decade,” he told The Conway Bulletin.
This delay and the asset freeze has angered officials at both KMG International and Kazmunaigas, its parent company.
Senior company officials have said that they will take legal action if the refinery sale is delayed.
Romanian investigators have focused on recovering cash from an allegedly illegal privatisation of the refinery in 2003, when the late Dinu Patriciu bought Petromidia for $760m. In 2007, Patriciu sold Rompetrol, which controlled Petromidia, to Kazmunaigas for $1.6b.
In the following years, the government acquired an 18% stake in the refinery.
Now, analysts say, the government might be looking to renationalise the refinery, an important and lucrative asset for Romania.
ENDS
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(News report from Issue No. 291, published on Aug. 1 2016)