SOCAR, DESFA, and the Greek crisis

/By AzerNews/

Gulgiz Dadashova

Bankruptcy-threatened Greece and its creditors – the European Central Bank, the International Monetary Fund, and the European Commission – have today launched talks on policies that Athens must implement over the next three years in return for loans worth as much as 86 billion euros.

After five years, two bailouts, and the deepest recession in more than half a century, the Greek government agreed on July 13 to apply stricter reforms, one of which is to sell off 50 billion euros in state assets.

Athens is trying to concentrate on the development of strategic projects that will bring dividends in the future.

One such project could be the privatization of DESFA and subsequent investments from Azerbaijan’s SOCAR, which agreed to pay 400 million euros to buy a 66 percent stake in the company in the summer of 2013.

The Greek natural gas transmission manager, DESFA, plays a crucial role in the realization of major pipeline projects including the Trans-Adriatic pipeline, Greece-Bulgaria Interconnector, and the newly proposed Turkish Stream.

The agreement in 2013 to sell a majority stake in DESFA to the Azerbaijani company was stalled by a European Commission investigation in late 2014 over EU competition and energy security concerns.

Later in early 2015, the new Greek government announced that it would sell only 49 percent to SOCAR, however, the Azerbaijani side countered that it sought to fulfill its original 66 percent stake.

The Greek side must remember that the more shares it holds, the more it must invest into DESFA projects, which is highly improbable given the current climate in Greece. This would also make the project less profitable for SOCAR and it is doubtful that SOCAR will participate in the project on such terms. The company therefore refused to yield and change the existing arrangements.

“SOCAR wants to buy two-thirds of Greek gas-grid co. DESFA as originally agreed,” the head of SOCAR investments department Vaqif Aliyev said in Baku in June. “The tender was for 66 percent of DESFA, and we won the tender.”

The European Commission’s decision, along with the new Greek government’s objections have delayed the process whereby SOCAR had already provided a 40 million-euro down payment and had concluded the drafting of several investment projects with the Greek side.

DESFA has put forward plans for the period of 2015-2025 that will require more than 2.2 billion euros for domestic projects both planned and ongoing, according to Euractiv.

However, the obstacles for SOCAR’s acquisition of DESFA shares will nevertheless have a negative impact on its investment plans.

Should SOCAR indeed drop its bid, DESFA will need to search for another foreign investor that would be able to guarantee its investment strategy since the Greek economy faced bankruptcy.

Now, the Greek side should understand that the Baku-proposed energy projects would help it to realize its plans along with bringing stable revenues and creating new jobs.

The more the decision on the DESFA drags on, the less SOCAR is interested in pursuing the purchase – since time is, indeed, money.