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Victoria Mindova

The news of the failed deal of Greek gas company DEPA’s sale was swept away by the announcement of the closure of the state broadcaster ERT. The problem of the collapse of the privatization, which is the most important part of the programme of the three-party coalition government in Greece, remains on the agenda whether local media reflect it or not.

Although the macroeconomic indicators of the country have been improving, the end of the crisis is still far away. The privatization of key state enterprises is the basis of the programme to attract foreign investment.

After the sale of 33% of OPAP, the privatization of the state-owned gas company was the most important deal that the Greek government could have completed to show foreign investors that the country is ready to turn a new page.

However, the deal has failed, leaving many questions without answers. The Russian gas giant Gazprom clearly stood out among the rivals for the purchase. In recent months, Gazprom’s Deputy Chairman of the Board of Directors Alexei Miller had visited Athens several times. He met face to face with Prime Minister Antonis Samaras and representatives of the company. The government paid special attention to the Russian company, which has unexpectedly withdrawn from the deal.

We have sought the opinion of Panos Michalopoulos, a representative of the Drasi party, who comments on the developments as an independent observer.

How would you comment on the failure of the deal of DEPA’s sale?

A clear framework for the functioning of the market is necessary before starting the privatization of a state monopoly such as the national gas company DEPA. This means that a proper legal basis for the formation of the market in favour of the consumer should be established first and then subsequently the tender for privatization should be announced.

Another problem associated with DEPA’s privatization was the relationship between the government and Gazprom. The procedures to be implemented during the tender were superficial and opaque.

What do you mean?

It is impossible for the government to officially announce that there were a series of meetings with Gazprom related to the price of the privatization deal and for the natural gas price, and then for the whole process to fail.

It is impossible for us to find out at this point that we will buy natural gas at a price that is 30% higher than the average in Europe and to believe that the tender was conducted properly and in the interest of consumers.

The whole procedure and the special attention the government had paid to Gazprom excluded other investors from the process. They did not have direct access to the Prime Minister's office, as was the case with Gazprom.
 
This is a very serious problem in itself because it makes the country unreliable in the eyes of foreign investors, regardless of whether it concerns DEPA or another company that, until now, has held the state monopoly in a particular sector.

So, do you believe that it had been largely predetermined who would receive the gas company?

When there is a special organization such as the Privatization Agency but all meetings and decisions pass through the Prime Minister’s office, it is clear that the processes of DEPA’s sale are not in accordance with the accepted rules. If so, why has a formal public tender been announced and why has an Agency been established, which is deprived of the right to do its job.

How would you comment on the price of natural gas to Greece? Do you think that there are violations in this regard?

There is a problem with the prices in the energy market in Greece in general. We have recently realized that we are buying natural gas at significantly higher prices than other European countries, whether they are members of the European Union or not. This is a heavy burden for the activity of the Greek industry. New data on the state of Greek production are constantly being published. Manufacturers are trying their best to keep the factories and workshops in the country but many of them either close or transfer their activities to other countries where electricity prices are much lower.

What, in your opinion, is the cause of the higher price of natural gas in Greece in comparison with its average value in Europe?

The first reason is a bad arrangement on the part of the seller which, in this case, is the Greek government. I think that the talks related to the prices of natural gas were not properly carried out in order for us to ensure a price closer to the average value accepted in Europe.

We do not know whether this is the result of international pressure or of other interests behind this deal. What is clear is that the specific deal is not in favour of the Greek households or of DEPA’s industrial customers who consume natural gas.

Do you believe that the informal intervention of Brussels in DEPA’s privatization, which is being widely discussed at present, has been in Greece’s favour?

The truth is that there is no concrete evidence of Brussels’ interference in the process. Even if this is so, the Greek government remains responsible for the completion of the deal. It must inform both the European Commission and the consumers about the course of things.

It is impossible for us, as citizens, to find out that we are buying natural gas at prices 30% higher than those in other countries in Europe or that the success story of the government may pose a problem to the European Commission. This can be called a completely superficial attitude towards things. Even if there are backstage developments, they are the responsibility of the government. It played a leading role in negotiating how we would buy natural gas and in what way.

The Drasi party is an advocate of the idea of ​​market liberalization and of the development of a free market economy. How do you think the liberalization of the energy sector should be completed and the gas issue addressed?

We are "for" the privatization but it must be carried out through specifying and observing rules and laws, and in a transparent manner. A basic prerequisite is to create a proper legal framework for the market activity before the start of privatizations. This applies not only to the gas company DEPA but also to the companies that manage water distribution, electricity and all other state monopolies that are to be sold.

We are opposed to replacing a government monopoly with a new private monopoly or oligopoly. This means that more than two or three companies must provide a service and compete for the consumers. A simple sale that will help the state monopoly pass into private hands for the sole purpose of bringing a sum of money to the treasury is an inadequate and ineffective action. As you can see, at the moment, the amount that we will receive from the sale is significantly lower than the fair value of the state companies due to the present conditions. This is certainly not a success.

Does this mean that the tender for the sale of the gas company was incorrect from the start, because the four companies that were interested should have obtained and should have actually become the new owners of DEPA?

Yes, it does. Let us explain it more clearly. One of the problems that spoilt the deal with Gazprom is the obligations of some of the customers (large industrial enterprises) to DEPA and some questions have emerged in this respect.
 
How did it turn out that, all of a sudden, the Greek government had given the potential buyer special guarantees for the unpaid obligations to DEPA? Should the government have given the same guarantees to another investor, not only to Gazprom? Why had these details been hidden until the last moment and come to the surface after the failure of the deal?

Obviously, we showed complete mediocrity in creating the tender and absolute opacity in the implementation of the procedures. If there are clear rules on how the energy market in Greece should act, whether we are talking about natural gas, electricity or renewable energy, we will be able to attract more investors who will have equal access to information which will enable us to achieve the best possible result. When an investor is unaware of the conditions under which he should operate in the market after the privatization and how, he will not risk a single euro.

The government and the Privatization Agency denied having given guarantees for the repayment of outstanding obligations of private customers to DEPA. Here there are some unclear points for us, as outsiders. Can you tell us whether there are government guarantees or not?

The situation is not clear to us either. The first official announcement by the Deputy Minister of Energy had left us with the impression that the government had given Gazprom guarantees as regards the payment of the full amount of overdue obligations of customers to DEPA. Then, Gazprom made it clear that they had not received guarantees for the payment of all obligations but only for some of them. Finally, the Privatization Agency, which is the third factor in the deal, has firmly denied having given any guarantees by saying that there is no investment without any risk.

There has been no specific message related to the issue from the Greek side but it is clear that the government had given some guarantees in one way or another. The problem is that this whole process has excluded from the tender other local and foreign investors who might have expressed interest in the deal.

The statements of the Prime Minister show that he recognizes, perhaps unwittingly, that he was surprised by Gazprom’s withdrawal from the tender since there was a deal. Here comes the question of "How could you have agreed since the tender is not over yet?", which means that something was wrong from the start.