It’s All Greek to Me: The Bailout & Greece’s Oil, Gas Industry

by Andreas Exarheas, Assistant European Editor

Following Alexis Tsipras’ resignation Aug. 20, the leader of the left-wing Syriza party was once again voted in as Greece’s Prime Minister after a Sept. 20 snap election.

Tsipras was first elected in January 2015 after championing an anti-bailout stance; he agreed to a third bailout package for Greece worth almost $100 billion July 13. Following the agreement, a number of Syriza MPs defected from the party, forming their own movement called Laiki Enotita (Popular Unity), which led to Tsipras losing his parliamentary majority. In an effort to reclaim power, Tsipras resigned, called a snap election and hoped that the Greek people would vote him back in. Fortunately for one of the youngest PMs in Greek history, his plan worked.

The Third Bailout & Greece’s Oil, Gas Industry

Before the latest bailout agreement, Syriza’s Energy Minister Panagiotis Lafazanis was actively against privatizing the country’s energy sector. In an interview with Greek newspaper Ta Nea, Lafazanis stated that “no privatization will go forward” when talking about the privatization package that the previous Greek government had set up for Greece’s energy sector. This included Hellenic Petroleum (ELPE), which focuses its exploration and production activities in Greece, and the Public Gas Corporation (DEPA). After the third bailout was agreed, Lafazanis objected the PM’s decision and was subsequently dropped by Tsipras, who drafted in a new energy minister that was more supportive of the bailout conditions.

Syriza’s about-face on privatization, evident by the agreement of a third bailout deal, suggests the sale of ELPE and DEPA is back on the table. Greek newspaper Kathimerini stated on its website in July 2015 that offshore oil or natural gas drilling parcels may also be sold to raise the $56 billion required by Greece’s international creditors, as part of the bailout’s privatization push. Considering the fact that the memorandum of understanding on the third bailout package, signed by Greece and the European Commission Aug. 19, stated that the agreement will involve an “ambitious privatization program”, it wouldn’t be surprising to see Greece sell off even more of its energy assets to appease its lenders.

As well as outlining one of the most radical privatization schemes in the European Union, the most recent memorandum of understanding between Greece and the EC stated that the Greek energy markets need “wide-ranging reforms to bring them in line with EU legislation and policies, make them more modern and competitive, reduce … inefficiencies, promote innovation [and] favour a wider adoption of renewables and gas”. While selling off state energy assets in order to pay international creditors who impose strict austerity might be a bitter pill to swallow for Tsipras, the prospect of improving the country’s energy sector will certainly be welcomed by the Greek PM. At this stage of the deal however, it is unclear what effect the proposed focus on renewables will mean for the country’s oil sector.

In relation to Greece’s oil and gas industry, the latest bailout package offers a variety of good and bad points for the country. There is still a big question mark over the viability of the deal however, with skeptics like Greece’s former finance minister Giannis Varoufakis repeatedly stating the new bailout would ultimately fail. Tsipras’ continued pledges to keep fighting the scale of the austerity measures imposed by the latest bailout deal also casts some doubt over how serious the Greek leader is about enforcing the planned reforms set out by the country’s international creditors. Judging by the nature of negotiations between the parties over the course of the summer, it seems extremely unlikely that the third bailout arrangement, along with all its associated changes, will be implemented in Greece without further problems, renegotiation or delays. No one knows for sure exactly what issues of this nature would mean for Greece’s oil and gas industry, but we won’t have to wait very long to find out.

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