QUESTIONS remained yesterday over precisely what deal the government had struck with international lenders – the troika – on the management of future proceeds from natural gas.

Around 11 days ago, the finance ministry sent to the troika the commerce ministry’s draft law for a national hydrocarbons fund that would manage gas revenues.

But according to daily Alithia, the troika was not happy with the contents of the bill. The paper said the troika informed the finance ministry that the proposed legislation violated the terms of the memorandum of understanding (MoU) with the government.

The troika was allegedly not convinced the bill ensured transparency in the management of the national hydrocarbons fund and failed to follow international practices. The international lenders reportedly asked the finance ministry to block the bill’s approval until consultations were completed.

It has since been confirmed that Finance Minister Vassos Shiarly did receive an email from the troika. Sylikiotis complained he had not seen the message, and questioned how the newspaper got its hands on an email that he was not even informed about.

Appearing on the state broadcaster on Wednesday, an irate Sylikiotis suggested that through the finance ministry’s mishandling of the issue, the troika would get to have a say in the management of the island’s gas revenues. This, he warned, would impinge on the country’s sovereignty and place the management of the revenues under the approval of the troika.

But yesterday Sylikiotis said his remarks were misunderstood. He never intended to imply that the finance ministry had adopted the troika’s position, he said.

“The Finance Ministry responded [to the troika] that it would study the matter. This does not mean that they are adopting the troika’s position. It is one thing to study something, and quite another to adopt it,” he said.

Under the preliminary agreement with the troika published in November, Cypriot authorities are to “prepare and adopt legal steps enabling the establishment of a resource fund, which should receive and manage the public revenues of offshore gas exploitation.”

Regarding the inflow and outflow of money, the fund’s management should give due respect to: the need to develop the hydrocarbon industry, including the necessary infrastructure; the importance of bringing Cyprus’ public debt on a steady downward path; and the need to invest for future generations.

As a first step, the government was obliged to submit its draft legal framework “for review” by the troika taking into account international best practices, as well as a detailed action plan within the second quarter of 2013.

“For review” is the operative – and contentious – phrase. Sylikiotis insists this should be interpreted as merely briefing the troika on the resource fund, and not asking for its permission.

Sources in the government told the Mail that nothing has changed since the preliminary agreement was struck with the troika. Questions over apparently differing interpretations of the MoU should be addressed to the commerce minister, they said.

Sylikiotis could not be reached for comment.

The same sources said it is their understanding that by June this year parliament must pass a law governing the resource fund on hydrocarbons. As agreed with the troika, any revenues from gas would not go to the recently-formed state hydrocarbons company (KRETYK).

Because gas revenues are not expected for many years to come, they cannot be included in the budget and as such have been designated as “extra revenues” for the state. That’s why parliament will pass legislation specifying how the revenues are managed once they start flowing.

The sources said also the law would spell out the respective percentages of the revenues for paying off the public debt, for investing in energy infrastructures and for savings for future generations.

It was their understanding that the lion’s share of revenues would go toward servicing the debt.

Moreover, any law passed here would be sent to the troika for “review,” the sources said, without elaborating.

In a related development, the House Finance Committee yesterday denied releasing €1m for the initial share capital of KRETYK.

MPs of ruling AKEL and EDEK wanted to release the cash, but they were outvoted by deputies from DISY, DIKO and the Greens.

Sylikiotis had issued a plea to lawmakers to release the funds so that KRETYK could start operating. Failure to do so, he warned, would delay negotiations with Noble Energy and put on ice broader plans for infrastructures to exploit Cyprus’ gas.

The government and the opposition have been locked in a tug of war over KRETYK; they claim that Sylikiotis hoodwinked them in establishing the company without consulting them.

The government’s request for the €1.0m will be revisited at the next session of the House committee, which will however, convene after the presidential elections and a new government takes office.

Published by: www.cyprus-mail.com