NICOSIA – The European Union is probing alleged corruption involved in a planned gas terminal on Cyprus it helped fund but wasn’t constructed by a Chinese-led group given the project, and wants back 1o1 million euros ($109.35 million) in funds.

The Financial Times said the gas import terminal project was set aside although a 2018 government under then-President Nicos Anastasiades awarded a 542 million euro ($586.79 million) contract for its development.

https://www.ft.com/content/7e781ac3-5b3d-4b32-8e5d-17cf60c997fd

The Vasilikos liquefied natural gas (LNG) terminal project was given to a consortium comprising China Petroleum Pipeline (CPP), Hudong-Zhonghua Shipbuilding, Norway’s Wilhelmsen Ship Management and the UK’s Metron.

The project, designed to reduce the country’s reliance on imported oil, was originally due to be completed by 2019, the report said, adding that it ran into delays, the deadline extended to 2022 and beyond.

The deal fell apart on July 18 over complaints the consortium didn’t meet contractual obligations and the Chinese company went to international arbitration in London to get 200 million euros ($216.53 million) for the undone work.

The EU’s agency in charge of Climate, Infrastructure and Environment, Cinea, on July 24 sent a request to the Cypriot government to explain what happened to the EU funds and seeking return of what it approved, the business site said.

Cyprus has already received 69 million euros ($74.7 million) earmarked for the project, officials on the island said, but not identified and the European Public Prosecutor’s Office (EPPO) said it was investigating suspicion “of procurement fraud, misappropriation of EU funds and corruption.”

Cypriot Energy Minister Giorgos Papanastasiou said his government had asked for 30 days to respond and after an emergency meeting said the case has not “put the country at risk,” without elaborating.

President Nikos Christodoulides said the government of Anastasiades – which he served as Foreign Minister – shouldn’t have picked the consortium for the work but said “the project will be implemented,” but didn’t give a timeline.

PIPE DREAM

The EPPO, which is responsible for investigating and prosecuting crimes against the financial interests of the EU, said its probe followed a January report by Cyprus’s national audit office. Cinea also provided information to EU prosecutors.

“After receiving this information and examining it in detail, the EPPO has taken the decision to open an investigation, in order to inquire into the contracts awarded by the public authorities,” it said.

In its public 142-page report, the Cypriot national audit office described the multiple times that it raised concerns about delays, increasing costs, and the quality and safety of the project and said the contract should be withdrawn.

But Cyprus’ natural gas company, ETYFA, said that can’t happen because the long-delayed terminal is critical, without explaining why it hasn’t been for the last six years of being held up by snags.

The consortium asked for an extra 25 million euros ($27.07 million) to cover higher steel costs, which was approved by the government over the objection of the national audit office not to do so.

The report said that ETYFA also waived its right to seek damages from the consortium over unreasonable delays in another concessions to the companies who haven’t fulfilled the contract.

That led to ETYFA on July 18 stopping the project, citing a “series of violations” of contractual terms by the Chinese-led consortium “leave no room than terminating this agreement” and pursuing legal action against the companies.

When asked about allegations that the Chinese-led consortium had not been paid, Cypriot officials said ETYFA had fully complied with its contractual obligations but didn’t give any details about the terms.

Papanastasiou said new bids would be sought imminently with the aim to complete the project “in eight months,” but didn’t say how it could be accomplished in such a small time-frame given its complexity.

The consortium, individual companies and ETYFA did not respond to requests for comment. The EU commission said it was aware of the investigation but declined to comment, the report added.