The European Commission has opened an in-depth investigation to determine whether Romania’s decision to write off debts at state-controlled petrochemical company Oltchim breaches state aid rules. The Romanian government has a controlling stake of 54.8% in Oltchim, which was declared insolvent in January 2013 and is currently in the process of being restructured ahead of another privatisation attempt. A previous privatisation in September 2012 failed since when the firm has accumulated further public debt.

The Commission said it would examine the debts owed to the Romanian Authority on managing state assets (AAAS), debt cancelled by AAAS and other state-owned firms as well as the continuing provision of electricity, steam and saline solutions to Oltchim.

"Our aim is to facilitate a sustainable future for the economic activities of the company without the need for further government support," Competition Commissioner Margrethe Vestager said.

The Commission is also concerned that the privatisation process, as currently planned, may lead to economic continuity between Oltchim and a future buyer. However, it said it welcomed the fact that the Romanian authorities had signalled their interest in avoiding a situation where a buyer would benefit from any past aid granted to Oltchim and could be liable to pay it back.

Oltchim is the only producer of liquid caustic soda in Central Europe, and the only producer in Romania of chlorine and polyether polyols. It exports around 70% of its output.