Sanader denied the existence of a tacit agreement with his government under which INA was exempt from paying 2 billion kuna (274 million euros) in excise taxes.

"(Finance Minister Ivan) Suker was right. There was no tacit agreement exempting INA from payment," Sanader said when asked by commission chairwoman Dragica Zgrebec whether the statement by former INA CEO Tomislav Dragicevic about a tacit agreement with his government was true.

Sanader said the government did not want to enforce the collection of the tax because it would have risked INA's bankruptcy and loss of jobs.

"If we had behaved just like an owner, we should have closed INA down, but being a responsible government we had to take into account the welfare policy as well," Sanader said.

He said that government funds had been used to rehabilitate companies in other sectors, such as shipbuilding, textile industry and agriculture, adding that it was logical for the government to wait for INA to recover so it could pay excise tax.

Sanader confirmed he had known that INA got into trouble towards the end of 2008 and was facing bankruptcy, but that the reason was the global economic crisis. He said INA's management had probably stockpiled oil supplies at a time when oil was expensive on world markets, and when oil prices fell sharply there were discrepancies in the books.

In the continuation of the hearing, Sanader was questioned by commission members from the ruling coalition.

When asked if the government had discussed annual reports on INA's business operations, Sanader said that the government had discussed INA every two or three months, in accordance with the government's obligations under the law.

He recalled that Hungarian oil company MOL became INA's strategic partner after acquiring 25 per cent plus one share in 2003, at the end of the term of the Social Democratic Party-led government of the late Ivica Racan, and that the practical implementation of the privatisation agreement fell to his government.

"One of the first tasks of my government, in February 2004, was to pay 5.5 million kuna (753,000 euros) to a privatisation adviser which the previous government had failed to pay," Sanader said.

Sanader said that the government had also discussed time frames for the modernisation of oil refineries, preparations for the initial public offering of INA shares, the transfer of shares to veterans and sale to employees, and the impact of rising oil prices globally on the domestic market.