Oil dependence is turning against Serbia

NIS, Serbia’s state-owned oil company, is majority-owned by Russia. As a result, it is now subject to US sanctions. The first consequences are already visible.

Serbia is facing serious problems due to the 2008 economic agreement with Russia, when it sold its financially troubled state oil company NIS (Naftna industrija Srbije) to the Russian state oil company Gazprom Neft.

Serbia hoped not only for economic but also political benefits, especially Russian support in the Kosovo conflict.

Today, Gazprom Neft and Gazprom together own approximately 56 percent of NIS, which is why the Serbian oil company became part of the US sanctions package against the Russian energy sector at the beginning of this year.

Croatian JANAF temporarily suspends deliveries

The fact that Serbia’s most important oil company has been affected represents a kind of geopolitical fate, said Serbian Energy Minister Dubravka Đedović Handanović.

“The sanctions were not imposed because of Serbia or the Serbian government. US President Joe Biden imposed them against Russia and its energy sector at the last minute of his term. For us, the energy supplier NIS is extremely important and of vital significance. As a country, we are affected by the fact that two great powers are waging war,” said Đedović Handanović.

Shortly thereafter, Donald Trump became president of the US, and exceptions were made to the sanctions for NIS so that Serbia’s energy supply would not be jeopardized. But since October 9, that is no longer the case. There are no more exceptions, NIS is now truly under sanctions, and the consequences are already visible.

Since Serbia produces less than a quarter of its crude oil needs, NIS receives crude oil mainly from countries such as Kazakhstan, Azerbaijan, and Nigeria. It is transported to Croatia by tankers, where it is fed into the pipeline to Serbia. Following the imposition of US sanctions, the Croatian company JANAF has suspended deliveries to NIS.

Accusations against the Serbian government

Criticism is coming from the opposition in Serbia. Dušan Nikezić, an economic expert from the opposition Social Democratic Party (SSP), believes that Serbian President Aleksandar Vučić has done nothing to reduce dependence on Russia, even though it has long been clear that the US would one day impose serious sanctions.

“I am surprised by the government’s irresponsible approach to this problem. Now the energy minister is telling us that we were just waiting to see if the NIS management had a plan,” says Nikezić.

Vučić had several opportunities to discuss this issue with Russian President Vladimir Putin. “The result is that Putin said, ‘We will cut off your gas too.'”

Gas contract extended only until the end of the year

The ten-year gas contract with Russia’s Gazprom expired in May. The Russian side extended it only until the end of the year.

Now there is speculation in Serbia that Russia wants to put pressure on Serbia so that NIS does not return to state ownership.

Russian Ambassador to Serbia Aleksander Bocan-Harčenko denied this:

“We will not stop gas supplies to Serbia. We will continue at the best prices.”

Return of ownership to Serbia?

A few days ago, President Vučić discussed NIS at a meeting with Alexander Dyukov, Chairman of the Management Board of Russia’s Gazprom Neft, and Pavel Sorokin, Russia’s Deputy Minister of Energy. The exact solution was not disclosed, but Vučić promised the citizens of Serbia that there would be no energy crisis.

“Times are not easy. However, I can assure the citizens of Serbia that there will be no shortage of oil or any oil derivatives in Serbia, nor will there be an energy crisis. Our Russian friends understood our message, and we understood their interests. And we will do everything that is tactically and strategically best for Serbia,” Vučić said.

Serbian media claim to have learned from multiple sources that the Serbian state plans to buy back part of its stake in NIS so that Russian state-owned companies would no longer be the majority owners. If Russia’s situation on the international stage “normalizes” one day, the purchased shares could be sold back to Russia – this is presumably the plan.

Is the energy crisis coming?

For now, there is no energy shortage in Serbia. However, some citizens are already concerned that they will have to buy gasoline in bottles and canisters again, as they did during the war in the 1990s.

Citizens are already feeling the first effects of the sanctions. NIS and Gazprom petrol stations in Serbia have been excluded from the Visa, Mastercard, and American Express payment systems./DW/