Serbia: Defies boycott of Russia and concludes new agreement with Gazprom

By Lidia Kurasinska

At a time when states around the world are imposing sanctions on Moscow and looking for ways to break free from Russian fossil fuels, Serbia is ready to sign a new multi-year contract with Gazprom for the supply of natural gas.

Last week, Dušan Bajatović, director of Serbia’s state-owned gas provider, Srbijagas, said talks with the Russian gas “giant” would begin in the coming days and should be completed “by 15 May at the latest”. . The agreement will be valid for 10 years.

Serbia, a candidate for EU membership that has had close ties with Moscow for years, defies European warnings that it will “pay the price” for its refusal to impose sanctions on Russia for its invasion of Ukraine.

Serbia’s dependence on Russian gas

Under the new agreement, Russia will deliver 3 billion cubic meters of gas a year to Serbia. The price, which is estimated at $ 600 to $ 850 per 1,000 bcm, will be a combination of the so-called “oil formula” and the market price. The agreement is expected to provide flexibility in quantities due to fluctuations in gas use during the summer and winter seasons.

Serbia currently supplies Gazprom with 6 million cubic meters of gas per day at a price of $ 270 per 1,000 cubic meters.

Belgrade’s previous contract with Gazprom expired on December 31, 2021, but the company agreed to continue supplying gas to Serbia at the same price until June 2022.

On March 19th, Serbian President Aleksandar Vučić said on a television show that his country was paying a minimum price for gas supplies. “$ 270 per 1,000 cubic meters is almost free, if one considers that its current price on the Commodity Exchange is $ 1,160,” he said.

As Serbia is almost entirely energy dependent on Russia, the new agreement could trap Belgrade in 10 years of political dependence on Moscow.

Since 2008, Gazprom has owned a majority stake in NIS, Serbia’s national oil and gas company. The sale came as a political deal, giving Moscow the right to launch the construction of a gas pipeline to Europe via Serbia, in exchange for its support for Belgrade’s Kosovo positions.

From 1 January 2021, Gazprom will supply natural gas to Serbia via the Balkan Stream – 402 km long – which is an extension of Turk Stream.

Belgrade is skeptical of the West

The EU and the Energy Community, an organization created between the European bloc and third countries between them and Serbia, have been trying for years to promote the diversification of the “energy supply mix” in the Balkan state.

However, Bajatović opposes the implementation of projects under the EU in this direction but also the liberalization of the Serbian gas market, a development that would reduce the country’s dependence on Gazprom.

In March, the International Atomic Energy Agency (IAEA) included the non-signing of new contracts for the supply of natural gas from Russia and the search for alternative sources of funding as part of its plan for the EU’s independence from Russia .

As an EU candidate, Serbia has agreed to align its foreign and security policy with that of the bloc. However, Belgrade is unlikely to impose sanctions on Moscow, at least until the April 3 elections, as this could alienate the ruling pro-Russian ruling party’s voter base.

A recent poll found that 95% of Serbs see Russia as either an ally or a necessary partner. Although the EU is the largest provider of financial assistance to the country, only 11% of Serbs see the bloc as an ally.

Last year, Vučić blamed the energy crisis on European countries’ failure to sign long-term agreements with Russia.

Belgrade is trying to maneuver between the West and Moscow, as it needs Russian diplomatic support in its dispute with Kosovo.

As a permanent member of the UN Security Council, Russia can use its power to veto Kosovo’s accession to international organizations.

Read also:

* How will the Biden embargo on Russian oil “hurt” the economy?

* Russia outside SWIFT: Will we relive the “oil chaos of 1979”?