HomeBlogFinanceSerbia ‘in a hurry’ to ease energy dependence on Russia

Serbia ‘in a hurry’ to ease energy dependence on Russia

Serbia is considering a move to retake majority control of NIS, its main oil company, from Russia’s Gazpromneft as it rushes to protect itself from the impact of sanctions on Moscow, said the Balkan country’s president.

Belgrade is also preparing a half-dozen other projects to diversify the country’s energy sources, including closer co-operation with Hungary, in a bid to cut its dependency on Russia, Aleksandar Vučić said.

“It’s crazy that we didn’t think about connecting with each other and building this infrastructure network before,” said Vučić. “We were not in the habit of wars in Europe, but now it is different. Almost everything changed. That’s why we are in a hurry.”

Moscow’s acquisition of Serbian gas storage and oil refinery operators and Belgrade’s more recent failure to secure long-term alternative supplies have left the landlocked country exposed as the EU targeted Russian energy after its invasion of Ukraine. In recent years Serbia has imported all of its gas and up to half of its oil from Russia.

From December EU sanctions mean Croatia will be barred from transporting Russian oil shipments to Serbia. And if Brussels overturns an exemption from a Russian ownership ban, Belgrade’s main oil company NIS will no longer be allowed to do business with EU entities; this would effectively shut down its operations as it receives all its oil via Croatia’s Adria pipeline.

According to three sources with knowledge of the situation, several groups including the Serbian government and Hungary’s energy company MOL have considered buying the controlling stake from majority owner Gazpromneft, though talks on a sale have stalled. MOL declined to comment.

For now, NIS can operate normally because its refineries have been retooled to handle oil from Iraq and other countries and because of Belgrade’s exemption from EU sanctions on Russian companies.

But Vučić said Serbia, an EU membership candidate, needed to consider “all the possibilities”, including taking over NIS and sourcing alternative supplies.

“If there were other sanctions against Russian-owned enterprises, it will be a huge problem for us,” Vučić told the Financial Times. “We will have to act anyway . . . we have to secure enough oil and gas to our people.”

He added: “If nobody wants to work with NIS . . . then we’ll act, but it’s not the case so far.”

Vučić is treading carefully because he wants to avoid confrontation while his country relies on gas imports from Russia, a traditional ally of Serbia, analysts said. Vuk Vuksanović, a researcher at the Belgrade Centre for Security Policy, said only drastic conditions such as a cessation of Russian gas flows or expanded European sanctions would trigger a hostile takeover of NIS.

Having formed a new government last month after winning elections in April, Vučić plans to spend about €2bn a year upgrading energy infrastructure, including new oil and gas links to Bulgaria, Romania, North Macedonia and possibly Montenegro.

Vučić held talks with Hungarian premier Viktor Orbán last month on strengthening energy ties, including an oil pipeline to hook up Serbia to Hungary’s network, and an electricity partnership.

Serbia would like to take a 10-15 per cent stake in Hungary’s Paks nuclear power plant, where two new reactor blocks are under construction. Russian state-owned Rosatom supplies fuel to Paks and is building its new reactors but is not subject to western sanctions.

The plan could give Serbia access to up to 600MW of power generating capacity from Paks, although Vučić said there was no final decision on the issue yet. In return, Hungary would gain a similar stake in Serbia’s national power company, whose hydroelectric dams contribute about a quarter of Serbia’s power.

“We have full trust in Hungary as a country and [in] this kind of energy alliance,” Vučić said.

Serbia’s inefficient economy leaves it vulnerable to disruption of energy flows, Aleksandar Macura, an energy expert at the RES Foundation in Belgrade, told a conference last week.

“Serbia needs three times as much energy to produce the same GDP as the EU average,” Macura said.

But the president said a gas pipeline to Bulgaria would be operational before next winter’s heating season, adding capacity to import 1.8bn cubic metres a year of gas, about half of the country’s annual consumption. Belgrade is also in talks with Azerbaijan about gas shipments starting next year.

Vučić said that “with another [pipeline to] North Macedonia, we can connect ourselves with the Trans-Adriatic and the Trans-Anatolian pipelines [which transport gas from Azerbaijan], as well as LNG terminals in Greece. This is all part of our diversification.”

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