Russian gas donation to Serbia comes with conditions | Seen
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Serbian President Aleksandar Vučić had a very unpleasant job when he met his Russian counterpart Vladimir Putin in Sochi last week to advocate for lowering the price of Russian gas.
Indeed, before going to Russia, President Vučić had declared to the Serbian press that he “would ask and beg”.
In the end, Putin responded to his Serbian guest’s request, which means the Serbian president will have one less problem to worry about ahead of the Serbian general election in April 2022.
However, the question remains whether there will be a price to pay.
Serbian gas supply on the line
Why was this an unpleasant task for Vučić? Serbia is totally dependent on Russia for its gas supply.
In 2008, Russia acquired majority stakes in NIS, Serbia’s national oil and gas company. The sale was made below market price, in exchange for Russia’s protection at UN level over Kosovo and a promise that Moscow would build the now-defunct South Stream pipeline over Serbian territory. . The opening of the Turkstream gas pipeline in 2021 confirmed the reality of energy dependence.
However, in light of the current energy crisis in Europe, Serbia is now concerned about the high prices of Russian gas.
In 2022, Serbia is set to undergo presidential and parliamentary elections, as well as elections in the capital, Belgrade.
President Vučić and his Serbian Progressive Party (SNS) are almost certain to win. But both still face the challenges of the COVID-19 pandemic and the economy, which must not experience a major slowdown until they have consolidated their power.
Serbian leaders must show that despite the pandemic, the economy continues to grow. This is the main reason the government has enthusiastically embraced Chinese funding, despite the resulting degradation in environmental and labor standards.
The United Arab Emirates are also useful as a source of liquidity and a tool for national promotion. However, the high price of gas would complicate matters.
Vučić’s first reason for concern was more immediate: the start of the cold season. High gas prices mean higher costs for heat, electricity, and groceries – everything voters see as elections approach. In mid-November, high food and energy prices pushed the inflation rate to 6.6%.
Serbian pro-government daily Večernje novosti, although he is known for his non-critical and hyperbolic praise for Serbian leadership and Serbo-Russian relations, gave precise insight into Serbia’s concerns ahead of the Putin-Vučić meeting.
Serbian gas consumption has doubled compared to previous years. Serbia paid Russia $ 270 (€ 239) for 1,000 cubic meters because, since Soviet times, Serbia has purchased Russian gas on the basis of a system where 100% of the price is derived from the petroleum formula.
In light of the energy crisis, Russian state energy company Gazprom has proposed that the price be determined 30% by the formula for oil, 70% by spot market prices, which would see Serbia newly charging 790 $ (€ 698) per 1,000 cubic meters.
It is too much for the Serbian leadership. The same goes for the alternative proposition, whereby the price would be determined 70% by the petroleum formula and 30% by spot market prices: in total, $ 510 (€ 451) per 1,000 cubic meters. .
Not such an easy task
The Serbian head of state hoped to get a new deal, in which Serbia would buy three billion cubic meters of Russian natural gas per year for ten years.
Pro-government media in Serbia have touted the idea that Vučić could guarantee a fairer price for Russian gas than countries like Germany, Belarus and Armenia.
The difference was that Germany is a big customer of Russian gas, with a long-term supply contract, and Belarus and Armenia are Russia’s allies in the post-Soviet space.
More importantly, as Serbia insisted the focus would be on gas supplies, Russian President Dmitry Peskov’s spokesman said the two leaders would discuss bilateral ties, energy n ‘being just one of the questions that would be addressed.
Why is this important? Over the past year, Serbia has pivoted slightly towards Russia due to the election of Joe Biden to the United States. However, 2020 has been a very bad year for Serbian-Russian relations. Putin has not forgotten that.
What happened in 2020? Putin didn’t like the idea that Vučić was trying to resolve the Kosovo conflict with the help of Donald Trump, which would mean Moscow would lose one of its last assets in the Balkans, and the move from Belgrade to Washington.
To win favor with the West, pro-government tabloids in Serbia accused pro-Russian gamers of being behind violent anti-lockdown protests in the summer of 2020.
Trilateral military exercises with Russia and Belarus have also been canceled. In the meantime, China has replaced Russia as Serbia’s main non-Western partner.
Putin hasn’t forgotten how Vučić tried to deceive him when he thought he would get a better deal from the West. The meeting was almost certainly used to discipline Vučić.
Nonetheless, Vučić got what he wanted. After the meeting, it was announced that the gas price for Serbia will remain at $ 270 and the amount of gas delivered will increase for the next six months.
No one knows what will happen after these six months are over. But Vučić received a gift from Putin for the heating season – and for the elections. Vučić can also present himself to his constituents as a skillful leader who enjoys the friendship of fraternal Russia.
What were the concessions offered?
It must be assumed, however, that Putin’s gift comes with strings attached.
On the same day, news began to circulate that the Russian state-owned nuclear construction company Rosatom could build a nuclear power plant in Serbia, although Serbian experts do not believe Serbia has the expertise or resources to such a business.
Russian companies are also expected to take over the construction of Belgrade’s urban and suburban rail system.
More importantly, there are discussions that Serbia could obtain Kornet anti-tank missile systems from Russia: a dangerous scenario since in late 2019 Serbia, out of fear of US sanctions, gave up buying Russian weapons.
It remains to be seen whether these deals will be completed and whether any other favors Vučić promised Putin will be discovered later in the game. After all, there is no such thing as free lunch.
Vuk Vuksanovic is a researcher at the Belgrade Center for Security Policy (BCSP) and associate of LSE IDEAS, a foreign policy think tank at the London School of Economics and Political Science (LSE). He obtained his doctorate in international relations from LSE. He has published extensively on modern foreign and security policy issues.