Serbia Sells NIS to Russian Gazprom

Today in Moscow, a contract is being signed at the highest state level whereby Serbia sells a 51% stake in the oil company NIS to Russian Gazprom for 400 million euros, with the obligation for the Russian buyer to invest 550 million euros in technological development.

However, the contract does not contain any provisions regarding the planned construction of an underground gas storage facility in Banatski Dvor and the routing of the future South Stream gas pipeline through Serbia. These two projects will be subject to a special ‘umbrella agreement’ to be signed by Russian President Dmitry Medvedev and Serbian Boris Tadić. For this reason, the entire arrangement faces significant reservations in Serbia, even within the government itself. Minister of Economy Mlađen Dinkić has long opposed the sale of NIS for such a low price without a firm guarantee from the Russian side that Serbia will be included in capital energy projects for gas transmission to Western Europe, which would make Serbia one of the gas hubs in Southeast Europe; instead, it will only receive political guarantees for the construction of South Stream and the storage facility in Banatski Dvor. According to some analysts, the price of NIS should not be lower than two billion euros, while others emphasize that with current trends in the oil market, it is difficult to determine the price of the oil company, which also requires significant investments for renewal.

Prime Minister Cvetković stated for B92 that it has been agreed that Serbia will receive financial and legal guarantees within two years, which critics of the agreement see merely as a promise. The construction of the South Stream gas pipeline is expected to be completed by 2015. “Serbia’s negotiating team represented the position that only the whole, i.e., the realization of all three agreements, is profitable for it, for which it sought financial and legal guarantees, but now we are no longer so sure about that,” said Cvetković, although he believes that the ‘presidential’ agreement is good. Regarding NIS itself, the Serbian side received somewhat more favorable conditions than in the previous version of the contract: the company will have a monopoly on oil production until 2010 instead of until 2014, and the funds for investment of 550 million will be secured by Gazprom through a 14-year loan. The buyer also committed to respect the environmental protection regulations in force in the country. (Davorka Zmijarević)