Resource Factor: Serbia counts on extension of contract with Gazprom
Serbia hopes to extend its contract with Gazprom in the near future, Deputy Prime Minister Aleksandar Vulin told Izvestia. The current agreement on supplies to the republic expires in March, under which Serbia receives gas at an extremely favorable price - it is 60% of the market price. Earlier, the U.S. imposed sanctions against the Serbian company NIS, a controlling stake in which is owned by Gazprom and Gazprom Neft. The benefits of energy cooperation between Moscow and Belgrade and the West's attempts to force Serbia to give up Russian resources are discussed in Izvestia.
When will the contract between Serbia and Gazprom be extended?
Serbia expects to conclude a new contract with Gazprom for gas supplies in the near future, Serbian Deputy Prime Minister Aleksandar Vulin told Izvestia.
- I hope [it will happen] as soon as possible. Russia has always had good intentions towards Serbia and has always been ready to help. And Serbia has also made sure to support its Russian brothers. "Serbia under the leadership of Aleksandar Vucic is the only country in Europe that has not imposed sanctions against Russia and has not become part of the anti-Russian hysteria," Aleksandar Vulin told Izvestia.
Despite enormous pressure from the US, Serbia is not confiscating Russian property or nationalizing NIS, he added.
- All this shows that Serbia and Russia are not only economic partners, but also brotherly countries and allies. I believe that the new gas agreement will be discussed in this spirit as well," Serbian Deputy Prime Minister said.
"Izvestia" sent an inquiry to Gazprom.
At the end of 2012, Serbia signed a 10-year intergovernmental agreement with Russia on natural gas supplies of up to 5 billion cubic meters per year. At the same time, the parties reached a compromise on the repayment of Belgrade's debt for Russian gas supplies from 2000 to 2011. After the agreement expired in 2021, Belgrade and Moscow extended it for six months and then signed a three-year contract until 2025.
At the same time Serbia received a significant discount, buying gas at a price of $270 per 1,000 cubic meters. - "practically for free," as President Aleksandar Vucic said in 2022, referring to the fact that the price on the stock exchange at that time was $1160. Thanks to this, the Balkan republic was able to calmly endure the energy crisis in Europe in 2021-2022. While the cost of electricity on the European market amounted to €250 per 1 MWh, in Serbia it remained at the level of €50, Vucic stated earlier.
The current contract expires in March 2025, and now the parties are negotiating a new three-year agreement until 2028. Last December, a delegation from Srbijagas arrived in St. Petersburg to negotiate payment for Russian gas. Difficulties arose due to the US sanctions against Gazprombank, which were imposed in November 2024. After that, Russian President Vladimir Putin issued a decree clarifying the payment procedure for Russian gas supplies, providing buyers with a number of options for making payments.
Under the future agreement, Russian gas supplies to Serbia may increase. In addition, the country's peak daily gas consumption has increased from 12 million to 17 million cubic meters in recent years, according to Srbijagas CEO Dusan Bajatovic. The Republic needs more and more blue fuel due to the developing economy: Serbia's GDP growth amounted to 3.8% in 2023 and 3.9% in 2024. The fluctuation of the gas price is stipulated in the contract, but in any case, for Belgrade it is lower than the European average. For Serbia in November 2024, it was 60-63% of the market price - $323 per 1,000 cubic meters against the background of $500-560 on the stock exchange, emphasized Vucic.
Where else Serbia can get gas from
Serbia not only consumes Russian gas, but also serves as an important transit country for other countries in the region. Since 2021, the blue fuel has been flowing into the country via Turkish Stream and Bulgaria's GTS. In October 2021 Gazprom also started supplying gas to Hungary and Croatia via transit through Serbia. Starting from February 2025, Slovakia will also receive fuel in this way. With the maximum volume of supplies through the second string of Turkish Stream to Hungary of 8.5 billion cubic meters per year, Budapest will use 7.6 billion cubic meters in 2024. For Slovakia, thus, about 1 billion cubic meters are available.
After Ukraine stopped pumping Russian gas through its territory on January 1, the Balkan route became the only way of pipeline gas supplies to the Balkans and Central European countries. Earlier, Poland stopped supplying through the Yamal-Europe pipeline and Nord Stream was blown up in September 2022. Therefore, in January, the volume of gas pumped through "Turkish Stream" increased by 26.4% compared to the same period in 2024.
Russkaya compressor station, part of the gas pipeline system to supply gas for Turkish Stream
Ukraine is trying to completely cut Europe off from pipeline gas supplies from Russia. In January 2024, the AFU attempted an attack with the use of nine drones on the infrastructure of the Russkaya station, which supplies gas through the Turkish Stream. Afterward, Hungarian Prime Minister Viktor Orban and Serbian President Aleksandar Vucic said that securing the pipeline was a challenge for both countries.
In addition to attacks on infrastructure, Serbia has faced sanctions pressure from the United States. In early January, Washington imposed restrictions on Gazprom Neft and Surgutneftegaz, as well as two dozen of their subsidiaries. The Serbian company NIS, 56.15% of which is owned by Gazprom Neft and Gazprom, also fell under the restrictions. The Serbian authorities announced their readiness to buy out the Russian stake in NIS for about €500-700 million and requested the US to postpone the imposition of sanctions for at least 90 days. However, there has been no response from the U.S. side so far.
However, the main option to secure NIS is to sell it from Gazprom Neft to Gazprom through an intra-corporate deal, because Gazprom itself will not be subject to US sanctions, Igor Yushkov, an expert at the Financial University and the National Energy Security Fund, told Izvestia.
- Otherwise, Serbia itself will buy the NIS stake at a discount and then sell it to Socar, an Azerbaijani company, or some Kazakh corporation. Both countries can easily supply oil there for refining," the expert said.
It is important that no restrictions have been imposed against the Serbian state gas supplier Srbijagas, so this factor will not affect the conclusion of the gas contract for the time being. Despite this, Belgrade is trying to diversify the supply of resources, fearing to lose its only source of gas in case of strengthening Western sanctions. In particular, in 2023, Serbia signed an agreement with Azerbaijan on the purchase of 400 million cubic meters per year from 2024 to 2026, with the possibility of increasing the volume from 2027. Deliveries under the contract began in February last year.
However, Serbia will not be able to completely replace Russian blue fuel. The point is not only that Gazprom's offer is the most favorable from the economic point of view. Azerbaijan will not be able to physically replace Russian supplies, as almost the entire volume of its production is supplied under existing contracts. Baku exports most of its gas to Turkey, Italy, Greece and Bulgaria. It sells the surplus to other Balkan countries, including Serbia. Another option is to buy LNG and deliver it via Greece or Turkey, but this is also economically unprofitable, summarized Igor Yushkov.
Переведено сервисом «Яндекс Переводчик»
