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Serbia’s “X” Factor: Oil (Or: How The EU Is Trying To Sell Serbia a Seat At the Table)

In its potential path toward membership with the European Union, Serbia’s cooperation with handing over war criminals, particularly Gen. Ratko Mladic, is most often discussed as a necessary precursor.  But looming beneath the surface of EU idealism is a more bottomline concern that should serve as no surprise:  Serbia’s oil monopoly. 

Put another way, Serbia has an oil company, and the EU wants it.  

The oil issue recently came to the forefront when Russia’s famous (or infamous) uber energy giant, Gazprom, made a bid to buy Petroleum Industry of Serbia (NIS) for a paltry 400 million dollars. http://blog.kir.com/archives/Gazprom_eng.gifGazprom proposed to purchase NIS through a single-bidder process, which would effectively eliminate any other company from making a bid.  The “company” also proposed a ban on imports of oil products into Serbia for at least five years.  In the end, Gazprom would then have unlimited access to the planned South Stream pipeline. 

Why is the Gazprom “offer” significant?

For one, NIS is worth close to two billion dollars.  Gazprom’s paltry offer strongly suggests that Gazprom and by extension, Mother Russia, will be filling in the price gap with political and other types of support/pledges to Serbia.  For the other, several competitors from EU nations, such as Austria’s OMV, Greece’s Hellenic Petroleum Group, Hungary’s MOL, Polish PKN Orlen, and Romania’s Rompetrol, are also vying to purchase NIS as well.  These EU companies will lose a tremendous deal in market share if NIS goes to Gazprom.  Further, it goes without saying that the EU has an interest in controlling the oil market in Eastern Europe, both for the tremendous profit boon and energy security.

And it is here where the mumbo jumbo begins.  The majority of the European press wants to make it appear that the controlling prerequisite for Serbia’s inclusion into the EU is bringing war criminals to justice.  Within the last few days, the EU again met with the Chief War Crimes Prosecutor over Serbia’s failure to bring Gen. Ratko Mladic and others to justice.  Add to that for flavor the future status of Kosovo.

We’re the EU and we have ideals! 

But what the European press is not making clear — and the issue that PM Vojislav Kostunica is harping about — is the significance of the NIS negotiations to Serbia’s EU membership.  After all, the EU has an extremely strong interest in having NIS controlled by a member state — both for financial and security reasons.  More specifically, if NIS goes to Gazprom, Russia will have both unimpeded control over the South Stream Pipeline and Serbia squarely in its pocket.  

The question is whether Serbia will bite at the EU’s price for membership?  NIS is the true wild card Serbia has in its pocket and, unlike its negotiations on the future status of Kosovo, it is using the oil card well. 

The EU is willing to overlook Serbia’s failure to bring war criminals to justice.  The EU is willing to overlook Serbia’s position over the future status of Kosovo.  Why?  Because in the end, money talks.  And if Serbia sells NIS to Gazprom and goes with Russia, the EU has the fail safe of idealism to protect its dirty oil motivations.

Russian gas monopoly Gazprom’s recent announcement that it intends to buy Petroleum Industry of Serbia (NIS) worries the Serbian oil monopoly’s European suitors. Not only does the Russian behemoth have unlimited access to the planned South Stream pipeline, but Russia is also Serbia’s main ally in the dispute over the future of Kosovo, giving Russian President Vladimir Putin, who wants to expand Russia’s energy policy before he leaves office, the chance to put the squeeze on the Serbian government to choose his favourite company or at least pick the other Russian contender, LUKoil.

EU companies — Austria’s OMV, Greece’s Hellenic Petroleum Group, Hungary’s MOL, Polish PKN Orlen, and Romania’s Rompetrol — have also expressed their interest in the tender. The Serbian government has planned to tender out 25 percent of NIS shares through a competitive bidding process. It is also offering a majority management and the option for the strategic investor to acquire an additional 24 percent stake over the next three years, provided that it invests approximately 200 million Euro in the company.

OMV is considering launching a joint bid for NIS with Hellenic Petroleum. The Greek company, which has bought Skopje Refinery, wants to expand into Serbia. Director General of International Affairs of Hellenic Petroleum Michalis Myrianthis told New Europe on January 9 that his company has expressed its interest in acquiring NIS many times in the past. He also confirmed that “there is also the intention of Hellenic Petroleum to make a joint European bid with Austria’s OMV, something that OMV does not exclude.”

Gazprom told New Europe on January 9 that the company is interested in acquiring a stake in NIS and is in on-going negotiations with the Serbian government. “This is a good business opportunity for Gazprom, but the decision if and how to sell is entirely up to Serbian government,” Gazprom’s Information Directorate said. In response to a New Europe question whether Gazprom is offering Blue Stream passage through Serbia as an incentive, the Russian company noted that at the moment, two possible routes of the South Stream pipeline are being considered. “Both of them (northern and southern) pass through the territory of the EU. However, final routes and volumes of gas supply will be accepted in the framework of a technical and economic assessment, which will be performed by a SVP set up by Gazprom and ENI.

In a bold offer, Gazprom proposes to take over NIS through Gazpromneft on a single-bidder process, ruling out a competitive tender. It has also proposed a ban on imports of oil products into Serbia for at least five years and offered a mere USD 400 million in cash and pledged USD 500 million in investments over the ensuing five years.  The estimated market value of NIS is nearly USD two billion. The Serbian government hopes to raise Moscow’s price offer. However, Belgrade is inclined to accept the other Russian terms for NIS, leaping at the South Stream bait.

The above quoted article was published by New Europe and can be found here.

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About Mr. Cheeseburger 9000

I am Mr. Cheeseburger 9000. I like my burgers medium-rare with a side order of french fries.

One response to “Serbia’s “X” Factor: Oil (Or: How The EU Is Trying To Sell Serbia a Seat At the Table)

  1. Reading another time your article Serbias-x-factor.. I just want to say what an excellent article.

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