The 15th package of anti-Russian sanctions, recently approved by the EU Council, is aimed at reducing the Kremlin's oil revenues. Even more tankers from Putin's "shadow fleet" have been added to the "black list" and are subject to a ban on access to ports. Now their total number is 79. Next up are new sanctions from the US, which can cause trouble not only for Russia, but also for Serbia, where the oil and gas market is controlled by the Russian monopoly Gazprom.

"Ukrainian Energy" has examined the prospects and consequences of future sanctions, and also found out how they can change the geography of hydrocarbon imports for Serbian consumers.

Why are officials worried

The US is preparing to impose sanctions on Serbia's largest energy company, Naftna Industrija Srbije (NIS), due to the significant control of its business by Russian structures Gazprom Neft (51% of shares) and Gazprom (5.15%). This was stated by Serbian President Aleksandar Vučić, known for his support of pro-Russian policies.

According to him, the sanctions, which are due to come into force on January 1, 2025, are wanted not only by the US, but also by the UK and the European Union. As a result, the business of NIS, which is the dominant taxpayer in the country's state budget, will be blocked, "because when a company is under US sanctions, no one wants to work with it."

"These are probably the toughest sanctions. We need to wait for the final act, and we still have negotiations with Russia on whether its control can be reduced below 50% so that we can buy out some of the shares. Or we can do nothing at all, I don't know at the moment," the Serbian leader admitted the other day, adding that he would "also talk to the Americans." He also noted that he did not plan sanctions against Russia, since "the main thing is to ensure the safety of citizens."

The topic was also taken up by other officials. "The introduction of US sanctions against NIS will have severe consequences for Serbia," warned the country's Energy Minister Dubravka Djenovic-Handanovic. According to her, if Bulgaria, under pressure from Washington, also bans the transit of Russian gas through its main gas pipelines, a collapse will occur. "We have secured gas supplies for this heating season, but the situation is extremely serious," the official said.

From the American side, only the US embassy in Serbia has commented on the topic. They did not comment on the possibility of imposing sanctions against NIS, but emphasized that "getting rid of the Russian owner would be a boon for the country and the entire region." "NIS is a valuable national resource for Serbia, worth more than $2 billion in 2008, when Gazprom bought more than half of the company's shares, paying a small fraction of their market value. It is now the most profitable company in Serbia. The Russian owners of NIS are using part of their profits to finance brutal aggression against Ukraine and threats to stability in the Balkans and throughout Europe, rather than investing in Serbia's future," the US embassy said in a statement.

NIS itself said that so far there are no restrictions on business and that it is operating normally, and "the situation is being closely monitored."

The Romanian "subsidiary" of NIS has already rushed to put its network of gas stations (gas stations) up for sale to pay off debts to creditors.

Controversial agreements

The Serbian authorities' concerns are not unfounded. NIS is a monopolist in the oil and gas industry in Serbia, developing deposits in the north of the country, owning all the country's oil refining facilities and infrastructure for transporting oil and petroleum products. NIS also owns the country's largest gas station network, and its subsidiaries operate in neighboring countries - Romania, Hungary, Bosnia and Herzegovina.

Until 2008, NIS was a state-owned enterprise. That same year, several events occurred at once. Gazprom persistently offered European countries to sell it ownership of gas transportation networks and sales companies. Russia and Ukraine argued over the terms of gas transit, which led to the closure of the "valve" on the main gas pipeline heading to Europe. And the Serbian economy, which suffered from the war in Yugoslavia, was fully affected by the consequences of the global financial crisis.

Under these conditions, the Serbian government, led by Mirko Cvetković, agreed to sell NIS to the Russian company Gazprom Neft not at an auction or tender, but through an intergovernmental agreement. And most importantly, at a fairly low price of 400 million euros. The agreements between Moscow and Belgrade also provided for the construction of the South Stream gas pipeline and the Banatski Dvir underground gas storage facility.

This agreement still attracts criticism. In 2014, an investigation into the privatization of NIS was even launched, which was conducted under the leadership of the then Minister of Internal Affairs, Nebojša Stefanović. But it did not bring anything except political statements.

Now the Serbian opposition is using the moment to put the issue back on the agenda. This is evidenced, in particular, by the activity of Bojan Kostreš, who heads the League of Social Democrats of Vojvodina (a region of Serbia centered in the city of Novi Sad, where the NIS headquarters are located).

“From the very beginning of the story of the shameful privatization of Serbia’s richest company by the Russians, we have emphasized that this is robbery. The largest asset of Vojvodina, which has helped develop the local economy for 60 years, was taken from the communities for 400 million euros. Our land and deposits were taken away for next to nothing. We ask that this mistake be corrected and that the company, which is being mercilessly exploited, be returned to state ownership,” Kostreš’s statement reads.

By announcing the preparation of sanctions and their consequences for NSI even before they were discussed in Washington, Aleksandar Vučić can, on the one hand, count on the approval of his actions by voters. The sanctions will allow him to resell Gazprom Neft and Gazprom's shares in NIS to a new owner at a higher price. On the other hand, a significant change in the ownership structure of an oil and gas monopolist is quite a shock, capable of causing a powerful scandal.

If Aleksandar Vučić's government has to buy out NIS to get the company out of sanctions, it will still need to find free funds in the state budget, but it is not a fact that they will be found. "I don't know how much it could cost - a billion, two, a few," the prime minister admitted.

Business of state importance

Serbian energy expert Miodrag Kapor admits that in the event of the introduction of American sanctions, NIS will not be able to fully function until the issue with the owners is resolved.

"No serious EU energy company, no respectable trader, will dare to work with NIS, lest they be exposed to secondary US sanctions, because any transaction in dollars will be under close scrutiny. Therefore, the company is obliged to sell a portion of its shares back at market price, to the Serbian government or to some third party free from sanctions," the expert says.

This will also help refineries find alternative oil suppliers instead of Russian ones. "After the anti-Russian sanctions from the latest EU package, which include dozens of oil tankers, it will now be difficult for Russian oil to reach Serbia even by barge across the Danube," explained Miodrag Kapor.

He considers the country's government to be the most likely candidate to buy out NIS shares in order to relieve the company of sanctions pressure. “It may be enough to buy out only that part of Gazprom Neft’s shares so that its combined share with Gazprom in NIS becomes less than 50%, but Russia will retain influence in the company. The Serbian authorities will probably seek such an opportunity from Washington,” the expert says. He predicts that the Kremlin can even count on a favorable scenario in which the Vučić government pays a much higher price than the market value of NIS, “because the countries have established close relations between the ruling oligarchy.”

In addition to the government, other possible buyers of NIS shares in the Serbian media also include MOL, which is controlled by the Hungarian government, and the Austrian semi-state OMW.

Gas friendship with the Kremlin

Changes in the ownership structure of NIS will facilitate the organization of oil supplies to Serbia from sources alternative to Russia. However, maintaining imports from Gazprom seems to be a settled issue.

Serbia consumes about 3 billion cubic meters of gas annually, purchasing more than 60% of its volumes from the Russian monopoly. The current contract between Gazprom and NIS expires in a few months, in March 2025. But Belgrade has already announced negotiations to extend it on current terms. “Thanks to strong relations with Moscow, we have a very advantageous position to discuss economic issues and a gas agreement with Russia,” Serbian Deputy Prime Minister Aleksandar Vulin said in a comment to Bloomberg.

Russian gas reaches Serbian consumers through the Balkan extension of the TurkStream pipeline, which crosses the Black Sea and Bulgaria, bypassing Ukraine. Therefore, Serbia can avoid a potential supply crisis after the transit agreement between Russia and Ukraine is completed at the end of this year.

At the same time, Aleksandar Vucic continues to emphasize that he seeks to diversify supplies. Therefore, Serbia has already started receiving Azerbaijani gas through Turkey and Bulgaria. Belgrade is also trying to negotiate the supply of liquefied gas from a terminal in Greece. However, for now, Russia remains the main source of hydrocarbon imports to the country. There are no other signs on the market for a change in the current situation, except for political statements.

Svitlana Dolinchuk, specially for “Ukrainian Energy”