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Serbia joins Southern Stream

Posted by Kris Roman on December 25, 2008

European Friends of Serbia

RIA Novosti political commentator Andrei Fedyashin

On December 24, Catholic Christmas Eve, the Slavic gas transit system strengthened its position: Dmitry Medvedev and Serbian President Boris Tadic signed several agreements on oil and gas at a meeting in Moscow.

Moscow, Belgrade and the European Union will benefit from Serbia’s participation in the South Stream pipeline, one of the main issues of the Russian-Serbian talks. It was the first thing Medvedev spoke about when meeting his Serbian counterpart at the Kremlin. He ensured that all energy cooperation agreements between Russia and Serbia were designed to guarantee Europe’s energy security.

The pipeline, which is planned to carry 31 billion cubic meters of Russian gas annually, will run from the Russian village of Beregovaya in the Krasnodar Region to Bulgaria and from there to Romania, Slovenia, Hungary and Austria.

Russia and Italy signed their first agreement concerning the South Stream pipeline system on June 23, 2007. The southern branch will carry Russian gas to Italy through Serbia, Montenegro, and even Macedonia.

Until recently, the most sensitive issue was how much Serbia would receive from Gazprom’s Gazpromneft for 51% of its oil monopoly NIS (which controls 72% of the oil and gas market, oil processing plants and 500 gas stations in Serbia, which is 70% of the country’s retail fuel market). Gazprom is buying NIS for 400 million euros and plans to invest 550 million euros in production development. Serbia wanted much more than that, but the world economic crisis has moderated its demands. Some of Serbia’s expenses will be partly compensated by gas transit. Up to 10 billion cubic meters of gas were supposed to run through the Serbian section annually. Now both parties have agreed to increase the annual volume to 21.4 billion, or even to 23.1 billion cubic meters.

Serbia hopes that transporting Russian gas will make the country more attractive to investors. The Russian pipeline may even help Serbian efforts in joining the EU. Belgrade hoped to join by 2009, but the EU doesn’t believe the country is ready to join yet. Still, it would be profitable for Brussels to accept a country which has a Russian gas pipeline, because Serbia would be more than just a transit territory near the EU, it would belong to it.

When South Stream goes online, it will bypass politically unstable Ukraine. It was Kiev (at least, Yushchenko’s Kiev) which opposed the Russian pipeline projects, both Nord Stream under the Baltic Sea, and South Stream under the Black Sea. They understand that when the pipelines start up, they will not be able to siphon Russian gas, or reject paying for gas or beg for “special conditions.”


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