"This news disappoints us": After Moscow's statement on gas supply, Vučić is in a difficult position

Pavel Marishov: Russia will observe Serbia's performance before the New Year. Exporters can completely cope without Serbia

(Image caption: Serbian President Aleksandar Vučić)

The CEO of Russian Gas Industry Oil (Gazprom Neft), Alexander Dyukov, and the Deputy Minister of Energy of Russia, Pavel Sorokin, are scheduled to meet with Serbian President Aleksandar Vučić on October 13 (Monday) to discuss subsequent energy supply plans to Serbia.

However, the day before, Vučić had already expressed dissatisfaction with the stance of his Russian partners:

"Russia proposed signing a contract for gas supply until the end of the year. This news disappoints us very much," Vučić said. According to him, Serbia had hoped to sign a long-term contract as early as May this year.

The problem in the cooperation between Russia and Serbia over natural gas stems from the U.S. demand that Russian capital fully withdraw from the Serbian energy company NIS and previously listed the company under sanctions. Belgrade is currently negotiating with the U.S. Treasury to exchange the lifting of sanctions, perhaps ready to make concessions to Washington, but the actual space that Serbia has to control is very limited.

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The Serbian authorities hold only 29.87% of the shares in NIS, while "Gazprom Neft" holds 44.85%, and another subsidiary of this Russian gas giant holds 11.3% of the shares.

Regarding the possible consequences of the Russia-Serbia gas dispute for Serbia, Pavel Marishov, director of development at engineering company "Energy Plus" and member of the expert committee of the Russian Gas Association, told "Slobodna Dalmacija":

"There is a feeling that this dispute is not closely related to the continuously escalating sanction cycle in the European direction, but more because 'Gazprom' now prioritizes its eastward development. Our exports to the West are gradually fading."

In Eastern Europe, our partners still include Serbia, Moldova, and Hungary. However, the amount of natural gas Serbia purchases from Russia is minimal, not enough for us to worry about, and these supplies are mainly not for profit, but for political considerations.

Previously, natural gas supplies to Serbia were based on long-term contracts, which first considered the interests of friendly countries. Because for "Gazprom", it is not particularly profitable to bear the infrastructure costs to sell small amounts of natural gas at extremely low prices.

Compared to the "Power of Siberia" gas pipeline (annual gas volume of 38 billion cubic meters, note from Slobodna Dalmacija) and the "Power of Siberia - 2" gas pipeline (annual gas volume of no less than 50 billion cubic meters, note from Slobodna Dalmija), the gas supply to Serbia is negligible. In addition, our ability to export liquefied natural gas to the Asia-Pacific region (ATR) is rapidly increasing.

Supplying natural gas to Eastern Europe does not bring us any economic benefits, and the political benefits from our Serbian partners are also decreasing. They have become accustomed to getting cheap natural gas, often delaying payments, and not fulfilling their contractual obligations on time and in full.

Therefore, Russia proposes to cooperate with Belgrade on an equal basis, fully considering the interests of both countries. However, Serbia, which has been used to Russia's continuous concessions, is now acting with arrogance, claiming, "No, you should have offered us better terms."

"Slobodna Dalmacija": NIS company is actually a Russian company. If we restrict its gas supply (even its production, since it is the only producer in Serbia), aren't we punishing ourselves?

Pavel Marishov: We participate in it, the primary task is to maintain the infrastructure. The subsidiaries of "Gazprom" in Serbia are facing operational pressure but are not getting the profits they deserve.

Budget allocations for subsidizing gasoline and diesel production have exceeded 4 trillion rubles. It's simply absurd. The losses caused by the Ministry of Finance are far greater than those caused by Ukrainian drone attacks.

If we set aside political factors — our concern for their friendship — (giving up the Serbian market) would not cause any loss. (After all, the Croatian authorities have stated that they are willing to buy the shares of Russia in NIS company, note from Slobodna Dalmacija).

I think Russia is taking a wait-and-see approach: we will continue to supply gas until the end of this year, and then, as people say, we will see how Serbia performs.

Short-term agreements do not exclude the possibility of extension. Vučić is currently under pressure domestically in Serbia, and we will monitor the developments. Let's see if he can prove his commitment to the common values between Russia and Serbia.

For us, considering the pace of the domestic gas distribution process in Russia, we can certainly use the gas originally supplied to Serbia for domestic use or for producing liquefied natural gas (LNG). Moreover, Europe is still buying our LNG, and at higher prices.

Furthermore, as we have seen, the gas pipelines to Europe are always in danger, and ensuring the safety of these pipelines has always been a challenge for "Gazprom". It is simply not worth it. Besides, we live in an era of lack of trust, and long-term contracts in the market are gradually being replaced by spot transactions. Instead of binding ourselves with long-term obligations, we prefer to solve commercial issues immediately and sell energy to buyers who offer higher prices.

"Slobodna Dalmacija": How is the preparation of the "Power of Siberia - 2" gas pipeline progressing?

Pavel Marishov: The first "Power of Siberia" pipeline is operating at full capacity, and the second one ("Power of Siberia - 2") is most likely to be completed entirely. The investment ratio of the project is not yet fully clear, but regardless, this project is more beneficial for Russia than for China. Because "Power of Siberia - 2" not only solves the issue of gas exports, but also promotes the domestic gas distribution process in our country.

This project will help the Buryat Republic and other Russian federal subjects along the main gas pipeline achieve gas distribution, and also allow the currently underdeveloped Yamal-Nenets Autonomous Okrug gas fields to operate at full capacity. Underdeveloped gas fields can have adverse effects on the technical condition of production facilities.

In this way, we can simultaneously resolve two major domestic issues, and even selling an additional 50 billion cubic meters of gas to China annually at discounted prices is a very positive contribution to the state budget.

Original article: https://www.toutiao.com/article/7560558816765411875/

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