site.btaThe Price of Russian Gas for Serbia

Serbia’s long-term contract for Russian natural gas supply expires on Tuesday but Serbian President Aleksandar Vucic announced that he has secured an extremely favourable three-year gas supply deal with Russia against the backdrop of the drastic appreciation of this energy source. 

Following a phone conversation with Russian President Vladimir Putin, Vucic told reporters on Sunday that the two have agreed on the delivery of 2.2 billion cubic metres of gas a year at a price to be calculated with a formula tied to the petrol price. One thousand cubic metres of gas will cost Serbia 310 to 408 dollars, which is the most favourable price in Europe, he specified, as quoted by public broadcaster RTS. 

Additional negotiations will be held for the remaining 800 million cubic metres of gas that Serbia will need.

A press release by Kremlin after the Vucic-Putin phone talk said only that the Russian head of State has promised uninterrupted gas supplies. 

The news of the gas supply deal was met with conflicting reactions on the public and political scene. 

Serbian Prime Minister Ana Brnabic commented that Vucic has done a great job for Serbia and has received more than during his previous conversation with Putin. 

Mining and Energy Minister Zorana Mihajlovic told Tanjug that for Serbia, which is entirely dependent on a single gas supplier, Gazprom, the new deal is of huge significance.  

Bojan Stankovic of the Chamber of Commerce and Industry of Serbia commented for RTS that the new agreement brings calm to the population, the economy and the entire state as it decreases the unknown in relation to gas supplies.

According to some analysts, however, the Russian gas comes at a hidden political price that could cost Serbia dear.

Forum for Ethnic Relations founder Dusan Janjic compared the Putin-Vucic phone conversation to negotiations between a dealer and a drug addict, referring to Serbia’s dependence on Russian gas. According to him, as quoted by the Danas daily, Moscow offers a good price to keep Belgrade in that state of dependence. 

In the energy sector, Serbia is entirely dependent on Russia, and Gazprom holds the monopoly on the petrol and gas market. Also, Gazprom through its subsidiaries sponsors sports clubs and funds music festivals and cultural events, Free Europe writes. In the words of Igor Novakovic of the nongovernmental International and Security Affairs Centre, these activities of Gazprom are part of an effective campaign praising Serbian-Russian relations.

Serbia did not introduce sanctions against Russia after the attack against Ukraine but supported the UN resolution condemning the violation of Ukraine’s territorial integrity and sovereignty. Serbian Prime Minister Brnabic said on Sunday that Belgrade is not joining the sanctions because of its principles, and not because of the gas deal. At the same time, Serbia is a candidate to join the EU, which has introduced a series of sanctions against Russia. 

In this context, energy expert Miodrag Kapor said, as quoted by EN1, that the favourable conditions under the new gas deal are just one side of the coin. Russia is using natural gas as a means for political blackmail.  Serbia’s allies in the EU will not look favourably at the deal as they knowingly sacrificed the price of energy sources due to the Kremlin administration’s aggression against Ukraine. There might be both political and economic consequences from Serbia’s gas deal with Russia, Kapor commented.

Next week, Belgrade will welcome German Chancellor Olaf Scholz and Russian Foreign Minister Sergey Lavrov – a rare visit by a ranking Russian official to a European country since the invasion of Ukraine began in February.

Lavrov is expected on June 7, when the new gas agreement will most probably be signed, while Scholz’s visit is scheduled for June 10 as part of his tour in Western Balkan countries. The main topic of the German Chancellor’s talks in Belgrade is expected to be whether Serbia will introduce sanctions against Russia, after European representatives more than once called on Serbia as an EU candidate country to align its foreign policy with that of the Union.