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Serbia - In Search of Gas

Serbia – In Search of Gas

Serbian Prime Minister Aleksandar Vucic said on May 28th that Serbia would accept the US suggestions to reduce the country’s dependence on Russian gas and join the US-backed gas pipeline, which will carry gas from Azerbaijan to Europe.

While some analysts see this statement as a U-turn in Serbia’s foreign and energy policy, Vucic says this is only an attempt to diversify gas supply routes and to increase the state’s energy security. In an interview with the AP, Vucic also said that Serbia, with regard to the issue of energy security, was ready to use gas from several sources, which, he said, is “very important for our American friends, too.”

According to the AP, the US has been encouraging Balkan countries for some time to turn to alternative sources of gas, rather than setting their hopes on the construction of the Turkish Stream gas pipeline which would carry Russian gas from the east to the Balkans. The AP also concluded that Vucic’s stance on the support for the US-backed gas pipeline was a major policy shift for Serbia, a traditional ally of Russia and a country deeply dependant on Moscow in the energy sector.

Commenting on his statement Prime Minister Vucic said in Belgrade on May 29th that it did not mean Serbia was “turning its back on Russia” in the energy sector, but just trying to increase its own energy security. He also said Serbia had to obtain gas from several directions, because in 2019 Russia would stop sending gas via Ukraine which is now the only direction Serbia receives this energy source. “That is why I have to do everything now in order to find secure gas supply for Serbia in future. It has nothing to do with geostrategic decisions, nor with our foreign policy, but with the survival of the state,” Vucic said.

Belgrade Economics Institute associate Mahmud Busatlija said experts should first determine whether there was a technical possibility for Serbia to join the gas pipeline from Azerbaijan. He added that its capacity would be much smaller than the one previously planned for the Russian gas pipeline South Stream, abandoned at the end of 2014. “I do not know whether we can expect some serious quantities of gas from Azerbaijan, and I am not sure how the Americans can help us with that,” Busatlija told Natural Gas Europe. He added that Serbia should first make “serious economic studies on whether it should join such a project.”

On the other hand, economist Milan Kovacevic thinks that the main problem is “the lack of an energy strategy” in Serbia. He also believes Serbia is not trying to distance itself from Russia, since Moscow will stop the gas supply via Ukraine in 2019, and then easily find new buyers in the Asian market. “The Turkish Stream pipeline is far away from Serbia and there is no way to receive gas through it. The only alternative is LNG,” Kovacevic told Belgrade daily Politika.

He suggests Serbia should ask the West and Russia to ship LNG to Serbia. “Even if Serbia makes new connections to the TAP and TANAP gas pipelines, it would have nowhere to store the gas because its only warehouse is controlled by Russia,” Kovacevic said. Dusan Bajatovic, the head of Serbia’s state-owned gas distributor Srbijagas, said Serbia and the rest of the region “suffer because of poor relations between the West and Russia.” “It’s not fair to leave Southeast Europe without a secure gas supply due to the geopolitical games of the US, Russia and the EU,” Bajatovic told reporters.

He also added TAP would not have enough gas for Southeast Europe. Bajatovic believes that shale gas is also not an alternative because it is not “cost-effective and competitive.” “There is still no real replacement for natural gas, primarily from Russia, in the European market,” Bajatovic said. Serbian Energy Minister Aleksandar Antic said the gas supply issue should not be “politicized” and that Serbia must be interested in all projects “that could bring gas to the region.” “We are most interested in the pipelines in which Serbia would be a transit country.

Our priority are gas interconnections with Bulgaria, which should allow us to have access to the TANAP and TAP pipelines, coming from Azerbaijan,” the Minister said. Antic also said that pipeline’s capacity should not be a problem. “I was with the Prime Minister in Azerbaijan where we had meetings with SOCAR officials on possible gas supply to Serbia. They told us the pipeline’s capacity was based on the number of potential buyers. So, if Serbia and other countries from the region want Azerbaijani gas, we can discuss capacity again. That is why I do not think capacity will be a problem,” Antic told reporters.

It is interesting that the head of Russian Gazprom, Alexey Miller, visited Serbia on the very same day the AP published Vucic’s statement on decreasing Serbia’s energy dependence on Moscow. Miller commented on that briefly, saying that Serbia and the rest of the region “could wait a long time” for gas from Azerbaijan. “Four years ago, it was planned that pipeline should start working in 2017 and now the deadline is 2021 and that delay can continue indefinitely,” Miller added.

Serbian officials have talked with Miller about reducing the gas price for Serbia, especially for the companies that use gas as a raw material. Serbian media reported that nitrogen plant Azotara had reached a deal with Russian Gazprom on reducing gas prices to under $300 per 1,000 cubic meters, ensuring profitable operation of the factory. The majority owner of the factory, which is important for the entire Serbian industry, is Srbijagas.