Jan 25, 2008 | 16:57 GMT

5 mins read

Serbia, Russia: Hopes and Fears About the Gazprom-NIS Deal

Serbia and Russia have signed an energy cooperation deal that, for most of the interested parties, has nothing to do with energy — or even with Kosovo.
The Serbian leadership and Moscow signed a deal Jan. 25 on energy cooperation. Specifically, the agreement deals with the potential sale of 51 percent of Serbian energy monopoly NIS to Russian state energy firm Gazprom. There are really four players in this game, and each has a dramatically different view of the situation — and from that, radically different goals. The only player who conforms to the conventional wisdom on the topic is Serbian presidential candidate Tomislav Nikolic. A representative of the Radical party — a group far more nationalist than even Slobodan Milosevic's Socialists — Nikolic wants to trade economic concessions in Serbia for a firmed up geopolitical alliance with Russia. Nikolic does not much care that the Russian offer is less than half of what NIS is worth, nor that the deal would in essence put Serbia in economic thrall to Russia in the long term. Nikolic wants such an alliance in order to prevent the European Union and NATO from formally hiving off Serbia's southwestern province of Kosovo. Serbia cannot resist the West on its own and hopes that if Russia is economically lashed to Serbia, Russia's opposition to Kosovar independence will deepen, changing from rhetorical to something more practical. He sees securing a Russian willingness to bleed for Serbia as the paramount concern, and sees the NIS sale as the logical means of securing it. Nikolic also has publicly mused about letting the Russians set up a military base in Serbia in order to fend off Western influence. For President Boris Tadic — who lost the first-round presidential vote Jan. 20 to Nikolic — there are two concerns. The first is securing an electoral victory in the second-round election Feb. 3. The second is pushing Serbia in the direction of Europe — specifically via the signing and implementation of a Stabilization and Association Agreement (SAA), the first step toward EU membership. Achieving these goals means forging an agreement with Prime Minister Vojislav Kostunica in order to gain Kostunica's endorsement (the votes of Kostunica's supporters should be enough to make the difference and give Tadic a victory). Tadic opposes the NIS sale both on principle (he finds the Russian lowball offer insulting) and in strategic terms (a rival offer from Austria's OMV would deeply integrate Serbia into European structures). But this is all secondary to his vision for Serbia (joining the European Union) and achieving re-election. If supporting the deal earns Kostunica's endorsement on both counts, then support the deal he will. Kostunica, in turn, is an opportunist. He only obtained the prime minstership via extremely canny negotiating; his party is only the fourth-largest in the Serbian parliament and the third-largest in the ruling coalition. He can only retain power by constantly leveraging the various Serbian factions against each other, and that means irregular shifts on issues European and Russian as well. Formally, he is in favor of the NIS deal, but STRATFOR questions his sincerity; if the NIS deal were sealed, Serbia would be economically hardwired into Russia — something that would drastically reduce Belgrade's (and Kostunica's) room to maneuver. For Kostunica, keeping everything in play is the preferred strategy, because as things get locked down — whether those things be the NIS sale, a Kosovo independence declaration, or progress on accession talks with the European Union — his flexibility diminishes. In the current case, Kostunica has managed to put himself (again) in the middle of everything. Tadic needs him to get re-elected, Nikolic needs him for the NIS sale, Europe needs him to get the SAA agreement approved, and Russia needs him to get its foot into the Serbian energy sector. For Russia, the NIS deal really has little to do with Serbia, and is more about nailing down as much economic influence in Europe as possible. Russia, via Gazprom, has been trying to get a hold of pieces of Europe's distribution and retail natural gas networks for three years. But European fears that Russia plans to use these networks to exercise political influence have prevented Russia from making more than negligible progress. The NIS deal would give Russia a nationwide network from which it could begin spreading into adjacent states. From Serbia, penetration into Bosnia would be child's play, and Gazprom also could have an excellent shot of dipping into EU members Bulgaria, Hungary and Romania. It is an opportunity too good to be missed. And if it happens to raise the possibility of deeper political influence in Serbia, so much the better. According to the agreement signed in Moscow on Jan. 25, the NIS deal has only been agreed to in principle. The pesky detail about price is still up in the air and subject to further discussions — which in essence means the entire deal is not yet done. For Tadic and Kostunica this is an ideal scenario. The deal is not yet permanent, so Kostunica retains his position as kingmaker while Tadic could back out of it once the second round of Serbia's presidential elections are behind him. Nikolic and the Kremlin, of course, would have preferred a firmer deal Jan. 25, but the agreement is certainly a step in the right direction for them as it gives more momentum to closer Russo-Serbian relations — although obviously not as much as they had hoped.

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