Serbia and South Stream – Walking the Tightrope

Although it is in Serbia’s interest that the South Stream gas pipeline is built, the government in Belgrade faces the fine balance between the interest of providing energy security and the need to harmonize with the policy of the EU, which it is looking to join.

When Russian President Vladimir Putin during a recent visit to Belgrade said that his state could not develop a project like South Stream on its own, some thought that was a also a message to the Serbian authorities, who had gone from fervent proponents of the pipeline’s construction to a much more moderate position after numerous warnings from the EU.

“South Stream cannot be realized unilaterally, but rather only if it involves two parties. We cannot build a project worth several billion dollars on our own, if our partners are weighing whether that project is necessary,” said Putin after meeting with Serbian officials in Belgrade. The Russian president added that the problems regarding the construction of the pipeline had increased due to political issues, and that politics is now harming the economy.

That notion is also clearly visible in the case of Serbia, which is completely dependent on Russian gas imports and to which South Stream would bring significant energy stability, with plentiful earnings from the pipeline’s construction and gas transit. However, Belgrade now has to balance between Brussels, which is asking that the building of the pipeline be harmonized with European regulations, and pressure from Moscow, which wants its project to be carried out as soon as possible.

Serbian Prime Minister Aleksandar Vucic has also attempted to explain the complexity of Serbia’s position. “I think that Serbia has a better agreement on South Stream than some European countries, it is a good agreement for us, but we have some obligations of our own and, of course, the construction of South Stream is not up to us but rather to an agreement between the EU and Russia,” Vucic said at a press conference with EU Delegation to Serbia chief Michael Davenport after the European Commission’s report on Serbia’s progress toward EU membership. “For [the pipeline] to start in Serbia and end in Serbia makes no sense at all,” added Vucic.

The construction of South Stream’s leg in Serbia, where only the first pipe was symbolically welded, ended up in the European Commission’s progress report on Serbia unveiled on October 8. In the energy section, Belgrade is asked to harmonize its regulations with European ones prior to building the pipeline. There is also the request that Belgrade gradually harmonize its foreign policy with the EU, which is particularly important as Serbia has not joined Brussels’ sanctions against Russia.

Mahmut Busatlija, Associate of the Belgrade Economics Institute, told Natural Gas Europe that Serbia was “only collateral damage” of the relationship between the U.S. and the EU on one side and Russia on the other. “Serbia will lose a great deal if South Stream is not built. The question is even raised as to stable gas supplies during the winter, if there is a gas crisis between Russia and Ukraine. The government in Kiev cannot resolve the matter of gas supply soon and it is nearly certain that it will reach for some of the quantities being transported through its territory to the EU,” said Busatlija.

The Russian president confirmed that theory during his visit to Belgrade. “If Ukraine ends up stealing gas like it did in 2008,” Russia will be forced to reduce deliveries of the fuel by that same amount, said Putin.

Busatlija agrees with the remark that ”politics is now harming the economy.” “Russian Gazprom is not the sole owner of South Stream, it is also owned by an Italian and a French company. Europe needs that Russian gas and it has to come from somewhere. Serbia needs that same gas, especially during the winter. However, despite its needs, Belgrade is now forced to balance between Brussels and Moscow, which should resolve the dispute over the pipeline as soon as possible,” he said.

But Serbia is, at least declaratively, not giving up on South Stream. Serbian Deputy Prime Minister Zorana Mihajlovic said conditions had been created for the issuing of construction permits on certain sections of the pipeline. “With regard to the construction of the South Stream pipeline, Serbia is not the problem, rather the key is the relationship between Russia and the EU. For us it is important that construction begin as soon as possible, and it is even more important to secure gas stability until the moment the first deliveries of gas are made through the pipeline, because until then we will be vulnerable as a country,” said Mihajlovic.

The South Stream project, worth about 16 billion dollars, is headed by Russia’s oil giant Gazprom. The pipeline is to transmit Russian gas to Europe as of late 2015, bypassing Ukraine.

The new EU high representative, Federica Mogherini, said in early October that ”not all political conditions have been created” for the continuation of construction of South Stream, which also involves Italian Eni and French EDF.

The European Commission, which believes Gazprom’s agreements violate European rules of competitiveness, has asked Bulgaria, which the pipeline is to enter through the Black Sea, to suspend work on the construction of South Stream.

 

Igor Jovanovic in Belgrade

 


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