Thewesternbalkans
Due to US sanctions, Serbia is paying a very high price as a “collateral victim” in the confrontation between the West and Russia.
The issue of ownership of the Naftna Industrija Srbije (NIS) is getting closer. It was previously reported that US sanctions against the Serbian company, whose majority shareholders are Russia’s Gazprom Neft and the Gazprom Group, are expected to come into effect on October 9. “There are no more options for postponing the sanctions,” Serbian President Aleksandar Vučić said. The only remaining option is to say: “Maybe tomorrow I will demand the nationalization of the property.” This is the last thing I have to say, but I don’t want to,” Vučić said.
“I am confident that JANAF (crude oil transportation company in Croatia) will stop oil supplies in a short time. I hope that NIS will not lay off a large number of employees,” Vučić added.
“Surprise”: New sanctions delay
Croatian oil pipeline operator Janaf said on Wednesday (October 8) that the U.S. Office of Foreign Assets Control (OFAC) has granted it a new licence to continue supplying Serbia’s Russian-controlled oil and gas producer NIS with crude until October 15.
In parallel, at a meeting of NIS’s senior and middle management this morning (October 8), managers were informed that U.S. sanctions against NIS would be delayed for another week.
At the meeting, management was instructed to convey to employees that the company is not planning any layoffs. This is particularly important given Serbian President Aleksandar Vučić’s statement the previous day, expressing hope that there would be no mass layoffs.
Employees were also informed that the company is working “intensively” to find a solution to the sanctions problem.
Dark clouds over NIS
NIS has been receiving non-Russian oil via the Croatian JANAF for two years. The Serbian company has difficulty paying for oil imports from JANAF, as since the beginning of the armed conflict in Ukraine, the Croatians have significantly increased the transit fee on oil pumped through Croatia.
In addition, the Croatian company, fearing secondary sanctions, is likely to refuse to transport oil to NIS, thus losing its largest customer. News reports indicate that JANAF, for this reason, has also lobbied hard for a postponement of sanctions on the Serbian NIS.
In addition, the sanctions will face NIS with problems regarding its internal payments. In the event of sanctions, NIS will find a solution for corporate internal payments by transferring its accounts to Poštanska Štedionica Bank. The retail solution, however, is only partial: there is a risk that Visa/MasterCard processing will also be blocked. In this case, customers at NIS/Gazprom gas stations will only be able to pay in cash or with the Serbian DinaCard.
Other Serbian gas station chains are also experiencing problems. Before Biden initially announced sanctions, 80% of fuel supplies for other chains (OMV, Eco, MOL, KnezPetrol) came from the NIS plant in Pančevo. In the six months since the initial sanctions were announced, these chains have apparently prepared themselves, increasing the share of imports to their networks from their own plants in Austria, Hungary and Greece, while reducing supplies from NIS.
In addition, NIS will have logistical and payment problems with maintaining imported equipment. Thus, unless a miracle happens in a week, Serbia will face a virtually inevitable fuel shortage and energy crisis, which will drag down other sectors of the economy. Authorities say that NIS has about six months of oil reserves, so the problem is unlikely to be completely resolved immediately. However, there is a sense that if nothing changes in those six months, the Serbian authorities will have no choice but to nationalize the shares of Gazprom subsidiaries in order to avoid sanctions. Vučić has mentioned this option several times in the past week, but always with the caveat that it is the least desirable scenario that would be used only in the most extreme cases.
The complicated relationship with Gazprom
By the way, in addition to the shortage of oil products, it seems that Serbia has not yet signed a new gas supply contract with Gazprom. The previous three-year contract expired in May, and it was later reported that it had been extended until the end of September, pending the conclusion of a new one. It is now October, and there has been no news that Gazprom and Srbijagaz have signed a new contract.
Vučić is engaged in complex negotiations with Moscow and Washington regarding sanctions against NIS. In this situation, he cannot turn to European leaders for help – the situation is completely controlled by the Americans and Russ
