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№ 9 (September 2009)

Russia, Serbia Cement Closer Economic and Political Ties

Highlighting increasingly close political and economic ties between Russia and Serbia were an energy pact and approval of a major loan to Belgrade, sealed during an official visit by Russian President Dmitry Medvedev to the Balkan country this week.

By Ivana Sekularac

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Serbian gas monopoly Srbijagas and Russia’s Gazprom signed a deal formally creating a joint venture to build the Serbian arm of the South Stream pipeline, which could unblock a project already delayed by months.

The Gazprom-led South Stream project has been designed to bypass Ukraine to transport Russian gas under the Black Sea to Bulgaria and onwards to Serbia and Europe — rivaling the European Union-backed Nabucco pipeline, which aims to reduce Europe’s reliance on Russia for energy supplies.

The agreement on the joint venture is part of a wider energy pact that put Serbia’s oil monopoly NIS under the control of Russia’s Gazpom Neft in return for Serbia’s inclusion in South Stream.

The joint venture will be registered in Switzerland in the next 30 days, Srbijagas said, adding that Gazprom will hold 51% with the Serbs controlling the rest.

The two companies also signed an agreement on forming another joint venture for modernisation of Serbia’s first gas storage facility, at Banatski Dvor, which is expected to be finished this winter.

In a further sign of growing Russian control over Serbia’s energy sector, NIS signed a USD100 million loan with the Bank of Moscow, saying the money would be "used to finance NIS current activities". Terms of the loan were not disclosed.

Serbia, Russia’s long-time Slav ally, is important to Moscow’s plans for expanding its energy exports by building the South Stream gas pipeline running under the Black Sea to Bulgaria and on to southern Europe.


Medvedev also approved a major loan to Serbia, President Boris Tadic said, but terms of the deal to help Belgrade through the global economic crisis have yet to be hammered out.

"We have received President Medvedev’s approval to our request for a credit," Tadic told reporters after talks with his visiting Russian counterpart. "We are grateful."

Serbia asked Moscow for a 1-billion-euro loan in July to help to cover a major budget deficit next year so that it can meet the terms of a 3-billion-euro deal with the International Monetary Fund.

The loan could also help Russia to strengthen its foothold in Serbia at a time of growing competition from Beijing , which is to lend Belgrade 200 million euros.


Before Medvedev’s visit, Serbian Foreign Minister Vuk Jeremic described it as a "historic day".

Medvedev, who arrived in Belgrade to mark the 65th anniversary of the city’s liberation by the Red Army from Nazi troops, lavishly used history and politics to underscore the special relations between Russia and Serbia.

Russia has staunchly supported Belgrade’s opposition to international recognition of independence of its breakaway province of Kosovo.

"Russia will always offer support to Serbia in this issue and insist on respecting its sovereignty and territorial integrity," Medvedev said after the talks.


Copyirght 2009. Reuters, Business News. All rights reserved

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