The warning of the Serbian authorities that the United States may impose sanctions on the Oil Industry of Serbia (NIS), raises the question of what consequences they would have for the treasury of this country and its population?!
The president of Serbia, Aleksandar Vučić, has spoken several times about the possibility of sanctions, while there is no confirmation from the USA.
The general secretary of the Association of Oil Companies in Serbia, Tomislav Micovic, says that the eventual sanctions would affect the Serbian oil derivatives market, but adds that for all the obstacles that may arise, there are solutions and that the supplies will not are interrupted.
"I am convinced that those sanctions - whatever they are, if they are approved - are not directed against Serbia. Therefore, I believe that a solution will be found to guarantee safe supply of the domestic market", says Miqovic for Radio Free Europe.
NIS is the only company in Serbia that deals with the exploration, production and refining of oil and natural gas production.
According to Vucic, the Russian ownership has made the US plan to impose sanctions on the former state company, NIS.
The Russian state company, Gazprom Neft, has held a majority stake in NIS since 2008, while from 2022, its parent company, Gazprom, also holds shares.
In total, they have 56.15 percent of the shares, while 29.87 percent are owned by Serbia.
The remainder belongs to citizens, employees, former employees and other smaller shareholders.
Gazprom Neft is under European and American sanctions due to the Russian invasion of Ukraine, but the world's largest gas producer, Gazprom, is not subject to the embargo of Western countries.
What would the sanctions mean for the NIS?
The US State Department told Radio Free Europe on December 16 that the United States "does not publicly warn of sanctions".
"The United States remains committed to disrupting Russia's revenue generation, as well as its procurement and financial networks, used to support its war against Ukraine," DASH said.
NIS has previously told Radio Free Europe that the company's operations are continuing without problems and that it "remains focused on continuing the investments it has started, as well as maintaining stability in the domestic oil derivatives market." .
It is also said that NIS continues to monitor the current situation and analyze all possible scenarios and possible consequences for the company's operations.
Micovic says it is difficult to speculate what the possible sanctions would bring.
"It is difficult to expect it to be a Serbian company 'with first name and last name'. Maybe some principle can be introduced, which would then also include the Oil Industry of Serbia, which is owned by two Russian companies", he says.
Micovic recalls that the USA and the European Union can sanction the operations of their companies, in this case the participation in the oil distribution chain, but not of companies in third countries.
"The current method of imposing and implementing sanctions looks like this... for example in the case of the European Union a directive is passed that prohibits [member] countries from doing business with certain companies or goods," he says.
"There will be no shortage"
Vucic said that there will be no shortage of oil in Serbia, in case of sanctions, and that "people should not worry".
Speaking on January 5, he said that, even if the country is unable to import, it will have enough oil and gasoline for 85 days and that Serbia will make it "even in the most difficult conditions".
Almost 80 percent of the oil needs in Serbia are met by imports, it is estimated in the annual report of the State Energy Agency of Serbia for the year 2023. The total oil consumption in Serbia that year was about four million tons, according to the report.
Oil in Serbia is mainly imported through a pipeline operated by the JANAF company in Croatia. Through it, oil is sent to Croatia, Hungary, Slovakia and Serbia.
JANAF has previously told Radio Free Europe that NIS is its oldest and largest business partner, with which it has concluded a "three-year contract for the transportation of 10 million tons of oil until the end of 2026".
What would be the consequences for the state treasury of Serbia?
The Serbian oil industry, as a large industrial complex, contributes significantly to budget revenues, Micovic points out.
"But most of these budget revenues are the result of the consumption of petroleum products, wherever they come from," he says, adding that the excise duties and VAT derived from the consumption of petroleum products are the same, regardless whether they come from domestic refineries or imports.
"What would not be the same [in the case of sanctions], is the operation of a large industrial plant. So, instead of operating a large domestic industrial plant, other industrial plants in the region would operate for our market," says Miqovic.
He adds that this would mean a decrease in budget revenues, due to the reduced operation of a large factory with a large number of workers.
"However, I am convinced that the energy sector will find an answer to any interruption and that the market will remain supplied, because in history there have been several such threats and they have been overcome," Miqovic says.
"Problems are solvable"
Micovic emphasizes that the Serbian oil industry has a significant weight in the supply of the domestic market.
According to data from the Serbian Ministry of Mines and Energy, about 80 percent of the oil processed into motor fuel at the Pancevo refinery, which is part of NIS, is imported, while 20 percent is oil from domestic deposits in north of Serbia.
Micovic says that the possibility of an oil shortage "always exists".
"There are many risks in the long chain of oil production, transportation and processing, which stretches from the remote countries of other continents to the gas station in our neighborhood," he says, but adds that, at present, there are no indications that interruption will occur.
The same, according to him, also applies to the possible increase in prices.
"Problems are solvable. I am convinced that a solution will be found that will enable the continuation of oil processing in Pancevo and, thus, there will be no shortages", says Miqovic.
He says he bases this optimism on past experience with Western sanctions against Russia.
"If you consider how the sanctions have been imposed so far against the Russian oil trade and the operations of Russian companies, there has always been a period to find a solution for companies that are not from Russia, but that have some kind of partnership relationship with them." , says Micovic.
Is there a plan B?
The Government of Serbia has, meanwhile, approved a decision to establish a coordinating body to guarantee safe supplies of oil and gas, due to, as has been said, the possible imposition of US sanctions against NIS.
Micovic says that all countries, including Serbia, have their own response plan in case of interruptions in energy supply.
"There is always the possibility that the oil supply in the oil pipelines will be interrupted. There is always the possibility of an accident at the refinery, so response plans are made," he says.
What does not exist, according to him, is a plan that would enable long-term and regular supply even without the operation of a refinery.
Despite efforts to diversify oil supply sources following the Russian invasion of Ukraine, Serbia remains largely dependent on Russian energy products.
This dependence has been one of the main arguments of official Belgrade for not imposing sanctions on Moscow - which the EU is asking it to do as a candidate country for membership in this bloc.
After the EU imposed new trade sanctions on Russia in 2022, Serbia and Hungary agreed in October of that year to build an oil pipeline that would enable Serbia to be supplied with "cheaper oil from Urals, connecting to the Druzhba pipeline".
According to an earlier statement by the Serbian Minister of Energy, Dubravka Gjedovic Handanovic, the construction of this pipeline will begin in the second half of 2025./ REL (A2 Televizion)
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