Energy Community threatens to impose sanctions on Serbia

Energy Community threatens to impose sanctions on Serbia
By bne IntelliNews March 22, 2016

If Serbia’s gas monopoly Srbijagas does not establish a legally separate subsidiary in charge of network operation by July 1, the Energy Community will propose sanctions against Serbia, the director of the Energy Community secretariat Janez Kopac told journalists on March 21 after a meeting with representatives of Serbia’s energy ministry and Srbijagas.

In order to open EU negotiation chapters related to energy, Serbia needs to implement standards from the EU Third Package which includes unbundling the transmission system. Currently, both are in Srbijagas portfolio. The Energy Community announced in February 2015 that the Serbian economy ministry and the secretariat had agreed on an action plan according to which Srbijagas would establish a legally separate subsidiary in charge of network operation in March 2015. The action plan also includes concrete steps for the separation of management responsibilities between the new company and its parent, Srbijagas, to be completed by July 1, 2015.

Kopac told journalists on March 21 that members of the Energy Community had received assurances that Srbijagas wold be unbundled by July 1, Tanjug reported.
“If this does not happen by July 1, we will recommend adoption of sanctions against Serbia at the Ministerial Council of the Energy Community,” said Kopac.

“We do not see much progress here, and are waiting for further explanation and suggestions from Serbia,” he said.

According to Kopac, sanctions could be either minor or quite serious, possibly including financial sanctions.

The symbolic sanctions may include ban on voting at Energy Community meetings or not receiving reimbursement for travel expenses for coming to Energy Community meetings. However, Serbia could also face more serious sanctions, including a suspension of European IPA funds for energy, he said.

Previously, the split of Srbijagas into two state-owned companies was expected to take place in two stages by end-2013. The first stage included the financial and business consolidation of Srbijagas, and the restructuring of its debt and liabilities. After that, the distribution and gas trade activities were supposed to be separated from the transport and storage activities. The company to be involved in distribution and trade would be called Srbijagas, while the transport and storage firm would become Transgas.

The restructuring of Srbijagas is required under the precautionary €1.2bn three-year stand-by arrangement (SBA) with the IMF approved in February 2015. The IMF has criticised Belgrade’s slow progress in restructuring Srbijagas as well as railway company Zeleznice Srbije and Electric Power Company of Serbia (EPS). This is mainly due to the government’s fear of losing support if it accelerates the process of downsizing their workforces. Prime minister Aleksandar Vucic is expected to have a stronger mandate to reform the companies after early elections scheduled for April 24.

According to the budget bill for 2016 only RSD44.1bn will be available for state guaranties for credits to EPS, power grid operator Elektromreza Srbije (EMS) and Srbijagas in 2016, against RSD81.72bn planned for public enterprise guarantees in 2015, the government announced in December 2015.

Serbia's first two EU accession negotiation chapters were opened on December 14 - Chapter 32 on financial control and Chapter 35 on the normalisation of relations between Serbia and Kosovo.

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