Russian president to discuss South Stream during Serbia visit

By bne IntelliNews October 16, 2014

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Russian President Vladimir Putin will arrive in Serbia on October 16 for a visit set to be dominated by discussions over the South Stream pipeline and Russian-Serbian economic ties.  

Putin will attend a military parade and remembrance ceremony in Belgrade, marking the 70th anniversary of the liberation of Belgrade. After the six-hour visit he will go on to the Asia-Europe summit in Milan. 

“I hope that ... we will discuss a sufficient number of concrete issues. This is primarily economic cooperation, further development of our relations in energy and agriculture,” Serbian Prime Minister Aleksandar Vucic said in an interview with Russia’s TASS news agency in advance of Putin's visit. 

Serbia has been forced into an awkward position this year over the conflict in Ukraine, torn between long-time ally Russia and its ambitions for EU membership. Integration with the EU is a priority since Serbia’s economy is primarily oriented towards the EU. However, relations with Brussels have become tense at times, as Serbia refused to join EU sanctions against Russia over Ukraine, and plans to continue with the Russian-backed South Stream pipeline. 

Serbia’s state gas company Srbjagas is planning to start construction work on the Serbian section of the pipeline in late October or early November, the company’s director Dusan Bajatovic said in September. Belgrade has repeatedly said that it is still behind the project, despite pressure from Brussels to fall into line with an EU decision to suspend preparation work. 

“We should discuss how and where we proceed in the South Stream issue,” Vucic told TASS. However, he added that, “not everything depends on Serbia ... South Stream cannot begin on the border between Serbia and Bulgaria and end on the border between Serbia and Hungary.”

Russia and Serbia are also hoping to bridge the growing rift over Serbian oil and gas company Naftna Industrija Srbije (NIS) which is controlled by Russia’s Gazprom. Issues including Serbian state owned companies’ unpaid debts to NIS - amounting to more than €530m - are due to be discussed at the meeting on October 16. Russia has also objected to the decision by the Serbian government to introduce a tougher tax regime for NIS in 2013, which was followed by a probe into the privatisation of the company launched in mid 2014. 

“There are many nuances and problems there and they will be discussed,” Russian presidential aide Yury Ushakov told reporters, according to Interfax. 

Earlier this month, Serbia agreed to hand over a stake in Serbian petrochemicals company HIP-Petrohemija to Gazprom in return for writing off outstanding natural gas debts of around $180m. 

Outside the energy sector, Belgrade is hoping for investments from Russian companies in the agro-processing sector. In August, shortly after the Russian embargo on fruit and vegetable imports from the EU and other western countries was announced, the Serbian Chamber of Commerce and Industry said there were “vast opportunities” for exports to Russia. Although Belgrade has promised the EU that it will not exploit its position as a supplier to the Russian market, Serbian producers have been able to up their exports to Russia. 

Vucic also said he expects Russian companies to invest in some of the Serbian companies currently up for privatisation, naming state telecoms operator Telekom Srbija and Belgrade’s Nikola Tesla Airport. In August, the Serbian Privatisation Agency listed 502 state owned companies for privatisation.

Despite the hopes of greater Russian investment, Vucic’s government is firmly committed to EU accession. Serbia received a positive assessment in the European Commission’s latest enlargement reports released on October 8. The last year has marked a turning point for Serbia on its road towards EU membership, with the accession negotiations process formally launched in January 2014. In an article published in Serbian daily Blic on October 8, EU Enlargement Commissioner Stefan Fule said Serbia had become one of the EU’s closest partners.

However, Serbia’s path towards EU membership remains blocked by the refusal to recognise Kosovo as an independent state, and Serbia has so far relied on Russia’s United Nations veto to keep Kosovo out of the UN. Two days before Putin’s visit, the tense relationship between Serbia and Albania erupted at a Euro 2016 qualifying match between the two countries, when a drone pulling a flag with pro-Albanian slogans flew into Belgrade’s Partizan Stadium. The match was abandoned when Serbian and Albanian players fought on the pitch, and may have wider repercussions, if Albanian Prime Minister Edi Rama’s forthcoming visit to Serbia is cancelled. 

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