Combined economic and political pressure push Serbia towards sanctions decision

Combined economic and political pressure push Serbia towards sanctions decision
/ bne IntelliNews
By Clare Nuttall in Glasgow March 14, 2023

As economic and political pressure on Serbia to join Western sanctions on Russia grow, Serbian Economy Minister Rade Basta took the unexpected step of calling for Belgrade to impose sanctions. 

He made the appeal which sparked an immediate backlash amid a tougher line taken by Western leaders on sanctions that has seen pressure increased on other countries such as Hungary and Turkey that have sought to keep a foot in both camps. 

Serbia has so far refused to impose sanctions on its traditional ally Russia, despite being under heavy pressure from its Western partners to do so; as one of the EU candidate countries it is expected to align its foreign policy with Brussels’. 

Such calls have been made in the past year by opposition figures as well as by former mining and energy minister Zorana Mihajlovic, who lost her job in the last government reshuffle, but there has so far been little open debate on the politically sensitive issue.

Basta, however, openly said he supports the introduction of sanctions against Russia in an Instagram post on March 13.

“Our country is already paying a heavy price for not imposing sanctions on Russia, and it is becoming unsustainable. As the minister of economy, I can't accept that such amount of pressure is being put on Serbian President Aleksandar Vucic and we remain silent," Basta, a member of the national-conservative United Serbia Party, wrote. 

“That is why I am in favour of imposing sanctions on Russia, I stand by President Vucic in the defence of state and national interests, and I have absolute trust in him. That is why I am asking the government of Serbia and all ministers to make a statement on this issue," he added. 

Basta implied his position has changed as the war has dragged on, saying that “with the passage of time, the reality has changed, and the conflict shows no signs of ending. Small countries always suffer in the conflict of big ones, and due to the global turmoil, Serbia is faced with terrible pressures.” 

Polls carried out over the last year show Serbians are broadly behind their government’s position on not introducing sanctions, and there is also a high level of sympathy towards Russia. Basta’s comments thus drew criticism from both government and opposition ranks. 

Foreign Minister Ivica Dacic said his party supports the government’s existing policy, Politika reported, while the Socialist Movement called on Basta to resign. United Serbia leader Dragan Markovic Palma said Basta had given his personal opinion and that the party does not back sanctions. 

The public backlash against Basta’s statement was evident from the comments under his Instagram post. "I think that it is not right what you stand for, sir, and I think that 85% of the inhabitants of the Republic of Serbia think so as well!" reads one of the comments. "The people will not allow the introduction of sanctions against Russia!" another comment said.

Russian officials also weighed in on the debate in response to Basta’s comments. Kremlin spokesperson Dimitry Pskov talked of “unprecedented, harsh [and] illegal” pressure on Belgrade, while foreign ministry spokesperson Maria Zakharova referred to Basta’s “strange attitude”. 

Pressure to pick a side

As reported by bne IntelliNews, other countries in the region that have sought to maintain relations with both the West and Russia are also coming under pressure to take a clear stand against Russia. At the same time, Western diplomats are piling pressure on countries friendly to Russia to stop helping Moscow dodge sanctions.

With 10 packages already announced, EU foreign policy chief Josep Borrell admitted on March 10 that the West is running out of sanctions options, and the emphasis seems to be shifting towards enforcing existing sanctions more forcefully. 

In the last few days, Turkey, which had been successfully playing both sides, abruptly stopped exporting goods to Russia. Meanwhile, one of Russian President Vladimir Putin’s strongest advocates in Europe, Hungarian Prime Minister Viktor Orban, has said that he might “rethink” his relations with Russia in the future in light of “shifting geopolitical realities”.

US Ambassador in Hungary David Pressman also warned the Hungarian government on March 10 that its equidistant stance between its Nato allies and the Kremlin is unacceptable. "Hungary has reached an important moment in determining its future path. As Russia’s unjustifiable war rages next door, the time is now for a stronger relationship between Hungary and its transatlantic allies and partners," a US embassy statement said. 

Serbia’s best interests

Vucic has said since the invasion that Serbia will act in its own best interests, a sentiment echoed on occasion by Dacic. 

Belgrade has continued its policy of maintaining relations with both Russia and the West over the past year, despite this becoming increasingly difficult. While avoiding sanctions, Serbia has voted consistently to condemn the war in UN votes and refused to recognise Russia’s annexations of Ukrainian territory.

However, Basta is not the first government minister to push for Serbia to take a tougher stance on Russia. Until the new government was appointed last autum, Serbia’s former Minister of Mining and Energy Zorana Mihajlovic was the main pro-Western voice in the Serbian government. She openly clashed with then interior minister Aleksandar Vulin during the latter’s visit to Moscow in August, when she accused Russian Foreign Minister Sergei Lavrov of “abusing” Serbia’s decision not to impose sanctions on Russia by falsely claiming Serbia supported Russia's invasion of Ukraine.

After losing her position in the new cabinet announced in October, Mihajlovic told journalists that she will “always fight for Serbia in the West”

Opposition politicians in Serbia have several times argued that Serbia should harmonise its foreign policy with the EU, or at least open up a dialogue on whether to impose sanctions on Russia. 

Opposition to sanctions 

Opponents of the sanctions cite the traditional ties such as culture and language between the two Slavic nations, Serbia and Russia. Moscow also supported Serbia when it was sanctioned by the West during the wars of the 1990s in former Yugoslavia. 

There is a vocal pro-Russian contingent in Serbia, which has seen several far-right rallies calling for Belgrade to actively support Moscow. 

Today, the main leverage Russia has over Serbia is its support in keeping Kosovo which unilaterally declared independence from Serbia in 2008 out of the UN and other international organisations. 

With a deal between Belgrade and Pristina potentially approaching, this would most likely dramatically change the relationship between Serbia and Russia. However, any deal would face strong opposition from sections of the Serbian population. A slogan now being chanted at pro-Russian protests is “who signs, dies” a direct threat to Vucic. 

Sentiment starts to change 

However, vox pops carried out by bne IntelliNews revealed that unconditional Russomania in Serbia has started waning despite aggressive campaigns by Moscow. 

The set of interviews revealed that the impact of the war on everyday life, such as higher prices of heating and electricity and food, is causing the change of sentiment. Other factors are the risk of isolation from the rest of Europe. The hundreds of Russians, who fled their homeland because of their opposition to the war and are now living in Serbia, have contributed to the beginning of the change of mindset too.

This was also evident on the anniversary of the invasion of Ukraine, when several hundred people gathered at a peaceful demonstration on Republic Square, where they raised a Ukrainian flag on Republic Square, then marched through the city centre. 

Among the protesters were Serbs, Ukrainians and Russians – many of whom have fled Russia for Serbia – as well as foreign diplomats.

On the same day, a group of activists arrived at the Russian embassy to deliver a request to Russian President Vladimir Putin to surrender to the International Criminal Court at The Hague. The group carried an iced cake that appeared to be dripping with blood and which was topped with a large skull, which they left on the pavement outside the embassy. 

Reports of recruitment by the Russian paramilitary group Wagner in Serbia have also created tensions, as recruitment of Serbian citizens to fight in foreign wars is against the law. 

Wagner is understood to have stepped up its activities in Serbia, where many people are sympathetic towards Russia, with the opening of a so-called ‘cultural centre’ in late 2022. 

The criticisms were not limited to local activists, some of which filed a criminal complaint against Wagner; Vucic also spoke out on the issue, saying that Russia should stop efforts to recruit Serbs to fight alongside the Wagner group in Ukraine. Vucic said he had “told his Russian friends” that it is not fair on Serbs or Russians to invite them to fight against Ukraine via websites, because Serbs are “suffering for not imposing sanctions on Russia”.

Paying the price 

Serbian Prime Minister Ana Brnabic said on March 12 that Serbia is paying the price economically for not imposing sanctions on Russia. 

“Does the non-introducing of sanctions cost us? Yes, Serbia is also paying that price … We pay a certain price because we were able to get a better price for government bonds, more favourable loans, more investments,“ the prime minister told TV Prva.

Analysts interviewed by bne IntelliNews for a recent feature on FDI in the Western Balkans said that Serbia has damaged its standing among foreign investors by failing to take a strong stand against Russia. 

The invasion of Ukraine shifted the emphasis from investing in nearby countries to investing into friendly countries with shared values. “Nearshoring is the story of the past. Friendshoring is the new trend,” said Branimir Jovanovic, economist at the Vienna Institute for International Economic Studies (wiiw).

Natalia Otel Belan, regional director for Europe and Eurasia at the Center for International Private Enterprise (CIPE), told bne IntelliNews that investment destinations are now viewed in the context of the "global fight between autocracy and democracy”. 

While almost all of the region is expected to receive much stronger FDI inflows in 2022, Serbia is the exception, as in nominal terms it saw a stagnation (for the data available so far), and FDI declined as a share of GDP. 

Specifically, investment from EU countries dropped sharply in 2022, accounting from only around one-third of the total compared with around 60% in previous years. By contrast, Chinese FDI increased a lot, and in 2022 China will be the biggest investor, overtaking the EU for the first time.

The stagnation in investment is a major change. Jovanovic noted that until now, “Serbia was considered to be the success story for FDI in the region”. “For the same reasons as some companies left Russia, they are not investing in Serbia now. They don’t consider Serbia to be friendly to the West, to the EU. And because of that they are saying we don’t want to invest in this country which is a friend of Russia,” he told bne IntelliNews

Expanding on this, Jovanovic cited company executives from Germany and other countries who disclosed they are having second thoughts about investing in Serbia because of the political uncertainty. “So far, they are postponing decisions to invest in Serbia, but if things do not improve they might also cancel investments. It seems Serbia is [paying the] price for its uncertain position re the Russia and Ukraine war.” 

EU accession progress stalls 

The EU has sought to encourage countries from the Western Balkans and Eastern Neighbourhood following the invasion of Ukraine by extending candidate status to Ukraine, Moldova and Bosnia & Herzegovina, and allowing Albania and North Macedonia to start accession negotiations. 

Serbia, meanwhile, has faced repeated calls from MEPs to introduce sanctions on Russia or risk having its EU accession progress frozen. In one recent draft report, the European Parliament’s standing rapporteur for Serbia said the country’s alignment with a “warmongering autocratic regime” namely Russia is unacceptable.

US Ambassador to Serbia Christopher Hill also argued earlier in March that Serbia is “paying a high price” for not introducing sanctions on Russia. Hill said in an interview with Novi Pazar Radio Sto Plus that the failure to introduce sanctions was one of the main reasons slowing down Serbia’s progress towards the EU. 

Hill also said he believes Russia is “not helping Serbia in any way”. “They [Russia] did nothing to help solve the Kosovo issue, they did almost nothing to help economically, even for their energy support, Serbia has to pay,” the diplomat said.