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Despite Western sanctions, Russia still plays a crucial role in supplying Serbia with natural gas.
Serbian Deputy Prime Minister Aleksandar Vulin hinted during the Eastern Economic Forum in Russia's Vladivostok in September that Moscow and Belgrade should resolve issues related to the gas supply contract due to expire in 2025.
Despite Western sanctions, Russia still plays a crucial role in supplying Serbia with natural gas.
Although continued Russian gas supplies to Europe pose a serious dilemma within the region, some EU member states such as Hungary, Slovakia and Austria, as well as non-members such as Serbia, do not hesitate to maintain energy partnerships with Moscow.
As such, Belgrade officials are preparing to extend the gas deal with Russia for another year. The original agreement was signed in May 2022, shortly after the outbreak of the Russian-Ukrainian war. Moscow agreed to sign the deal on favorable terms for Belgrade, while cutting off gas supplies to Finland, Poland and Bulgaria.
Europe sought alternative gas suppliers to address the energy deficit and urgently reduce dependence on Moscow. However, it is not yet clear whether the EU plans to close the Russian supply pipeline that crosses its member states. Russia supplies 2 billion cubic meters (bcm) of natural gas through the Balkan section of the Turkish Stream pipeline, which is operating at full capacity. This dependence on Russian gas could potentially hinder the EU's efforts to reduce its dependence on Moscow and diversify its energy sources.
Unlike some EU member states, Serbia is highly dependent on Russian gas. The EU has not taken any bold steps to punish or pressure Serbia to avoid extending the gas agreement with Russia. However, in 2023, Serbia agreed to import additional volumes of gas from Azerbaijan in an effort to diversify the domestic market, including the inauguration of a new pipeline link via Bulgaria. This move to diversify its energy sources could potentially reduce Serbia's dependence on Russian gas. As of 2024, Azerbaijan began supplying Serbia with 400 bcm of natural gas, with an additional agreement to supply an additional 1 million cubic meters of gas on a daily basis from November 2024 to April 2025.
Since Azerbaijan's gas exports represent less than 15% of Serbia's domestic gas consumption, Belgrade still considers Russia's Gazprom its main source of gas supply. However, this diversification strategy could be a step towards reducing Serbia's dependence on Russian gas. Moreover, the EU's criticisms and expectations of waning Russian influence in the Balkan energy market, especially in Serbia, are unlikely to be justified anytime soon, given that its main energy companies are majority owned. Russian.
Consequently, Europe's major efforts to wean itself off Russian fossil fuels have not yielded major results due to the pragmatic foreign policy strategy of some countries such as Serbia, which chose to remain tied to Moscow's energy and reap cost benefits. Given the favorable terms of the initial agreement, Serbia's enthusiasm to secure a deal with Russia seems rational.
Although Russia's long-term energy dominance in the Balkan region appears intact due to efforts to diversify the region's countries, Serbia's renewed gas deal could extend Moscow's presence in the domestic energy market for a while, even as continued the delivery of Russian gas will become more expensive, encouraging other countries to seek cheaper solutions. Taking this factor into account, Belgrade signed a gas agreement with Russia based on a fixed price, protecting against additional costs, which is now likely to be renewed on the same terms.
However, Russia's expected drop in state revenues from oil and gas to $117.53 billion between 2025-2027 due to the heavy tax burden on energy giant Gazprom is a cause for concern. That could prompt Moscow to reconsider the price it charges Serbia when the contract comes up for renewal in 2025.
Furthermore, as the main EU member states, Serbia made great efforts to switch to alternative energy sources in the near future. By 2026, Serbia expects to have more than 1,500 megawatts (MW) of green energy under the National Integrated Energy and Climate Plan, which outlines a vision up to 2030 and 2050. Successful implementation of the strategy will enable Serbia to dramatically reduce its dependence on fossil fuels, especially Russian, thus solving a difficult political dilemma./ Adapted "Pamphlet" from "TheGeopost"
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