Could the Serbian Government break with Moscow over NIS?

Experts assess that Russia would take a significant hit if it withdrew from NIS, but note that it would still have other tools of influence in Serbia.

Developments surrounding the sale of Russia’s stake in the Petroleum Industry of Serbia (NIS) are changing by the day. What is actually happening in the negotiations largely becomes known to the Serbian public only during emergency government sessions and addresses of the Serbian President Aleksandar Vučić. From what the authorities are saying, the impression is that Serbia does not, in fact, have a concrete plan.

For the past 50 days, NIS has been under US sanctions, and unless the Russian side relinquishes its share in the company, the negative consequences for the state and the economy could be enormous.

The imposition of sanctions against NIS appears to prevent the Serbian government from continuing its balancing act between Russia and the West. Part of the expert community believes the sanctions will accelerate the weakening of Russian influence in Serbia.

However, experts consulted by Savremena politika caution that Russia’s exit from NIS would cost it only one of its instruments of influence in Serbia, while a pivot toward the West remains uncertain, largely because the current government in Belgrade would far prefer to replace Russia with China.

“Russia has three instruments of influence in Serbia and the Balkans: energy, the unresolved Kosovo dispute, and its popularity among the local population. Once the ownership of NIS changes, Russia will lose one of these three instruments, but the remaining two will stay in place and will most likely endure even after a possible change of government in Serbia, which is why Vučić’s successors will also find it difficult to fully distance themselves from Russia,” says for European Western Balkans Vuk Vuksanović, Senior Researcher at the Belgrade Centre for Security Policy (BCSP). 

Vuksanović does not see how Serbia’s leadership could make a clean break from Moscow at a moment when it is internally weakened and when voters favorably inclined toward Russia and China form a core electoral base the ruling party cannot afford to alienate.

“Russia is well aware of this political capital and plays that card. Before the (last year’s) Novi Sad tragedy, you could still make hypothetical projections about whether the ruling regime would distance itself from Moscow if the alternatives risked its hold on power. At this stage, the regime is so wounded that it cannot turn its back on any external actor, making its international positioning chaotic and dysfunctional,” Vuksanović believes.

He adds that mistrust is visible in relations with Moscow regarding both the fate of NIS and gas deliveries, even though a segment of the public still sees Russia as an easier partner than the US and the EU.

“Apart from its popularity in public opinion, Russia, if the ownership structure in NIS changes, can play the card of punishing Serbia’s leadership through gas supplies and pricing,” Vuksanović noted.

Political scientist Aleksandar Đokić argues that the government in Belgrade has nowhere to turn in the West, as it does not share ideological ground with Brussels, and Washington is not particularly interested in the region.

“I think the domestic regime would like to replace Russia with China in its game of balancing between Brussels and Washington. It also benefits from the fact that the Trump administration is entirely uninterested in democracy as such, while European powers see Russia as an existential threat and therefore prioritise maintaining stability in the Balkans,” Đokić says. 

According to him, if Russia does not leave NIS, Serbia’s government will be destabilized by a sharp rise in prices, something that, on top of already high political dissatisfaction, would mean certain electoral defeat for the ruling party.

“In the absence of a better alternative, it is not in Moscow’s interest to provoke such an outcome. Logic suggests that Russia will sell its stake in NIS to a company acceptable to the United States. Since NIS has unofficially, and for political purposes, been used as a financial source to expand Russian influence in Serbia and in non-EU countries that the domestic regime considers part of the so-called ‘Serbian world,’ losing this resource would deliver a serious blow to Russia’s influence,” Đokić argued.

Could the situation with NIS have been resolved earlier?

Signs that NIS could become subject to sanctions because of its Russian ownership appeared soon after the start of the war in Ukraine, when the European Union introduced its first sanctions packages against the Russian Federation.

Even then, messages were being sent to the authorities in Belgrade that candidate countries were also expected to align with these sanctions. Despite this, no lasting solution was found to prevent the sanctions scenario.

Vuksanović believes the government in Belgrade kept postponing decisions regarding NIS because it hoped for a normalisation of relations between Washington and Moscow and wanted to avoid “angering” Russia by taking over NIS.

Because of this delay, he adds, some potential buyers have since become unviable.

“Although a few years ago, Hungary’s MOL was mentioned as a potential new owner of NIS, I don’t think that is an option anymore. Washington is calculating that Hungary’s energy sector will come under scrutiny within a year, given that the US granted it a one-year postponement on sanctions,” Vuksanović explained.

He noted that a potential buyer from the United Arab Emirates (UAE) is being mentioned because that country maintains strong relations with both Russia and the US, while Serbia’s close ties with the UAE could help the government present the takeover to the public in a positive light, as the acquisition of NIS by a proven partner.

Aleksandar Đokić agrees that both Serbia and Russia waited until the last moment to see whether the Trump administration would actually enforce the sanctions or whether it was yet another manoeuvre.

However, he believes Serbia will not get away with merely “pouring from one empty cup into another” and that Russia’s share will have to go to a company clearly not under Moscow’s control.

“Let’s recall that Lukoil attempted to sell its foreign assets to Gunvor, whose owner has long been known as a partner of Gennady Timchenko and whose wife, a Russian citizen, owns luxury property in Russia. The Americans rejected that deal, demonstrating the seriousness of their intentions. The same will apply in Serbia: there will be no pouring from empty to empty, and the company will have to end up with an owner not controlled by Russia,” Đokić concluded.