Russia and Serbia reach agreement: Srbijagas general director speaks - here's what it means for us

Photo collage: Shutterstock, Tanjug/AP, Nikola Tomic

The general director of Serbia's public gas enterprise Srbijagas Dusan Bajatovic said today that the extension of the gas contract Serbia has with Russia for another three months clearly shows that Russia will not allow Serbia to be left without gas supply, and noted that there will be no increase in the price of gas for households, while gas will even be somewhat cheaper for the industry.

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Bajatovic said that the extension of the gas arrangement is excellent news and that Serbian President Aleksandar Vucic and Russian President Vladimir Putin agreeing on it yet again confirms the good relations between the two countries.

He explained that "the old" long-term contract has been extended, but that the period of time is not longer because there were additional problems with payments, and in interpreting EU sanctions.

"Serbia is safe at least until January 1, 2028, we are talking about transit through third countries, that is, from European countries to third countries that are not members of the EU. When it comes to additional costs, if there are payment problems, for example, it's possible that some payment agent appears and takes five percent. Whose expense is it now? And many other such things," Bajatovic told RTS.

When it comes to prices, official data says that gas in Europe has gone up 75 percent, but the truth is that since February the price rose by 100 percent as a result of the crisis in the Middle East. Bajatovic also said that Serbia has "kept the oil formula".

"It's the old way of calculating energy, 35 percent is affected by the price of 3 percent fuel oil, 35 percent is affected by the price of 1 percent fuel oil, and 30 percent is affected by the price of diesel. And that's how you calculate. It's the formula that ultimately pays off. What is important is that this kind of formula is calculated over nine months. So, with these current price increases, it would be a higher price, but it is calculated over the past nine months," said Bajatovic.

He added that in the next quarter the price of gas (supplied by Russia) will be stable - 320 (dollars, per 1,000 cubic meters), while if Serbia were to buy gas on the market the price would be 690.

"When it comes to flexibility, there's the minimum amount (to buy) for the summer, that's what you have to take on. But if you need more, you can get more at contract prices. Nobody has such a contract. It was like that before as well. As far as I know, this has been the way things have been done between Gazprom and Srbijagas for the last 20 years," said Bajatovic.

He stressed that the price of gas for households will not be changed, and that gas will become cheaper for the industry.

"Because we won't spend (gas) from storages, we won't be buying on the market, and we have a stable and relatively low price," said Bajatovic.

Asked what other gas supply Serbia can count on as an alternative, Bajatovic said that talks with Azerbaijan will resume in early April, while the country can currently count on up to 2 million cubic meters of gas from there, as higher quantities are limited by technical capabilities and production.

He also stated that Serbia can buy gas from other sources, including that arriving via German ports, but that this is "economically less favorable."

Bajatovic said that the gas arrangement should not be linked to finding a solution when it comes to US sanctions against NIS (Petroleum Industry of Serbia).

"I wouldn't connect those two things, since the negotiations about acquisition of NIS are ongoing. There will be more extensions for that, I'm absolutely sure of that, therefore we proved that we will change the (majority) ownership in NIS, which was the basic requirement of the US sanctions," he said.

Bajatovic said that Gazprom (which is currently majority NIS owner) "wants to remain a reliable partner and the agreement between Vucic and Putin clearly shows that Russia will not allow Serbia to be left without gas supply."

(Telegraf.rs/Tanjug)