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Serbian deal to give Gazprom further control

By David R. Sands
January 25, 2008

Serbian leaders today are expected to sign an agreement in Moscow that critics fear will help cement Russian energy giant Gazprom's chokehold over critical supply lines for much of Europe.

The deal, to be witnessed by Serbian President Boris Tadic and Prime Minister Vojislav Kostunica, clears the way for Gazprom to acquire a controlling stake in Serbia's national gas and oil company and for the construction of a 250-mile stretch of pipeline through Serbia that will pump Gazprom natural gas to European customers farther west.

Serbian and Russian energy officials reached the agreement this week despite pleas from EU officials that Belgrade consider competing — and more lucrative — offers from Austrian, Greek, Hungarian and Romanian energy firms.

Many in the region fear that Russia is using its energy clout to reclaim influence lost with the collapse of the Soviet Union.

"It is possibly the single most important political issue we face in Central Europe today," said Tibor Navaracsics, a top official in the Hungarian Civic Union, the country's leading center-right party.

"Energy policy is not just one of many policies in the plan for Russia's revival," he said. "It is the policy, the one whereby they hope to achieve their political purposes in Central Europe and beyond."

Gazprom has proved that it can play hardball when it abruptly moved to end Soviet-era price subsidies for former Soviet territories such as Ukraine and Belarus in 2005 and 2006. More recently, in deals like the one with Serbia and a similar one clinched by Russian President Vladimir Putin on a visit to Bulgaria last week, Gazprom is seeking control of the pipeline routes supplying oil and natural gas to Europe from its own reserves and from Central Asia.

The pipeline routes provide lucrative transit fees to favored Russian allies like Serbia, while pointedly bypassing other countries, such as Poland and Romania, with more problematic relations with Moscow.

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