Serbian deal to give Gazprom further control

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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.

Russia and Serbia, bound by cultural, religious and historic ties, have long had a close relationship. Moscow initially opposed the NATO air bombing campaign against Yugoslavia under President Slobodan Milosevic over Kosovo in 1999, and has repeatedly blocked a U.S.-backed plan in the U.N. Security Council to grant independence to the breakaway province.

The Gazprom deal in Serbia reportedly will pay Belgrade less than competing bids offered, but will mean transit fee profits of $200 million annually and the construction by Gazprom of a major underground gas storage facility inside Serbia.

Lithuanian President Valdas Adamkus said Russia appeared to be using its energy clout to punish the Baltic nation for a string of clashes, including Lithuania's sale of a major stake in a key refinery to a Polish company instead of to Russian rivals.

"The question comes up whether a very strong financial recovery in Russia is a stimulus for the new Russian leadership to return to the Cold War," Mr. Adamkus told the Financial Times newspaper.

A top Gazprom official denied that the company was being used to further Russian political ends.

"There is some old-style thinking about our actions in the West," Alexander Medvedev, deputy chairman of Gazprom's management committee, told The Washington Times in an interview last month. "Unfortunately, we are facing debates about Gazprom's activities, including criticism from some in the United States, that cannot be explained on an economic basis."

Hungary's Mr. Navaracsics said Gazprom's moves make it critical that the 27-nation European Union develop a coordinated energy policy as a counterweight. But unity has proved difficult as individual EU countries cut bilateral supply deals with Gazprom.

Gazprom also has cultivated supporters among its customers. Former German Chancellor Gerhard Schroeder is on the board of the Gazprom subsidiary building the pipeline network that would pass through Bulgaria and Serbia.

"On no other issue is it more important that EU member-states cooperate, and on no other issue are they more divided," said Alexandros Petersen of the Center for Strategic and International Studies.