Serbia’s sole oil refinery, which supplies the majority of the country’s fuel, is facing a potential shutdown due to US sanctions imposed on its majority Russian ownership. The Petroleum Industry of Serbia (NIS) has been under sanctions since October 9 as part of Washington’s crackdown on Russia’s energy sector following the 2022 invasion of Ukraine.
The refinery’s operations are crucial, covering around 80% of Serbia’s fuel needs, with imports making up the remaining 20%. Energy Minister Dubravka Djedovic Handanovic had assured that the Pancevo oil refinery would continue operating without disruption until November 25. However, experts warn that replacing such a large portion of the market with imports will be challenging.
To mitigate the crisis, the Serbian government has stocked up its fuel reserves and contracted new import volumes for December. Nevertheless, economist Goran Radosavljevic cautioned that relying solely on imports is not a sustainable solution, stating that “you can prolong the agony for a few months through additional imports, but NIS will go bankrupt if it can no longer operate.”
Negotiations are ongoing between Serbian officials and potential buyers, with President Aleksandar Vucic revealing that there are three possible buyers for NIS. The company’s majority stake is held by Russians, with Gazprom and Gazprom Neft owning 51% since 2008. Serbia has requested a temporary exemption from the sanctions while negotiations are underway, but there has been no response from Washington yet.
A state takeover is a possible option, but Vucic has been hesitant due to his close ties with Moscow. Instead, he has offered to buy the stake at above market rates if negotiations fall through. Serbia’s reliance on cheap Russian gas and its refusal to impose sanctions on Moscow over the war in Ukraine have further complicated the situation.
As the deadline for the refinery’s potential shutdown approaches, the Serbian government is racing to find a solution to avoid an energy crisis. The outcome of the negotiations will have significant implications for Serbia’s energy security and its relationship with Russia. With the country’s fuel supply hanging in the balance, a resolution is urgently needed to prevent a potentially devastating shutdown of the refinery.
