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Putin pressures Serbia with old gas debt

Russia -- Employees stand near pipes made for the South Stream pipeline at the OMK metal works in Vyksa in the Nizhny Novgorod region, April 15, 2014

A phone call between Serbian Prime Minister Aleksandar Vucic and Russian president Vladimir Putin was scheduled for Nov. 5, Vucic told the media. But whether this phone call persuaded Putin to postpone the collection of Serbia’s gas debt worth more than 200 million USD is still unclear.

The media is speculating that the activation of this old debt is Putin’s response to Serbia’s delay in construction of the South Stream pipeline

The debt dates from the nineties and raises the question why Russia became so impatient to collect it at this time.

The trigger for the sudden activation of this forgotten debt, commentators tell RFE/RL, was Putin’s disappointment when the Serbian government didn’t agree to start the construction of the South Stream pipeline. During his Oct. 16 visit to Belgrade, Putin warned the Serbian government about its participation:

“The South Stream cannot be implemented unilaterally, if our partners are still considering it. It is like love. It can be happy only if both participants in that wonderful process agree to continue their relationship.”

Although Putin’s message couldn’t be clearer, Serbia withdrew from the construction deal after pressure from the EU that could have caused Putin’s resentment.

Siljka Pistolova, editor of the site Energy Observer says:

“Mr. Putin remembered the old Serbian gas debt now. It’s not about the debt -- the debt has to be collected -- it is about the fact that Serbia politely refused to participate in the construction of the South Stream pipeline that is not in accordance with the Third Energy Package of the EU. Belgrade clearly said that they will start the construction of the South Stream only when it starts respecting the basic EU rules. That is why I think Putin remembered this debt now. So the problem is not the money, the problem is the South Stream.”

Vladimir Medovic, energy specialist and an assistant professor at the University of Novi Sad in Serbia has a similar opinion. But Medovic also blames the Serbian government for such an outcome:

“During Vucic’s last visit to Moscow in early July, the agreement between Gazprom and Serbian gas giant Srbijagas on building South Stream was signed. But only a few months later when Putin came to Belgrade he found out that Serbia withdrew from the deal until the agreement between Russia and the EU is reached. Therefore it is very possible that this gas debt collection is a result of Serbia’s refusal to start the construction of the South Stream pipeline on its territory.”

Medovic noted:

“When Bulgaria stopped the construction of the pipeline at the beginning of June, Minister [of energy] Zorana Mihajlovic said that Serbia has to do the same, but was quickly denied by the Prime Minister. Shortly afterwards, the agreement between Gazprom and Srbijagas was signed in Moscow, which is proof that Russians were promised that the construction will be continued despite all the difficulties with Bulgaria and despite the attitude of the EU. Disappointed by such a changing attitude of the Serbian government, Putin probably decided to implement this measure and to collect the gas debt.”

He said it is difficult to predict whether Vucic will manage to change Putin’s mind, but further escalation of Ukrainian crisis is complicating this situation even more:

“No one in the European Union or in Serbia knows at this point how the Ukrainian crisis will affect the gas supply of all of Europe.”

Asked whether Serbia, already on the verge of bankruptcy, will be able to pay the enormous debt Medovic said:

“Serbia will perhaps have to follow the example of Ukraine in this matter-; to present the problem to the EU and to try to find some financing model through some arrangements with the Union. The thing that makes it more difficult is the problem that we have with the EU and that is Serbia’s refusal to impose sanctions on Russia [which would be in alignment with UN policy]. So all of that is complicating the issue even more. Serbia will try to find the solution while trying not to cause Russian resentment in order to ensure the stability of gas supply. But on the other hand Serbia will have to find a certain modus vivendi that will enable further dialogue with the EU about its membership. It all starts to look as a mission impossible.”