Oil Energy Money

The political turmoil of Kosovo’s independence from Serbia is creating problems for Gazprom.

On January 25th, Gazprom Neft (the main oil producing arm of Gazprom) agreed to buy a 51% stake in Serbia’s oil company Naftna Industrija Srbije (NIS) for €400m and €500m of further investment.  Further, the firms announced that part of the South Stream Pipeline would run through Serbia.  This deal was agreed but must be ratified by the new government which has not yet been formed due to rifts formed by Kosovo’s independence.  For a country in unrest, oil deals do not attain the highest attention.

Serbia’s president Boris Tadic, and prime minister Vojislav Kostunica support the deal but many Serbian ministers are protesting the low priced sale of NIS, whose book value is €760m.  One opponent has called for a parliamentary meeting “so the (government) officials who want to destroy Serbia can correct their mistake by changing their mind.”

To combat the growing unrest, Russia has sent a diplomatic team to secure a formal agreement ahead of the country’s elections next month.  Their main task will be convicing parliament members of Gazprom and NIS’s joint potential.

Dmitry Malyshev, advisor to Gazprom Neft’s president claims much work must be done to make NIS profitable and Gazprom will invest more than the agreed €500m to modernise facilities and double NIS’s refining capacity.  “We want to make NIS an example of how Russian business could function in Europe.”  Malyshev said.  If sending teams to push through risky deals in a country in crisis is any indication, Russian business has a long way to go.