Politics spurs Serbia-Russia energy deal

Politics spurs Serbia-Russia energy deal Twice in the past week the prime minister has scored politically against his coalition partner and chief rival, Boris Tadic, the country’s president. First, he weakened Tadic’s performance in the first round of presidential elections, held last Sunday, by steering his own supporters’ votes away from Tadic to a minor candidate, the populist infrastructure minister Velimir Ilic. The move helped ensure Tadic’s disappointing second-place finish behind Tomislav Nikolic, the ultra-nationalist candidate of the Serbian Radical Party. In a February 3 run-off for the presidency, the pro-Western Tadic must now run from behind to retain his role as head of state and ward off the diplomatic uproar that would be invited by if the pro-Russian Nikolic were to win. Capturing the center of Serbian politics – shoring up his own position by playing pro-Western politicians and ultra-nationalists off each other – is vintage Kostunica, political analysts note. Yet to use this strategy even in the sensitive matter of a presidential election, risking a potential ultra-nationalist victory, is extraordinary. Kostunica’s second maneuver, however, looks more audacious still. Senior politicians and analysts interviewed by Balkan Insight say that behind the major energy deal struck this week between Serbia and Russia was a furious round of political horse-trading in which agreements over the energy deal were traded explicitly in exchange for pro-European diplomatic moves sought by Tadic and dear to many of the president’s potential supporters at the polls. In this way, Kostunica’s appears to have extended his strategy of stealing the centre ground, domestically, to Serbia’s geopolitical jockeying between the European Union and Russia. The energy deal, agreed by government ministers just two days ago but already due to be signed tomorrow in Moscow, secures for the Russian energy giant Gazprom a 51 percent stake in Naftna Industrija Srbija, NIS, Serbia’s state oil company, which holds monopoly rights on oil imports and other privileges. The cash value of the NIS sale remains unannounced, though a figure of 400 million euros – far below NIS’s previous estimated market value – has been widely reported. Conditions of the sale are expected to include contractual obligations to invest 500 million euros in NIS. Paired with this sale is an agreement allowing Gazprom to build a section of its South Stream natural gas pipeline to Italy – a rival to the European Union’s Nabucco pipeline project – on Serbian territory. A week earlier, Russia secured permission for the pipeline to cross Bulgarian territory, as well. Kostunica told reporters late Tuesday that the deal would be “Serbia’s biggest economic undertaking” and a “guarantee” of rapid economic development. “In this way, the government is security a stable and constant supply of energy for all our citizens and economy for years to come,” he said. Details of the deal done within the government, trickling out from political party sources, indicate that agreement was reached between the parties partnered in Serbia’s governing coalition with Kostunica’s Democratic Party of Serbia, DSS only after the prime minister threatened to slow Serbia’s progress toward achieving EU pre-accession status. “Kostunica conditioned his consent to signing an SAA with selling NIS to the Russians, regardless of the poor bid, because he wants to strengthen ties with Russia at the expense of derailing Serbia’s path to Europe,” a Serbian government source told Balkan Insight. The source spoke on condition of anonymity, citing politically sensitivities. The Stabilization and Association Agreement, SAA signing, tentatively scheduled for January 28, just ahead of the presidential run-off, will secure for Serbia formal pre-accession status with the EU. The signing is considered crucial to boost Tadic’s likelihood of re-winning the presidency, since opinion polls show a great majority of Serbs in favor of EU integration. The threat of a delayed SAA signing was enough to persuade Tadic’s Democratic Party, DS to support the energy deal, party insiders said. “It was yet another compromise Tadic had to make to save Serbia from sliding into a catastrophe of again being ruled by ultra-nationalists as in the 1990s. We did not have a slightest doubt that Kostunica would have, again, at least silently supported Nikolic had we been reluctant over the deal,’’ said a high-placed source within the DS. Kostunica and his DSS last year briefly supported Nikolic as speaker of Serbia’s parliament, a position he then briefly held, pushing the fragile DSS-DS governing coalition to near collapse. Kostunica eventually backed away from Nikolic, and a replacement speaker was elected, but the DS source indicated that fears persist that the prime minister could swap allegiances yet again. A source present at the hour-long cabinet deliberations said Bozidar Djelic, the DS’s most senior government minister, did not participate. Mladjan Dinkic, economy minister and leader of the economic reform-minded G17 Plus party, a smaller coalition member, demonstrated opposition to the energy deal by skipping the cabinet meeting. Yet it is not clear whether DS and G17 Plus gained much from looking the other way. Kostunica has since refused to state publicly whether he would support Tadic’s presidential bid. The president still looks exposed before February 3. The prime minister, by contrast, looks emboldened. Misa Brkic, an economy writer and commentator, said the energy deal, whatever its economic implications, was a political boon for the prime minister. “Kostunica has cemented his position as prime minister by securing Russian backing. As in the case of some other countries, such as Ukraine, gas supplies could one day stop if a politician Moscow dislikes threatens Kostunica’s political position,” Brkic said. Julijana Mojsilovic is a regular Balkan Insight contributor. Biljana Korica Vukajlovic is a journalist with Ekonomist, a Serbian business magazine. Balkan Insight is BIRN’s online publication. On a roll: Kostunica announcing the Russian deal (FoNet) By the rough-and-tumble standards of Serbian politics, Vojislav Kostunica is on a roll. Julijana Mojsilovic Biljana Korica Vukajlovic Twice in the past week prime minister Vojislav Kostunica has scored politically against his coalition partner and chief rival, Boris Tadic, the country’s president. First, he weakened Tadic’s performance in the first round of presidential elections, held last Sunday, by steering his own supporters’ votes away from Tadic to a minor candidate, the populist infrastructure minister Velimir Ilic.

Politics spurs Serbia-Russia energy deal

Twice in the past week the prime minister has scored politically against his coalition partner and chief rival, Boris Tadić, the country’s president.

First, he weakened Tadić’s performance in the first round of presidential elections, held last Sunday, by steering his own supporters’ votes away from Tadić to a minor candidate, the populist infrastructure minister Velimir Ilić.

The move helped ensure Tadić’s disappointing second-place finish behind Tomislav Nikolić, the ultra-nationalist candidate of the Serbian Radical Party.

In a February 3 run-off for the presidency, the pro-Western Tadić must now run from behind to retain his role as head of state and ward off the diplomatic uproar that would be invited by if the pro-Russian Nikolić were to win.

Capturing the center of Serbian politics – shoring up his own position by playing pro-Western politicians and ultra-nationalists off each other – is vintage Koštunica, political analysts note. Yet to use this strategy even in the sensitive matter of a presidential election, risking a potential ultra-nationalist victory, is extraordinary.

Koštunica’s second maneuver, however, looks more audacious still.

Senior politicians and analysts interviewed by Balkan Insight say that behind the major energy deal struck this week between Serbia and Russia was a furious round of political horse-trading in which agreements over the energy deal were traded explicitly in exchange for pro-European diplomatic moves sought by Tadić and dear to many of the president’s potential supporters at the polls.

In this way, Koštunica’s appears to have extended his strategy of stealing the centre ground, domestically, to Serbia’s geopolitical jockeying between the European Union and Russia.

The energy deal, agreed by government ministers just two days ago but already due to be signed tomorrow in Moscow, secures for the Russian energy giant Gazprom a 51 percent stake in Naftna Industrija Srbija, NIS, Serbia’s state oil company, which holds monopoly rights on oil imports and other privileges.

The cash value of the NIS sale remains unannounced, though a figure of 400 million euros – far below NIS’s previous estimated market value – has been widely reported. Conditions of the sale are expected to include contractual obligations to invest 500 million euros in NIS.

Paired with this sale is an agreement allowing Gazprom to build a section of its South Stream natural gas pipeline to Italy – a rival to the European Union’s Nabucco pipeline project – on Serbian territory. A week earlier, Russia secured permission for the pipeline to cross Bulgarian territory, as well.

Koštunica told reporters late Tuesday that the deal would be “Serbia’s biggest economic undertaking” and a “guarantee” of rapid economic development.

“In this way, the government is security a stable and constant supply of energy for all our citizens and economy for years to come,” he said.

Details of the deal done within the government, trickling out from political party sources, indicate that agreement was reached between the parties partnered in Serbia’s governing coalition with Koštunica’s Democratic Party of Serbia, DSS only after the prime minister threatened to slow Serbia’s progress toward achieving EU pre-accession status.

“Koštunica conditioned his consent to signing an SAA with selling NIS to the Russians, regardless of the poor bid, because he wants to strengthen ties with Russia at the expense of derailing Serbia’s path to Europe,” a Serbian government source told Balkan Insight. The source spoke on condition of anonymity, citing politically sensitivities.

The Stabilization and Association Agreement, SAA signing, tentatively scheduled for January 28, just ahead of the presidential run-off, will secure for Serbia formal pre-accession status with the EU. The signing is considered crucial to boost Tadić’s likelihood of re-winning the presidency, since opinion polls show a great majority of Serbs in favor of EU integration.

The threat of a delayed SAA signing was enough to persuade Tadić’s Democratic Party, DS to support the energy deal, party insiders said.

“It was yet another compromise Tadić had to make to save Serbia from sliding into a catastrophe of again being ruled by ultra-nationalists as in the 1990s. We did not have a slightest doubt that Koštunica would have, again, at least silently supported Nikolic had we been reluctant over the deal,’’ said a high-placed source within the DS.

Koštunica and his DSS last year briefly supported Nikolić as speaker of Serbia’s parliament, a position he then briefly held, pushing the fragile DSS-DS governing coalition to near collapse. Koštunica eventually backed away from Nikolić, and a replacement speaker was elected, but the DS source indicated that fears persist that the prime minister could swap allegiances yet again.

A source present at the hour-long cabinet deliberations said Božidar Đelić, the DS’s most senior government minister, did not participate. Mlađan Dinkić, economy minister and leader of the economic reform-minded G17 Plus party, a smaller coalition member, demonstrated opposition to the energy deal by skipping the cabinet meeting.

Yet it is not clear whether DS and G17 Plus gained much from looking the other way. Koštunica has since refused to state publicly whether he would support Tadić’s presidential bid. The president still looks exposed before February 3.

The prime minister, by contrast, looks emboldened.

Miša Brkić, an economy writer and commentator, said the energy deal, whatever its economic implications, was a political boon for the prime minister.

“Koštunica has cemented his position as prime minister by securing Russian backing. As in the case of some other countries, such as Ukraine, gas supplies could one day stop if a politician Moscow dislikes threatens Koštunica’s political position,” Brkić said.

Julijana Mojsilović is a regular Balkan Insight contributor. Biljana Korica Vukajlović is a journalist with Ekonomist, a Serbian business magazine. Balkan Insight is BIRN’s online publication.