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26 Feb, 2008 00:55

Russia & Serbia sign South Stream deal

Serbia has signed an agreement with Russia creating a joint company to build the Serbian stretch of the South Stream gas pipeline. The green light for the pipeline is just one part of a series of deals reached on Monday, which see Russia's Gazprom increas

The agreement comes during Russia's First Deputy Prime Minister Dmitry Medvedev's visit to Belgrade to discuss bilateral economic issues. This agreement brings Serbia into the South Stream gas pipeline project.

Dmitry Medvedev has also been in Budapest, where South Stream was a top issue on the agenda in talks with Hungary's Prime Minister. Hungary supports having South Stream run through its territory, but also backs the Nabucco project, and is interested in hosting that pipeline as well.

Gazprom plants to build a 400 km segment of the South Stream gas pipeline through Serbia. When complete, it will carry no less than 10 billion cubic metres of gas annually.
After the signing ceremony, Russia’s First Deputy Prime Minister, Dmitry Medvedev, stressed the importance of the deal. “I’m sure such agreements will bring dividends for both countries. It also benefits the interests of Russia and Serbia and forms the foundation for the energy security of a unified Europe,” said Medvedev.
The deal also sees the construction of an underground gas-storage facility, Banatski Dvor, with a capacity of 300 million cubic metres.
The third element to the deal is the acquisition by Gazprom Neft of a 51 per cent stake in the largest Serbian oil refiner Nafta Industriya for almost $US 600 million.
Gazprom will invest about $US 1billion to renovate the plant, .
“Serbia will receive guaranteed gas supplies, strengthened geo-political ties and also a flow of investment from Gazprom. And that’s not to even mention the dividends that Serbia will receive from transporting gas through its territory,”  saianalyst Titin Razuvaev.
Instead of paying gas transit fees to other countries, Serbia will now earn money for the gas it ships to Austria.
The deal has another consequence. With Serbia, Bulgaria and Hungary participating in South Stream, the Nabucco pipeline project – an EU plan to bypass Russian territory -  becomes less viable.
For Russia, analysts say, the significance of the deal is more than commercial, helping to restore its influence in the region, along with economic and trade ties.