Vlahovic for eKapija: Most likely solution for NIS is selling Gazpromneft’s stake to existing partners

Nationalization of Naftna industrija Srbije (NIS) should not be an option, believes Aleksanadar Vlahovic, president of the Association of Economists of Serbia and former Minister of Economy and Privatization. As he said, one of the options could be bankruptcy, but the most likely solution is the sale of Gazpromneft’s stake in the company to existing partners.

As Vlahovic told eKapija, sanctions against NIS were announced back in January of this year, and their implementation has been postponed several times.

– I believe that the Serbian Government has done everything to find a solution before the sanctions come into force. The biggest problem is that Gazprom needs to exit NIS ownership, or rather majority ownership in the company, in order for the sanctions to be lifted, and that is decided by the Russian side. In that case, Serbia’s hands are pretty much tied. The other day, talks were held with the Russian delegation, more precisely with the Chairman of the Board of Directors of Gazprom, Aleksandr Dyukov, and as far as I can see, they were assessed as quite positive and successful – says Vlahovic.

Considering that the Serbian Government announced that the refinery would operate completely undisturbed until the end of this month thanks to the previously defined stocks, Vlahovic believes that, if the issue of sanctions is resolved in the next month, or month and a half, they will not pose a major problem for Serbia.

– However, the problem will arise in the supply of petroleum products sometime after the New Year, when a significant contingent coming from the Pancevo refinery - that is more than 60 percent of the total consumption of petroleum products - needs to be replaced by imports. Here, I believe, the issue of logistics and the import of petroleum products is key – says Vlahovic, adding that he is not sure that Serbia can logistically ensure the supply of petroleum products from alternative sources at this moment.

– On the other hand, I hope that in the end, the talks between the Serbian and Russian sides will reach a solution - even if Gazpromneft sells its majority stake to a third party, and not directly to the state.

Vlahovic says that the state, for its part, has an obligation to ensure the stability of the energy system, that is, the stability of the supply and consumption of petroleum products.

– Therefore, if no final agreement is reached, I believe that there are mechanisms that will force the other side to make greater efforts in the coming period in order to find a solution – says eKapija’s interviewee.

Given that in recent days we have been able to hear different scenarios for NIS - nationalization, introduction of bankruptcy, purchase of shares by the state of Serbia or some other partner, we asked Vlahovic which of these possibilities is the most likely. According to him, nationalization should not be an option.

– That would be an attack on private property and would further jeopardize the level of risk of investing in our country, which is already quite high due to the lack of institutional integration – Vlahovic stated.

When it comes to bankruptcy, he believes that it can be an option in itself if the company itself creates the conditions for bankruptcy through its operations, and that will depend on its operations in the coming period.

– Therefore, I believe that the Russian side will sell that part of the share package, which will enable Gazpromneft to become a minority owner. Will it do it directly to the state through some possible forward sale, where the Russian side would have the option to, after the conflict that exists between Russia and America in terms of foreign policy is over, later buy back those shares - or will the Russian side find a partner it trusts more and sell to that third party, I don’t know. But I am sure that both sides will be respected in this way – he says.

When asked how the crisis with Naftna industrija Srbije will affect the Serbian economy, if an adequate solution is not found soon, Vlahovic replies that NIS means a lot to Serbia in fiscal terms, considering that around 15% of the budget is filled from excise duty collection - not only from NIS, but from the total consumption of petroleum products.

– In other words, it is certain that, if there is a shortage or a decrease in the consumption of petroleum products, it will have an impact on the budget. However, I still think that this is just the tip of the iceberg. Essentially, both the Serbian economy and the economies of the Western Balkans have deeper problems. This is the insufficient institutional development of the business environment – he says.

On the other hand, he adds, the development model that has been accepted in most Western Balkan countries, which forces the so-called traditional branches of industry that do not contribute to rapid productivity growth and do not contribute to technological progress, is also questionable.

– Economic policy needs to make a step forward in the coming period through a different approach, that is, through the activation of industrial policy mechanisms, which have been quite forgotten in this region – Vlahovic concludes in an interview with eKapija.

Dragana Obradovic

NIS a.d. Novi Sad

Savez ekonomista Srbije Beograd

Vlada Republike Srbije

Gazprom Moscow

NIS

Gazprom

Gazpromneft

Aleksandar Vlahović

Aleksandr Dyukov

sanctions on NIS

sanctions on Naftna industrija Srbije

Pančevo Oil Refinery