U.S. Sanctions Hit Serbian Oil Industry Hard
The US Office of Foreign Assets Control (OFAC) said sanctions against the Russian-owned Oil Industry of Serbia (NIS), Serbia’s sole crude oil refiner, have taken force after several delays, a move that could hit the Balkan nation hard.
NIS said on October 9 that a special license from the US Treasury that allows the company to operate was not extended after being delayed eight times since the company was first put on the US sanctions list in January for its “secondary risk,” its Russian ownership.
The sanctions are aimed, among other things, at preventing the financing of the Kremlin’s war in Ukraine by Russian energy companies.
“The company has not been extended a special license by the United States Department of Finance, which enables smooth operational business,” NIS said in a statement.
“Since the listing of the company on the SDN (Specially Designated Nationals) list in January, NIS has been carefully monitoring the situation and trying to adapt its operations to the new circumstances…NIS has secured sufficient stocks of oil for processing at this time, while gas stations are properly supplied with all types of oil derivatives.”
Kremlin-controlled Gazprom Neft, directly or through its subsidiaries, is the main owner of substantial energy assets in Serbia. Since 2008, Gazprom has owned a large stake in NIS, Serbia’s national oil and gas company.
Although Serbia has repeatedly condemned Russia’s invasion at the United Nations and other international forums, it has so far refused to join Western sanctions against Moscow.
Serbia is heavily dependent on Russian gas and is currently in talks for a new supply deal.
Serbian President Aleksandar Vucic said on October 7 that Belgrade will discuss ways to resolve problems created by the sanctions with Russia.
“We no longer have anything to discuss with the Americans. The United States has imposed its will on others and Europe will support American sanctions,” said Vucic.
The ownership structure of NIS has been changed several times as the company looked to avoid the sanctions, but it is still mostly in the hands of Russian companies.
Gazprom in September transferred its shares to one of its subsidiaries based in St. Petersburg, which now holds 11.3 percent of the company’s shares, according to data published on the website of the Belgrade Stock Exchange on September 21.
Gazprom Neft, a subsidiary of Gazprom, still holds the largest share in NIS at 44.9 percent, while Serbia owns 29.9 percent. The remainder is held by small shareholders.
In January, Vucic rejected the possibility of nationalizing NIS, adding that Serbia “will not participate in the seizure of Russian property.”
“The financial sector will have to stop working with NIS – halt all transactions and cooperation immediately – to avoid being considered a bank dealing with a sanctioned entity,” he added.
Industry experts said crude oil deliveries to Serbia, as well as exports of fuel, and higher gasoline prices are likely to be among the negative consequences of the US sanctions against NIS, which supplies over 80 percent of Serbia’s diesel and petrol fuels.
The consequences of the US sanctions against NIS are likely also to ripple across neighboring countries, with the Serbian oil firm having operations in Croatia, Bosnia-Herzegovina, Romania, and Bulgaria.
Croatian President Economy Minister Ante Susnjar said on October 9 that his country is ready to buy the NIS if Serbia sees the sale as a potential solution, noting Croatia’s oil firm Jadranski Naftovod has been closely linked to NIS for 40 years “without any pretensions to dominate the retail market in Serbia.”
“That would make it easier for both us and Serbia,” he said.
Serbia, which applied to join the European Union in 2009 and started negotiations in 2014, has not responded to the comments.
