Serbia to lose Pančevo refinery due to Hungary's move?

(Patria) - Seven days before the deadline for the sale of the majority Russian stake in the Oil Industry of Serbia (NIS), set by the US Office of Foreign Assets Control (OFAC), the Serbian side is still not satisfied with the proposed solutions from the Hungarian company MOL, primarily concerned about the future of the refinery, Belgrade media reported today.

The US Office of Foreign Assets Control (OFAC) has extended the operational license of the Oil Industry of Serbia (NIS) by 60 days - until June 16, which is also the deadline for Janaf's license to supply NIS's refinery in Pančevo, the only one Serbia has and which is strategically important for the country's energy security. At the same time, OFAC has set a deadline for the sale of the Russian 56.15 percent stake in NIS by May 22 to avoid the application of US sanctions on the Russian energy sector, of which NIS is a part.

Although MOL announced in April that it would retain the Pančevo refinery in the long term if it became the majority owner, Minister of Mining and Energy Dubravka Đedović Handanović stated that the future operation of the refinery and the issue of market coverage from processing remain the key stumbling block in the negotiations.

Serbia's concern stems from the fact that the Hungarian company does not have a good reputation in the region, as it closed the Sisak refinery upon entering the Croatian market, leading to fears that buying the majority Russian stake in NIS could have the same consequence for the Pančevo refinery in the foreseeable future, which ensures about 95 percent of the domestic market's needs for petroleum products.

"We will not jeopardize our supply security, nor the impact that the refinery's operation has on the economy," Minister Đedović Handanović said in a statement, announcing that negotiations would continue until the end of this week. "We want to reach a compromise, but not at any cost," the minister added.

Amidst the negotiations, Reuters reported that another offer had emerged, with Serbian businessman Ranko Mimović and his company KFT Senator Treasury G.T.7 Two LLC, founded last summer, reportedly offering two billion euros for a 56.16% ownership in NIS, currently controlled by Russian companies.

Mimović then claimed to Belgrade media that he had sent all the necessary documentation regarding the offer to OFAC and simultaneously to the Russian majority owners of NIS, and that the office of Serbian President Aleksandar Vučić had also been informed. Reacting to Mimović's claims, Vučić dismissed this possibility in a statement to journalists.

At the same time, domestic economic analysts point out that the President of Serbia, nor Serbia as a minority shareholder with a 29.9 percent stake in NIS, has a say in the transaction and negotiations regarding the fate of NIS, as Serbia is not selling its stake. The majority package is being sold by the Russians.