Serbia faces closure of one-fifth of its gas stations

(Patria) - The situation on the Serbian oil derivatives market, despite US sanctions on Naftna industrija Srbije (NIS), majority Russian-owned, does not look dramatic yet, but could soon cause the gradual closure of one-fifth of the country's gas stations, Belgrade media report.

Sanctions imposed by the US Department of the Treasury's Office of Foreign Assets Control (OFAC) on the Russian energy sector at the beginning of the year have been in effect for the Russian-Serbian company since October 9, and there are no indications that NIS will receive a license to secure crude oil supplies via the Janaf pipeline or other sources.

US officials have repeatedly warned the official Belgrade that they do not want Russian ownership (56.15 percent) which "should be - zero", but even with several postponements of sanctions implementation over the past nine months, this has not happened, despite "stock shuffling" among subsidiaries not affected by sanctions.

Serbian President Aleksandar Vučić admitted that the Russians do not want to sell their stake in the company, stating that "it is not about money, but about politics".

Meanwhile, negotiations were held on the possibility of the Russian side selling the majority stake to avoid sanctions, but an agreement was not reached.

NIS's refinery in Pančevo, after several days of system maintenance, yesterday began the process of shutdown and reduction to minimum sustainability, so that the refinery system is ready to start "as soon as conditions are met" and confirmation of crude oil availability is received, the supply of which predominantly depends on delivery through the Janaf pipeline.

Serbian authorities have decided to maintain payment operations with NIS until the end of this week, risking secondary sanctions affecting the payment operations of domestic banks.

According to official data, NIS operates about 20 percent of gas stations in Serbia, but generates almost 50 percent of market turnover from fuel sales, meaning it sells more fuel than all others combined.

The state of Serbia is also a co-owner of NIS (29.87 percent), and shares are also held by citizens, current and former employees, and other minority shareholders.

A negative outcome of the situation could lead to the gradual closure of NIS and Gazprom stations - 356 out of a total of 1,520 in all of Serbia.

Sanctions from December 13 will also apply to Russian LUKoil, which will also be left without supplies.

- When NIS exhausts its operational stocks at the pumps, we cannot give them from reserves, nor LUKoil from December 13 - then the whole of Serbia would face sanctions - Vučić said yesterday, adding that there will be fuel, "but at other gas stations".

If the sanctions persist, Serbia must further turn to importing oil derivatives from neighboring countries, which is a more expensive option and requires additional logistics, so experts warn that this could be a generator of chain price increases and inflation.