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Serbia could face fuel shortages, but alternative supply options are available

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Nebojša Atanacković, the former majority owner of Nafta AD, a company that imported and processed crude oil at NIS, believes that NIS is likely hurrying to procure and stock up on crude oil while the current situation lasts. He notes that Serbia has been given until February 25 to comply with US demands, which means procurement will continue until the sanctions take effect.

According to Atanacković, there is no immediate threat to the supply of oil, with the Adriatic pipeline, Janaf, being the primary connection for crude oil supply.

To recap, on January 10, the US Department of the Treasury imposed sanctions on the Serbian Oil Industry (NIS) as part of a broader package of measures targeting Russian interests in response to the ongoing war in Ukraine. Gazprom and Gazprom Neft hold a 56% stake in NIS, and the US is demanding the complete exit of Russian capital from the company. Serbia has until February 25 to finalize the transition.

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Atanacković comments on the potential impact of the sanctions, stating that it would make no sense to raise pump prices until the sanctions take effect. He explains that the situation is complicated since fuel prices in Serbia are technically determined by the Ministry of Trade, but these prices don’t directly correlate to crude oil prices or the costs and profits of NIS. Instead, the prices are shaped by the price of derivatives in the Mediterranean, with major traders influencing the final price at the pump, which is then adjusted with excise taxes and other costs.

If sanctions are enforced, Atanacković suggests that everything will depend on Janaf and the Croatian government, which is likely to join the sanctions, as well as the European Union as a whole.

“We know that the sanctions will be supported by the Americans, who initiated them, and the British. The European Union has yet to make a statement, but it’s likely that, once the sanctions take effect, Croatia will align with them, and crude oil will no longer be transported from the Adriatic to Pancevo,” he said.

In that case, Atanacković predicts that crude oil and derivative reserves will be gradually depleted. The alternative would be for the refinery to operate at reduced capacity, relying on domestic crude oil from Banat, which has a slightly different composition. He estimates that this could meet about 15 to 20% of the country’s needs, with the rest of the supply coming via tankers.

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With the refinery operating at reduced capacity and relying on domestic oil, Serbia could meet 20 to 30% of its total consumption. The remaining supply would be met through finished derivatives, which would cover part of the domestic market.

Atanacković notes that derivatives could be sourced from companies like MOL, which currently supplies its stations in Serbia from its refinery in Budapest. Other companies, if they don’t purchase from NIS, could also use similar channels. For example, OMV may supply from its refinery in Vienna. He suggests that while Serbia could meet 30-40% of its consumption through these alternative suppliers, additional fuel would be needed from other sources to cover the full domestic demand.

Ultimately, Atanacković concludes that Serbia’s fuel consumption could be sustained, but only with the use of imported derivatives, reducing reliance on local crude oil supplies.

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