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Serbia should rework gas deal with Gazprom -EU energy watchdog

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Serbia should renegotiate its long-term gas supply deal with Russia’s Gazprom to align it with European gas market rules, a body in charge of extending the EU’s energy policy to would-be member states said on Monday.

In 2011 Serbia agreed to a 10-year deal to import natural gas from Gazprom at a discounted price under which  Gazprom will deliver 5 billion cubic meters (bcm) of gas per year to Serbia, or more than double its current annual needs.

“The agreement concerned should be renegotiated to remove the illegal destination clause,” Janez Kopac, who heads the Energy Community – an international body established by the EU and eight aspiring member states, told Reuters.

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He said the Balkan country needed “to make sure its companies are not prohibited from selling on the gas they purchase from Gazprom to other countries”.

The body sent an opening letter to the Serbian government, initiating a three-step preliminary procedure the purpose of which is to give Serbia a chance to react to the allegation of non-compliance with Energy Community law within two months.

“Destination clauses in gas contracts and intergovernmental agreements are not legal under EU and Energy Community law and have been removed from contracts and agreements all over Europe,” Kopac said.

A failure to address these concerns may result in Serbia losing voting rights and resources to compensate the costs of its participation in the Energy Community activities, he said. “In addition, the EU may suspend funding for energy projects,” Kopac added.

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The Energy Community was established in 2006 under a treaty signed by the EU and a number of countries in southeastern Europe that aspire to join. It reports annually to the bloc on progress made in harmonising energy legislation.

It has already warned Serbia it could lose EU funding for a gas pipeline link with Bulgaria if it fails to reform indebted gas company Srbijagas.

Serbia, which hopes to wrap up its EU membership talks by 2019, is under pressure from the EU to reduce its dependence on Russian gas, which accounts for more than 80 percent of its needs, to join the bloc.

Gazprom said last month it had filed proposals with the European Commission aimed at resolving a five-year EU case over the Russian state gas exporter’s alleged monopoly practices.

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