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U.S.-Serbia energy agreement: Strategic cooperation or geopolitical shift?

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A press release issued by the U.S. Department of State on September 18 titled “United States and Serbia Sign Agreement on Strategic Cooperation in Energy” might warrant closer reading and analysis, especially in light of the sanctions the U.S. administration has prepared, though they are associated with the outgoing President Biden. It seems that the “outgoing” detail may no longer be significant, as these policies are expected to be continued under a potential Trump administration.

The agreement signed in September between U.S. Under Secretary of Economic Growth, Energy, and the Environment, Jose V. Fernandez, and Serbian Foreign Minister Marko Djuric, is simply called the “Agreement on Strategic Cooperation in Energy.” The document is concise, only about 1,700 characters long, and while official, careful reading highlights at least three important points.

The first is that this agreement aims to “expand opportunities for U.S. companies to invest in Serbia’s energy sector, strengthening the strategic partnership between the two countries.”

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The second point is that the agreement is expected to “promote U.S. investments, particularly in clean energy projects, which could play a key role in Serbia’s green transition and sustainable development.”

Third, the agreement reflects “a multiyear effort involving close collaboration among experts from five U.S. agencies, demonstrating the U.S. government’s commitment to supporting American investors and fostering sustainable energy initiatives in Serbia.”

In summary, the agreement focuses on U.S. investments entering Serbia’s energy sector, especially in alignment with eco-friendly and sustainable energy sources. Additionally, it emphasizes adherence to best business practices, encouraging Serbia to adopt practices set by international organizations like the OECD, UNCITRAL, World Bank and the World Trade Organization (WTO). The U.S. strongly supports high standards of openness and transparency in public procurement processes, although Serbia’s experience with public tenders has been less than ideal, with only one bidder in 51% of cases (according to the State Audit Institution’s 2023 report). In other words, there is a lack of competition due to suspicions of rigged tenders, with predetermined winners.

Now, back to the energy sector and Serbia’s interests. It is logical to assume that, at the time this agreement was signed in September, preparations were already underway for the sanctions the U.S. would impose on Russia, including those affecting the Serbian Oil Industry (NIS). This became clear on January 10, even though U.S. Ambassador to Serbia, Mr. Hill, had not been able to confirm the sanctions on December 16. However, this is understandable — sanctions cannot be confirmed until they are implemented.

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On January 15, during a well-conducted interview on Insajder TV by Jugoslav Ćosić, Ambassador Hill detailed the sanctions, which clearly indicated the U.S. stance on Serbia’s energy development direction. In short, the message is: Russia cannot own NIS; Serbia must have a good plan and may be granted flexibility with deadlines; Serbia is too reliant on Russian gas; and NIS must be managed by Serbian leadership. These diplomatic statements are wrapped in polite language but carry a clear message: the Russians must relinquish ownership, and only Serbian management will be accepted at NIS.

This economic and ownership issue has evolved into a highly political matter. When Serbian management in state-owned enterprises is mentioned, it evokes memories of EPS (Serbia’s Electric Power Industry) losses, the director of whom, Mr. Grčić, was advised by President Vučić to “take a rest.” Similarly, there are memories of SerbiaGas, which faced cumulative losses of a billion euros a few years ago, which were covered by the state budget. Public enterprises, once called “golden geese” or “Alaybeg’s straw,” were considered prime political spoils, awarded to whichever political party wins the elections.

Now, the unraveling of the U.S. sanctions and political messages has just begun. Anyone who does not realize that a major geostrategic energy reshuffling is taking place in this part of the world, with the energy sector becoming a new sphere of Russian or American influence, is seriously mistaken. Things are happening much faster today than in the past, and it won’t be long before the effects are visible.

Given everything happening in Serbia right now, I am reminded of a brilliant observation by our famous director, screenwriter, and art historian, Đorđe Kadijević: “The Serbian people have this inconvenient trait of realizing reality too late.”

The question is, will we ever realize our reality in time?

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