American sanctions on Serbia’s oil industry, specifically targeting NIS (Naftna Industrija Srbije), will officially take effect on February 25. However, uncertainty still surrounds the conditions under which fuel will be purchased and distributed. NIS operates a network of 414 fuel stations, with the majority in Serbia, and additional stations in Bosnia and Herzegovina (42), Bulgaria (23) and Romania (19).
While there is a possibility that the U.S. Treasury Department may postpone the sanctions, it remains crucial to consider how the fuel supply might be affected if NIS’s operations are severely restricted, especially with regard to the flow of money and crude oil.
Since July 2022, all oil producers and importers, including energy entities responsible for distributing oil derivatives, have been required to maintain mandatory reserves. These reserves must meet a certain threshold based on the previous year’s average daily consumption. Currently, companies are required to maintain a five-day supply in stock, a number that will increase annually until it reaches a ten-day supply. This responsibility falls on the companies themselves. On the other hand, the state must also collect crude oil and oil derivatives and adopt a program each year to manage these reserves, which is finalized by April 1 and remains in effect until March 31 of the following year. The program adopted for 2023 is still valid.
State reserves to cover 51 days of imports
According to the approved budget for 2024, Serbia is required to maintain oil and oil derivatives reserves for up to 51 days of average net imports by 2025. The Law on Commodity Reserves mandates that at least one-third of the total mandatory reserves must be kept in finished products.
The government’s reserve inventory at the end of 2023 included 86,100 tons of crude oil, 127,200 tons of Euro-diesel, 14,600 tons of motor oil, and 3,900 tons of kerosene. In addition, there were 171,200 tons of finished products and 25,500 tons of heating oil.
The program for 2024 dictates that the procurement of Euro-diesel should begin in the second quarter of the year. By the third quarter, the construction of new storage capacities in Smederevo will be completed, allowing for the storage of oil derivatives in tanks of 20,000 cubic meters each. In the same quarter, efforts will begin to secure mandatory reserves of oil and its derivatives.
MOL likely to dominate the market
If NIS is banned from importing crude oil, it is expected that Hungary’s MOL Group would take over the majority of the market. “In such a scenario, NIS would probably focus on refining crude oil sourced from domestic reserves in Banat,” said Nebojša Atanacković, a long-time oil industry expert. MOL has already indicated that they would assist with delivering derivatives from Budapest.
However, any potential scenario remains contingent on the exact scope of the sanctions. If NIS is restricted from processing payments through international banking channels, it would be unable to import or distribute oil derivatives. This could limit NIS’s ability to operate, especially if sanctions are imposed on suppliers outside of Serbia.
“The depth of the sanctions will determine the course of action,” added Atanacković. If sanctions target international suppliers, MOL’s role would likely increase. Other suppliers may look to use the Danube for deliveries, as was the case during previous sanctions when fuel was imported from Montenegro.
NIS holds a dominant position in Serbia’s fuel retail market, controlling about half of the market and supplying around 80% of the country’s fuel needs. As the deadline for the sanctions looms, there is still significant uncertainty about the future of the fuel supply for Serbian citizens and businesses.
