EU eyes interim pact with Serbia, Russia wins “pipeline war”””

BRUSSELS (Reuters) – The European Union is considering signing an interim pact on trade and cooperation with Serbia before a Feb. 3 presidential election to try to boost the pro-European incumbent, diplomats said on Friday.

The interim agreement would normally enter into force only when the EU signs a Stabilisation and Association Agreement (SAA) with Belgrade and pending its ratification, but the Netherlands and Belgium have so far blocked that signature to demand the arrest of a key fugitive war crimes suspect.

“The idea is that the European Commission could be given the green light by foreign ministers next Monday to sign the interim agreement to give the Serbs some positive gesture,” a senior EU diplomat said on condition of anonymity.

However, even that move would require unanimous agreement of the 27 EU member states, and as of Friday, the Dutch had not decided to give the go-ahead despite intense lobbying from other capitals, another diplomat said.

Incumbent pro-Western President Boris Tadic faces a tough battle to defeat nationalist Radical challenger Tomislav Nikolic in a runoff after the pro-Russian hardliner took a five-point lead in last Sunday’s first round.

Although the presidency has little power, EU leaders are keen to see Tadic win a symbolic victory to bolster pro-European forces on the eve of a turbulent period in Serbia over an expected declaration of independence by Kosovo.

Slobodan Samardzic, Serbia’s Minister for Kosovo, said the SAA had became “a bargaining chip in political games” and warned it would not take effect if the EU pursued separate plans to take over policing duties there from the United Nations.

“The government would be obliged to declare it illegal and the parliament could not ratify it,” he said.

If Serbia accepted the SAA as a trade-off, “the countries that have been supporting us so far will cease backing us,” he told reporters in Belgrade, referring to Russia, Serbia‘s sole ally in trying to block Kosovo’s independence.

Danish Prime Minister Anders Fogh Rasmussen, long a stickler for cooperation with the U.N. war crimes tribunal, raised pressure on the Dutch on Thursday by calling publicly for the EU to sign the SAA agreement next week.

Up to now, Brussels has insisted Belgrade must cooperate fully with the Hague tribunal, as certified by its chief prosecutor, before it will sign the pact, initialled last year.

Dutch Foreign Minister Maxime Verhagen has said that means former Bosnian Serb military commander Ratko Mladic, charged with genocide for the 1995 Srebrenica massacre of 7,000 Bosnian Muslims, must be arrested and put on a plane to the Hague.

 

— Russia signs Serbia, wins “pipeline war”

 

Meanwhile, Russia won the right on Friday to route a major gas supply route to Europe through its ally Serbia, a move analysts described as marking a Kremlin victory in a “pipeline war” with the European Union.

The gas agreement, signed in the Kremlin before President Vladimir Putin and visiting Serbian leaders, alarmed the United States because it increased Moscow’s control over energy supplies to Europe and could undermine a rival EU project.

Strong Russian opposition to independence for the Serbian province of Kosovo was a key bargaining chip in the agreement for Serbia to join the South Stream gas pipeline. Belgrade also agreed to sell a majority stake in Serbia’s oil monopoly NIS to Russian gas giant Gazprom at a favourable price.

South Stream is a 10 bln euro ($14.65 bln) gas transit project organised jointly by Gazprom and Italian energy giant ENI to bring Siberian gas to Europe via the Black Sea.

At the signing, Putin reiterated Moscow‘s strong backing for Belgrade‘s campaign against independence for Kosovo, which the European Union broadly supports. Serbia could count on Russia as a reliable friend and partner, he added.

The EU, worried about its dependence on Russian gas, has been promoting a rival pipeline called Nabucco which would take gas from Central Asia through Turkey to Europe. But it has been having trouble finding enough gas supply to justify the project.

The United States believes the deal with Serbia, which followed a similar agreement with Bulgaria, is deeply worrying, according to a confidential Serbian government document obtained by Reuters minuting discussions between Washington and Belgrade.

Serbian President Boris Tadic told reporters as he started talks with Putin that without Russia‘s support “Serbia would find it far more difficult to defend its position on Kosovo”.

Friday’s agreements, signed by Tadic and Russophile Serbian Prime Minister Vojislav Kostunica, gave Gazprom a 51% stake in Serbia‘s NIS oil and gas company, for 400 mln euros ($586 mln) and a pledge to invest 500 mln more by 2012.

Some analysts described the price as well below market value, giving estimates of 1.0-2.0 bln euros, although others said the plant needs heavy reconstruction.

NIS, the only state-owned oil firm in the Balkans to have escaped sale, dominates Serbia‘s market with a monopoly on refining and a network of 500 petrol stations.

Under the gas deal, Gazprom will route a northern branch of its South Stream pipeline through Serbia and make Serbia a major transit hub for supplies.

“The other option for Gazprom would be to go via Romania, but historically ties with Serbia have been much better,” said Valery Nesterov from Troika Dialog brokerage.