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Gazprom, Serbia to sign oil firm sale deals by end Dec

Serbia and Russian gas giant Gazprom will sign deals to finalize the long-planned sale of Serbian oil monopoly NIS by the end of the year, Gazprom’s CEO said on Friday.  

“We will sign all three agreements by the end of the year,” Gazprom CEO Alexei Miller told reporters after meeting Serbian President Boris Tadic. Serbian officials agreed in January to give Gazprom’s oil arm, Gazprom Neft, control of a majority stake in oil monopoly NIS in exchange for Serbia’s inclusion in the South Stream pipeline.

The pipeline will begin to flow by the end of 2015, and perhaps even earlier, according to the agreement that will be signed in the coming weeks, Miller told reporters in Belgrade. “It will be by Dec. 31, 2015, not later. The project could be completed before that,” Miller said, adding he did not know where and when the deals would be signed. The South Stream pipeline will run south of the EU bloc, will be part-owned and operated by Gazprom and will pump Russian gas.

Asked why the Serbian and Russia sides were still unable to conclude the high-profile agreements, Miller said: “There are some technical questions, but no principal issues.” He said all three deals would be signed at the same time. Gazprom Neft has agreed to pay €400 million ($507.6 million) for a 51% stake in NIS and pledged an additional €500 million of investment by 2012.

Local media has reported that Belgrade has made the sale of NIS conditional on the construction of the South Stream pipeline, saying it would allow Russians control of a majority NIS stake only when the construction of South Stream begins. A third deal with Russia involves gas storage in the northern province of Vojvodina.

Analysts have said the deal was largely politically motivated. Russia was Serbia’s main ally in its unsuccessful bid to block independence for its former province of Kosovo, which declared independence in February.

Serbia’s Economy Minister Mladjan Dinkic, a deputy prime minister, has said the price for NIS was insultingly low, but the parliament ratified the agreement anyway in September.

NIS is the last of the state-owned oil companies in the Balkans to be sold. It was given a monopoly on processing oil derivatives until 2010 so that it could recover after its refineries were heavily damaged in bombing in 1999.

Milan Prokopijevic of the Free Market Centre said it would have been best to float shares of NIS and then sell the stake in the company in the market. “It is difficult to say what would be the best price for NIS. Because of the global financial crisis the price that could be achieved now would be much lower than the one agreed with Gazprom,” he said. “The monopoly on crude oil processing is what makes NIS attractive to buyers.” (Reuters)