HomeMediaLatest NewsRussia is unlikely to agree to the "Belarusian scenario" for Serbia

Russia is unlikely to agree to the "Belarusian scenario" for Serbia

19 October 2021

Belogoryev Alexey M. Deputy Principal Director on Energy Studies, Director of the Center for Energy strategic analysis and forecasting

Alexey Belogoryev, Deputy Principal Director on Energy Studies at the Institute for Energy and Finance, commented to Regnum on the prospects for agreeing on a preferential price for Russian gas for Serbia.

It should be reminded that earlier Serbian President Aleksandr Vucic announced that Belgrade could not pay for gas at the price of $ 790 proposed by Moscow. Therefore, Vucic intends to meet with Russian President Vladimir Putin in November and consider the possibility of obtaining a better gas offer for Serbia. He told about this to the citizens of Serbia on the air of the Prva TV channel.

“If the issue of gas price formation is approached from the point of view of fair pricing, then it is determined not voluntarily, but on the basis of rather complex formulas, where there may be different linkages. In Gazprom's contracts, the link to petroleum products has now remained at about 15% of total gas supplies to Europe. The rest is either spot or forward indices of European hubs. The formula voiced by Vucic is 70% hub and 30% oil peg. In this formula, the share of oil is even higher than the average for Gazprom's supplies to Europe. For deliveries to Germany or Italy, there is now almost one hundred percent exchange price,” the expert explained.

The price should be revised once a quarter or once every six months based on the real exchange dynamics, Belogoryev continued. Prices are very high at the moment, and they will remain at this level until March, especially if the winter is cold, the expert believes. Therefore, it can be said that, despite the price decline expected in April, the average annual gas price in 2022 will be higher than in 2021, he added.

Nevertheless, the expert continued, a number of political issues also influence the determination of the gas price.

“Relations between Russia and Serbia are special, including in the gas industry. The construction of the Balkan gas pipeline has just been completed. Therefore, it is possible that an agreement will be reached on some kind of fixed cost. But if we keep the formula with floating pricing, in any case it is impossible to predict what the gas price for Serbia will be next year. Oil prices are high now, and, they are unlikely to collapse in the foreseeable future. Exchange gas prices, at least until spring, will remain high,” Belogoryev said.

The expert suggested that it would be very difficult to keep the price at the level that Vucic designated as desirable - $ 500 per 1,000 cubic meters of gas. The only chance would be to sign an agreement on a fixed price for Serbia, which, for example, exists with Belarus, he admitted.

At the same time, Belogoryev noted that Serbia must very carefully consider all the subtleties of gas pricing in order to benefit for itself in the long term. If, for example, one hundred percent tie the price to oil, as it was in the past, in 2022 gas for Serbia will definitely be cheaper, the expert believes.

 

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