NO GAS THE SECOND WINTER IN A ROW

Russian gas and the world sanctions

AIM, BEOGRAD, February 15, 1995

For two years now scandals have been attending Yugoslavia's vain attempts to break through the appalling energy shortage and world blockade by imports of natural gas from Russia. Likewise, the most recent careless discarding of the offer of Boris Vukobrat, a well known Yugo-nostalgic from Paris, to invest his worldwide business reputation and highest level connections in his endeavour to mediate between Moscow, Washington and Belgrade for securing approval for the import of one billion cubic meters of gas for humanitarian purposes to Serbia and Bosnia, is yet another piece in the mosaic of previously ill-placed demands, excessively self-confident moves, frustrated hopes, denied declarations, false promises, fighting over profits and commissions.

Since Russia, already in the autumn of 1993, submitted its request to the UN Sanctions Committee for the monthly export of 123 million of cubic meters of gas and specific quantities of fuel oil and diesel to FR Yugoslavia for heating (both the population and numerous refugees) and food production, the arrival of that gas was announced every single week, while it is now almost 14 months that it has not come. Experts have grown accustomed to joking that gas will start flowing as of "Wednesday", crudely hinting at the statement of Dragan Kostic, Minister of Energy of Serbia, given as early as November last year.

This carelessness on the part of Kostic was only one of the minor consequences of last year's announcement of the US State Secretary Warren Christopher that the States would give its consent to the UN Sanctions Committee for the export of Russian gas to Serbia. This announcement, disclosed at the Press Conference in Bonn by his colleagues Kozyrev and Kinkel, was promptly conveyed by the Russians to Belgrade so as to cover up the shame of having submitted in New York a demand which no single UN Committee would even put on its agenda, irrespective of the fact that it has come from a former world super power. And it was also necessary to prove somehow to Milosevic that his concessions regarding Bosnia are beginning to discard the dividends. For this same reason the Serbian top echelons have delivered this information to the home public already chilled to the bones. It is worthwhile noting here that it was normal to think that Christopher did not give this statement lightly, but it seems that he himself underestimated the lobby which would render his promise nonsensical.

The delay in the approval of the export of gas to Yugoslavia was firstly explained by procedural reasons, reportedly there were some complications regarding the customs, and after that by control procedures. After, that in mid December, an unpleasant piece of news arrived that the Sanctions Committee had skipped the issue of gas for Yugoslavia, but approved the export of electricity to Albania, over Yugoslavia. This country was constantly short of these 10 million KWh a day, which our neighbours (also with an electricity deficit) have allegedly, on the approval of East River, "pushed" to Albania via our country. This December cold shower from New York did not discourage Dragomir Djokic, the Yugoslav Ambassador to the UN, who kept on sending, and is still sending statements that gas will be okayed at the following session of the Sanctions Committee, but there is still no approval and the conditions for easing the sanctions are multiplying.

In the meantime, there were new episodes on the highest international level in the unfortunate complications regarding the infamous gas imports. The problem of gas imports was precisely in the center of the "misunderstanding" regarding the statement of Oleg Davidov, Vice Prime Minister of Russia during his recent visit to Belgrade. Namely, on February 7, the Russian Vice Prime-Minister, just before signing the pompous Agreement between the Yugoslav and Russian governments on the long-term supply of gas till 2010, stated that his country would unilaterally withdraw from the UN Sanctions Committee, if it did not reconsider its embargo on gas deliveries. Unfortunately, only three days later, Interfax carried in Moscow the statement of an "unidentified representative" of the Foreign Affairs Ministry of the Russian Government that Russia has no intention of unilaterally revoking the sanctions regime against Yugoslavia, and that "that is not at issue at all", that Davidov had made a "slip" because he had been "misinformed by his associates", etc.

Irrespective of the fact that the loudly publicized results of the visit of the Russian governmental delegation to Yugoslavia were, in this unbelievably inelegant manner "wiped out" by an anonymous clerk of the Ministry of the Exterior of the Russian Federation, it should nevertheless be noted what was written in the mentioned agreement concerning gas - i.e. mentioned what leaked out. According to what can be calculated and what Milan Zogovic, Director of "NIS-Energogas", the Yugoslav distributor of imported gas, said for the Novi Sad daily Dnevnik, when a YES comes from Washington to New York the import of about 1.5 billion cubic meters of gas annually would start, so that till 2005 that quantity would reach almost 5 billion cubic meters of gas and as much as 7.5 billion in 2010.

For the better understanding of these figures it should be added that between 1975 and 1990 the consumption of gas in Serbia almost quintupled, i.e. increased from cca.780 million cubic meters to 2 billion and 750 million cubic meters. Domestic production fell far short of this increase but, on the contrary, there are indications that it fell, so that it now amounts to about 800 million cubic meters annually. Accordingly, already in 1990 Serbia imported as much as 2 billion cubic meters of gas from Russia. At least 1.2 billion cubic meters of transit imports to Bosnia should also be added to this.

It is hard to calculate how much gas, in addition to that that kept flowing into Sarajevo, remained in Serbia after the imposition of the sanctions, as it is not known when the outstanding debt of US $138 million, which is reportedly registered with "Gazprom" in Moscow was incurred (if you divide that debt with last year's gross price of about US $70 per ton, it comes out that we have not paid for about 2 billion cubic meters). More experienced people claim that the Russian supplier, which produces nearly 600 billion cubic meters annually, was always open-handed and did not make complications regarding payment, so that it is not known which came first, the debt or the sanctions. Neither are the people from Sarajevo "Energo-petrol" making any fuss about the transit "pinching", because they are happy to get something, as they are also not paying. Both are having troubles with the price that has to be paid to the Hungarian "Mineral Export" for "pushing" the gas through.

The above mentioned ambitious aims regarding gas imports in the 21st century imply the continuation of the gassification of Serbia and the opening of another "inlet" to Yugoslavia, near Dimitrovgrad. But in these plans also there are scandals and paradoxical misunderstandings, this time on the Serbian side. Namely, already two years ago the Serbian Prime Minister, Mirko Marjanovic, at that time only the Director of the export-import firm "Progres" from Belgrade, entered this story of ours as one of the heroes. A man who during his work in Moscow observed that the greatest profits are most easily made on strategic energy raw materials and who made a broad circle of business contacts there, when he came back to the helm of "Progres", with much help from interested Russian "gas staff" and by a combination of circumstances, managed under the patronage of the then Minister of Energy (later Prime Minister) Nikola Sainovic, to establish a shareholding company "Progres-gas Trading" and through it, "rob" the Novi Sad "Naftagas - promet of a profitable deal of gas imports".

It was never precisely published who the shareholders were of the new firm which took over the business with an approximate net annual profit of US $ 10 million, from a public Serbian enterprise. The only thing that leaked out was that Marjanovic paid Sainovic's signature by appointing Toplica Nedeljkovic (Sainovic's assistant while he was Minister of Energy) as the head of the new firm.

This new firm, with a monopoly concession for importing Russian gas, during the days when Marjanovic was elected head of the Serbian government, started making a new consortium for the further gassification of Serbia, although the previous one, at whose helm was the Belgrade "Energogas" had for years been elaborating and implementing the general plan. In contrast to the Oil Industry of Serbia, the Belgrade firm had a nerve to raise hell over this, so that the dispute concerning two consortiums for the same gassification was hidden from the public eye. Although the creator of the new consortium has grown much stronger and keeps raising the problem of gas in his contacts with the Russians, and pushing in his favourite "Progres-gas Trading" into various documents, the first man of "NIS Energogas", Milan Zogovic is not giving up - quite the contrary. Recently in a talk on gassification (Politika of January 30) he did not even mention some problems, and answered the questions as a man whose enterprise is sovereignly in charge of the development of the gas distribution network, which has been "significantly slowed down", but has allegedly continued even under the sanctions.

Zogovic even stated that their projects of the network of main gas pipelines were highly assessed in Avramovic's celebrated Commission for Investments so that they would be "among the priorities for credit allocation".

Bearing in mind these, aforementioned, exciting complications with the import of Russian gas, it is easy to understand some circumstances regarding the latest confusion with the rejection of Vukobrat's offer to intermediate and arrange for the import of gas which the Belgrade Telegraf of February 15, called "sensational". It seem that the story for the public about this case was prompted by the statement of the representative of the Foundation for Peace and Settlement of the Crisis, Nebojsa Spasic, (February 9) which says that Boris Vukobrat, as President of this Foundation, during his meeting with Vuk Draskovic in London on February 1, informed the Head of SPO (Serbian Revival Movement) that there were possibilities for obtaining the consent of Moscow and Washington for gas deliveries within humanitarian assistance from Russia. In his later statements to Vesti and after that to Telegraf, Mr.Vukobrat gave them reason to believe that his company "Kopesim gas AF" could arrange a permit for and import of 250,000 cubic meters of gas per hour to Serbia and 80,000 cubic meters of gas to Bosnia during the four winter months, but that it did not get the approval of the Serbian government for such an initiative.

In other words, the Chief of Cabinet of Mirko Marjanovic, Goran Milicevic let him know that such a request would not be put by the Government to the UN Sanctions Committee in New York. In his phone conversation with AIM Mr.Vukobrat explained that it was not true that the deal was concluded and over, but what was true was that in his contacts with the Russian Prime Minister Chernomyrdin and the American Ambassador to Moscow Pickering he was seriously assured that the initiative was worthwhile launching and submitting a Serbian, instead of the Russian request, with a specific guarantee of an impartial firm, which has extensive operations on the Russian as well as world markets. He points out that the deal would be realized under the already agreed upon prices between the Serbian and the Russian side, while naturally his firm promptly pays for what it buys.

This is where the guesswork started about the reasons for which the head of Marjanovic's office, after consultations, declined the offer, although the Serbian government could not have been "caught unawares" as it had previously received the Vukobrat "report" on how the idea evolved. Since the Russians refuse their "non-convertible debt" to SFRY (estimated to be above US $ 2 billion) to be mixed with the deals in "convertible goods", the engagement of a foreign firm in the gas deal would raise many issues regarding prompt payment by FR Yugoslavia.

Apart from the sorrowful state of our foreign reserves, the problem is further complicated by the fact that the Sanctions Committee still refuses to give its consent to any "specific de-freezing" of the frozen assets of our firms abroad (in other words, not those in respect of which Kosta Mihajlovic will for the following 100 years pursue legal action in the SFRY succession processes). The Americans will not even allow 11 million dollars to be unblocked from such accounts, for the payment of arrears to the United Nations. There are, naturally, many other hypotheses on the fears of the concerned firms and the concerned founders of such firms, that they will lose the really high profits which are as a rule realized on gas and on "humanitarian aid" too. For, those who decide on all this are not too worried that about 400 MV of thermo-electric power plants in Vojvodina were idle due to the shortage of gas and that the deadlines for the start of fertilizer production in the Chemical Industry of Pancevo is being constantly postponed, just as the sowing season is about to start. Without gas there will be no cement, and the building season is also about to start. Even newsprint will be in short supply without imported gas, so that in addition to papers many other unimportant things will also be lacking in Serbia. Perhaps they will let us have the Russian gas at long last.

Dimitrije Boarov (AIM)