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Russia's Balkan Power Play

(AFP) A looming low-intensity struggle between Russia and the West for influence in Serbia is casting a long shadow over the pivotal Balkan country's presidential election.

Serbian election officials tried to ban observers from the United States and Britain from monitoring the January 20 first round before the Supreme Court intervened at the last minute and allowed them in. A leading presidential candidate is vowing to scuttle a key pre-membership agreement between Serbia and the European Union. And alarming, albeit unconfirmed, media reports allege that Russia is drawing up plans to eventually set up military bases in the country.

Serbia's incumbent president, Boris Tadic, has long sought to steer his country into Europe's mainstream. But mounting anger over the imminent prospect of an independent Kosovo, lingering resentment from the 1999 NATO bombing campaign against Serbia, and growing impatience about the slow pace of Serbia's EU bid have all converged into an anti-Western backlash.

The most visible result of the new national mood has been the dramatic rise of Serbian Radical Party leader Tomislav Nikolic, a blunt nationalist who is Tadic's main rival. The two are widely expected to advance to a runoff on February 3.

But in a broader geopolitical sense, Russia is also turning out to be a major beneficiary. Moscow has long had a close cultural and religious bond with predominantly Orthodox Christian Serbia. It has also been a staunch opponent of Kosovo's independence. And now the Kremlin is trying to parlay this into greater political and economic influence.

A deeper Russian footprint in Serbia would have major implications, particularly for European energy policy. Serbia is a key transit corridor and Russia is trying to gain a stranglehold over its energy infrastructure. If successful, this would frustrate Western plans to diversify its energy suppliers, leaving the continent even more dependent on Russia's state-controlled natural gas monopoly Gazprom.

The inking of a Stabilization and Association Agreement between Belgrade and the EU has been perpetually delayed over Belgrade's failure to arrest key war crimes indictees like Radovan Karadzic and Ratko Mladic. Tensions between Serbia and the EU are also growing over the issue of Kosovo's independence, which Brussels supports. Pristina is expected to make its announcement as early as February.

"I think that the Russian strategy is to let the West disappoint Serbia. And then, where else does Serbia have to go?" says Nicholas Gvosdev, a Russia expert at the Washington-based Nixon Center and editor of the journal "National Interest." "If you have strong control over the infrastructure of Serbia, you have control over one of the major corridors of European commerce and transport."

Energy Grab

Two days before Serbs vote for a new president, Russian President Vladimir Putin traveled to Bulgaria and signed an agreement to build the South Stream gas pipeline. It's a key step in a joint project of Gazprom and Italy's ENI to build a pipeline stretching from Russia under the Black Sea to Bulgaria. It would then fork, with one branch going west to Greece and Italy, and another going north through Serbia to Central Europe.

Serbia, which suffers from chronic gas shortages, is keen to be part of the project -- but there are strings attached. Russia is insisting that, as part of the deal, Belgrade also sell a 51 percent stake in the Serbian oil company NIS -- which controls most of Serbia's distribution networks -- to Gazprom’s oil subsidiary, Gazpromneft.

The European Union was pressing Serbia to hold a competitive international tender for shares in NIS; Serbia had been planning to privatize the company in 25 percent share packages. Among those planning to participate were some of the continent's leading energy companies: Austria's OMV, Poland's PKN Orlen, Hungary's MOL, and Romania's Rompetrol.

But Russia has reportedly informed Belgrade that if it wants the South Stream pipeline to run through Serbia, then selling NIS to Gazprom is part of the package. It has also indicated that other diplomatic favors -- like its firm opposition to Kosovo independence in talks at the United Nations Security Council -- could dry up if the energy deal falls through.

Federico Bordonaro, a Rome-based energy politics analyst with the "Power and Interest News Report," says Moscow appears to be "linking their diplomatic support on the Kosovo question to guarantees for a future enhancement of Gazprom’s interests and presence in Serbia's energy market."

NIS has a market value of approximately 2 billion euros ($2.9 billion), but Gazprom has offered a bargain-basement price of only 400 million euros in cash and 500 million euros in investment over five years. Belgrade is reportedly holding out for more and the two sides are still negotiating -- but Moscow is pressing for the deal sooner rather than later.

Moscow's plans in Serbia don't stop with NIS. As part of South Stream, Gazprom is pressing another state-owned company, Serbian Gas, to form a joint venture to build the pipeline and to grant Russia a 30-year supply and transit monopoly. Gazprom, which would hold a majority stake in the joint venture, is also demanding that it take over the transmission network of Serbian Gas.

Gazprom is also seeking to form another joint venture with Serbian Gas to build underground natural-gas storage facilities in the country.

For Russia-watchers, it's a standard game of Kremlin hardball. "It would be strange if Russia, which is actively defending Serbia politically, wouldn't try to convert that political support into economic advantage," says Fyodor Lukyanov, editor of the Moscow-based journal "Russia in Global Affairs."

Banks, Not Tanks

If Russia is able to gain control of these energy assets in Serbia, it would severely hamper plans, pushed by the EU and the United States, to diversify the continent's energy supply. It would, for example, effectively block the EU-backed Nabucco project, which seeks to transport gas from the Caspian region to Europe via Turkey and the Balkans -- circumventing Russia.

Russia's foray into Serbia has become an issue in the presidential campaign. The nationalist Nikolic has, not surprisingly, played the Slavic unity card and offered Moscow the warmest embrace -- even offering to station Russian military bases in Serbia.

Poorly sourced newspaper reports have even claimed that plans were already in the works to put a Russian base on the border with Bosnia-Herzegovina's Republika Srpska. Analysts, however, are highly skeptical that Russia is aiming to create a military alliance with Belgrade.

"I don't see any objective possibility how Serbia -- given where it is located, and given that it is surrounded by countries that are going to be EU and NATO members -- could become part of some Russian bloc," Lukyanov said. "It isn't realistic. Sooner or later, Serbia will be in the European orbit."

Many observers say Moscow's strategy in Serbia -- and in Europe as a whole -- is best summed up by the phrase "banks not tanks." Russia is seeking to use its energy-fueled economic muscle to insinuate its way deep into Europe, first commercially, and then politically.

"I think it is part of a larger plan or strategy to redevelop a Russian sphere [of influence], not just simply in the Balkans, but in Europe as a whole," Gvosdev says. "And part of this strategy is predicated on having nodal points in various parts of Europe that are receptive to Russian business, economic, and political influence."

Gvosdev adds that Moscow wants to "embed itself in the European economy in such a way that it will be very difficult to dislodge," which would effectively make Russia an "honorary member" of the EU.

"They would be connected in that you wouldn't be able to have this nice, neat dividing line where you can say this is European and that is Russian." That, says Gvosdev, is "the long-term goal."

Russia, for example, is seeking to build underground natural gas storage facilities in Hungary and Belgium. Gazprom has also recently secured a license to operate in the Irish energy market -- and plans to begin supplying customers there by the end of this year.

The Price of Support

Public opinion polls show that an overwhelming majority of Serbs -- approximately 70 percent -- favor eventual integration into the EU. At the same time, even staunchly pro-EU politicians like Tadic have not dared to speak out openly against Moscow's expanding influence.

According to media reports, Tadic reportedly is opposed to the NIS deal, but has been careful about saying so publicly before the elections.

"Nowadays you cannot oppose Russia and win the election, because there is a sense, or feeling, that Russia is protecting Serbia from losing Kosovo," says Teofil Pancic, a political columnist with the weekly "Vreme." Pancic adds, however, that the Russia infatuation will turn out to be an "emotional reaction" that will not last -- provided Tadic eventually wins the election.

"I don't think that most of the Serbs care about it in such a way that they would want to become a sort of Russian 'guberniya' as we say here -- a part of Russia, or a Russian satellite," Tancic says. A Nikolic victory, on the other hand, would likely mean substantially greater Russian influence in the country's affairs.

According to Gvosdev, Russia is now "laying out its price" for its long-standing diplomatic support over the Kosovo issue.

"You want Russian support? Well, we don't want just simple declarations of cultural friendship and Slavic unity," Gvosdev says, describing Moscow's position. "We want, essentially, to be let into what in most countries would be seen as critical infrastructure. What would be seen as a national security issue. And the question will be now: What Serbian government might want to pay that price?"

Between The EU And Russia

Between The EU And Russia

'EU? No thanks!' (AFP)

SERBIA'S FUTURE. With many observers seeing this presidential election as a referendum on Serbia's EU ambitions, RFE/RL asked Belgrade residents ahead of the first-round vote whether they saw their future with Europe or with Russia, and why the Kosovo issue was such an emotional one for Serbs.

(see Photo Gallery)