As Serbia’s new parliamentary majority plots a new path for the country, old economic ties to Russia and China present it with multiple dilemmas -- with the clock ticking on the future of the country’s Russian-owned oil industry and its Chinese-driven Expo project, as well as prospects for unlocking European Union funding.
A US sanctions-waiver on NIS Group, which runs Serbia’s only oil refinery, expires on December 11. Expo 2027 is due to open its doors in May. The window for accessing payments from the EU’s Growth Plan for the Western Balkans closes at the end of next year.
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After A Crushing Defeat, What Now For Serbia's Vucic?Meanwhile, Serbia’s Student List opposition has still not even named its candidate for prime minister after its landslide election win last month.
Russian Energy And ‘Seismic’ Midterms
Under former President Aleksandar Vucic, Serbia’s economy was powered by Russia’s oil and gas industry. This presents an immediate challenge.
Washington has imposed sanctions on NIS, which is majority-owned by Russian energy giant Gazprom, as part of punitive measures following Russia’s 2022 full-scale invasion of Ukraine.
The sanctions forced the company to suspend production last year until a series of waivers, starting in December, enabling it to continue activities while a deal was worked out for Gazprom to sell its stake to Hungarian energy company MOL.
“The Russians are still proving to be a very stubborn customer on this point, and they are not willing to give up that particular ownership -- at least at this point in time,” Vuk Vuksanovic, foreign policy lecturer at King’s College London, told RFE/RL.
If the waiver is not extended, it would be “a complete economic shock at the very start of the new government,” he said, adding that the uncertainty was “a very dark cloud in the background.”
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Arrests, Resignations, Repainting: Here's What's Happening In Postelection SerbiaNikola Xaviereff, a research fellow at the German Council on Foreign Relations, told RFE/RL that “there will not be so many extensions” and that the “seismic change” of the US midterms would lead to more pressure from Washington to get the deal done quickly.
On November 5, Hungarian Foreign Minister Anita Orban was quoted by local media as saying that a deal could be completed by the December deadline.
Reliance on Russian gas imports is also entrenched, covering some 90 percent of Serbia’s gas needs at bargain prices. These have been covered by a series of 3-month supply deals, with the current one expiring at the end of this year.
The exact prices have not been disclosed, but Vucic claimed on social media that the latest deal was 318 euros ($357) per 1,000 cubic liters -- compared to market prices around the 900 euros mark. Student List leaders have indicated this is an economic dependency that will not change anytime soon.
China: Can ‘Ironclad Friendship’ Endure?
Under Vucic, the relationship with China was described as an “ironclad friendship” and the Student List has said it wishes to continue economic ties -- but with transparency on contracts and open tendering processes.
Crucially, Chinese companies carried out the work on Novi Sad railway station, where a fatal roof collapse spawned nationwide protests and the student movement that has now won a parliamentary majority.
"At this point, we have no insight into what was signed, how it was done, or whose interests it served," Ilija Srdanovic, the lead candidate on the Student List, told RFE/RL.
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China-Backed Bridge Project In Belgrade Draws Scrutiny Over Hidden ContractsChinese companies are involved in all of Serbia's major infrastructure projects, including road construction, the Belgrade subway, and the complex being built for the Expo international exhibition.
“I have no clue how Expo can be completed in time or in a satisfactory manner,” said Vuksanovic. “For many, they perceived the Expo to be a jewel in the crown of Vucic's corruption and cryptocracy. And so, they will treat this initiative with a microscope.”
But, he added, projects would likely continue with Chinese firms adapting pragmatically to increased levels of scrutiny and openness under a new Serbian government. Other analysts agree.
"I believe the change will not be dramatic, given how deeply China has become entrenched in Serbia's economic, security, and military landscape", Bartosz Kowalski, an associate professor of Asian studies at Lodz University, told RFE/RL.
“This shift will test the true standalone economic value of Chinese investments when they no longer operate under the direct political umbrella of the Serbian authorities,” Kowalski added.
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New Evidence Of Labor Abuses At Flagship Chinese Factory In SerbiaVucic made his first state visit to China in May, following on from several previous trips, and came back with promises for some $1 billion in new investments.
“The parliamentarians and the ministers that will take power in a few months can say that they want to sort of renavigate this relationship, but they need to be aware that it can cost them dearly because Serbia is not in a position to cut ties with a foreign power which is very important in the economy,” said Xaviereff.
Indeed, with nearly $8 billion invested since 2010, China is Serbia’s second-largest investor, behind the EU.
Unlocking EU Funds
The EU is also Serbia’s biggest trading partner, and these economic ties will undoubtedly continue to grow. Srdanovic has said it is committed to EU integration. But Serbia’s accession talks have been stalled for years and reinvigorating them will not be easy.
Xaviereff suggested that the EU’s Growth Plan, which makes some 6 billion euros available to candidate states in the Balkans over 2023-27, would be lower-hanging fruit.
A European Commission report on November 4 noted that 167.6 million euros had been released to Serbia so far, but further payments were effectively frozen earlier this year following judicial reforms seen by Brussels as democratic backsliding.
“In relations with Europeans, it is going to be to really start looking at what reforms they can undertake in order to unlock the funds from the growth plan,” said Xaviereff.
There are multiple hurdles to quick progress on more ambitious goals.
The Student List, like Vucic, has made it clear it will not recognize Kosovo as an independent state -- a key item on the wish-list in Brussels. Likewise, the Student List has been critical of what some perceive as the EU maintaining an overly close relationship with Vucic.
“I don't think it will be a full-fledged EU reset. I think it will be a gradual sort of phasing in and getting to know each other and then to really establish some kind of a new communication,” said Xaviereff.