Serbia’s Vucic warns oil refinery faces shutdown as US sanctions bite

Pancevo, the country’s only oil refinery, now on ‘hot standby’ as Vucic faces tricky prospect of seizing Russian asset.

Serbian President Aleksandar Vucic has warned that the country’s only oil refinery will shut down in four days if the United States does not lift sanctions that were imposed over its majority Russian ownership in connection with the Ukraine war.

Vucic said on Tuesday that he would give Russia’s Gazprom and Gazprom Neft, which together own 56.2 percent of the Petroleum Industry of Serbia (NIS) oil company, 50 days to sell their stake or the Serbian state would take over operations and make an offer to buy them out.

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For Vucic, who has close ties to Moscow, the option of seizing a Russian asset may be unpalatable, but he said that his country had been left in an “increasingly difficult position” with “no easy solutions” as Washington and the Kremlin clashed.

The US sanctions, which hit NIS in October, have cut off crude supply to the Pancevo refinery, the only oil refining facility in the country. “It has not been shut down yet, but it is already running at a reduced level compared to normal,” said Vucic.

“Serbia is facing major problems … When you impose sanctions against Russia and its companies, they end up hitting our country,” he said, adding that the US sanctions may end up affecting supply lines and electricity production in the middle of winter.

The Balkan country does have enough fuel reserves in the short term, but a total shutdown of its only refinery will halt production of petrol, diesel and jet fuel and may hurt the country’s economy, Vucic said.

NIS said in a statement that it began preparations for a shutdown of its Serbian refinery by placing it on a so-called hot standby that would allow a restart once crude oil becomes available.

“NIS continues to supply the domestic market with petroleum products without interruption, thanks to previously secured stocks,” it said.

The US Treasury Department’s Office of Foreign Assets Control imposed sanctions on Russia’s oil sector in January – including NIS, which was granted repeated waivers before the sanctions finally came into effect in October.

After sanctions hit, banks stopped processing NIS payments, and Croatia’s JANAF pipeline halted crude deliveries to the refinery, forcing the Balkan country to look for alternative supplies.

The Serbian central bank also said in a statement that it would stop all payment transactions for NIS if the company’s operating licence were not extended.

Washington is seeking complete Russian divestment from NIS, and on November 1,5 it gave the company’s owners until February 13 to find a buyer for the Russian stake.

Gazprom Neft holds 44.9 percent of NIS and Gazprom 11.3 percent of NIS, according to news agency Reuters. Serbia owns 29.9 percent, with the rest held by small shareholders.

Oil company Gazprom Neft is a subsidiary of energy giant Gazprom.