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What is good for us is good for you, Gazprom tells Serbia

RUSSIA'S Gazprom defended its controversial purchase of Serbia's state-owned oil company, Nis, last month, by claiming the deal would create a new energy hub in the country and result in the modernisation of its oil sector.

Gazprom and Serbia agreed a deal at the end of January that handed over 51% of Nis to Gazprom for $400m and $0.5bn of investment up to 2012. At the time, the Russian company also promised to route a section of its South Stream gas pipeline through Serbian territory. Critics of the deal, including government ministers in Belgrade, said the country had undersold the assets – before an earlier planned privatisation, a book value of at least $2bn had been put on Nis.

Gazprom dismissed those criticisms last month as the work of "representatives of other potential investors trying to cast doubts on the rationale of such a deal, implying that equity in Nis could be sold for a higher amount".

Yet "the cost of the shares is not the sole condition of our participation in the project for the development of Nis," said Dmitry Malyshev, head of Gazprom Neft's Serbian business, in a speech in Belgrade. "Our company assumed the obligation to carry out deep reconstruction and modernisation of the entire technological complex of Nis. This programme is developed jointly with the Nis management and shall be agreed on with the second shareholder of the company, the state of Serbia." Gazprom Neft, he said, would double crude-processing capacity at Nis, which is the main refiner in Serbia, to more than 7m tonnes a year.

First, however, the deal must be approved by Serbia's parliament. Although Malyshev said Gazprom would "respect these democratic procedures", it warned Belgrade that "each day [of delay] will cost a lot, not only for Gazprom but Serbia as well. This is a well-known situation where everybody loses."

Malyshev also said Gazprom Neft's oil reserves – estimated at over 6bn barrels – were the best guarantee of Nis' future because they will ensure Nis "will depend neither on speculations by traders, nor accessibility of oil on the market".

Pitting Nis and Gazprom in a shared destiny following the agreement, Malyshev added: "I can assure you that the success of Gazprom will become the country's success as well. The most evident manifestation thereof will be the transformation of Serbia, with our company's assistance, into an energy 'hub' for at least the European Region." Gazprom plans to increase Serbia's gas-storage capacity as part of a new energy corridor it is developing based on the South Stream pipeline, a project to connect Russian gasfields with markets in the Balkans and central Europe by pipeline across the Black Sea.

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