Is Moscow's Support for Serbia Stance Paying Off?
Russian Firms Relish Push for Privatization; Kosovo Link Is Denied By MARC CHAMPION August 23, 2007; Page A6 After winning a delay in the diplomatic push to grant Kosovo independence from Serbia, Russia looks likely to win some major Serbian companies, too, sparking claims that the Balkan country is trading economic assets and influence for diplomatic support. Over the months to come, Serbia plans to privatize its state energy company, NIS, and its national airline, JAT. Russia's OAO Lukoil and OAO Aeroflot are favored to win the two tenders. Serbia's government recently decided to reopen a tender for the country's largest copper mine, RTB Bor, following lobbying from Russian metals tycoon Oleg Deripaska and President Vladimir Putin, according to people familiar with the matter. • The News: Russian companies are getting a warm welcome from Serbia in the wake of Moscow's support at the United Nations for Serb efforts to block independence for Kosovo. • The Background: Russia has won a delay on plans to make Serbia's mainly ethnic Albanian province independent, a key issue for Serbs who see Kosovo as their historical homeland. • The Significance: Serbia's new openness is helping Russian efforts to take big stakes in energy assets across the Balkans, which Russia sees as a critical corridor to providing oil and natural gas to Western Europe. That would mark a change for Russian investors, who complain they haven't been welcome in Serbia since the downfall of former President Slobodan Milosevic in 2000. Russia ranks 18th among foreign investors in Serbia, according to government figures. Serbian officials deny any link between Russian support for Belgrade's position on Kosovo and the coming privatizations, expected to be completed over the next year and a half. "That's just nonsense. There is no trade-off," said Deputy Prime Minister Bozidar Djelic, in an interview, adding that cash-rich Russian companies are investing aggressively around the globe. But Mr. Djelic, who heads a recently formed working group to attract Russian investment to Serbia, also acknowledged a change in atmosphere. "Somehow the juiciest assets end up in Russian hands," said Jonathan Eyal, a Balkan specialist and director of international security studies at the Royal United Services Institute in London. "It is a strategy to bind Serbia again to Russia." He warned that such a trend could damage Serbia's efforts to join the European Union. EU officials haven't echoed that, but they have said a failure to settle Kosovo's status would damage Serbia's membership prospects. U.N. Talks Extended Russia last month blocked U.S.-led efforts at the United Nations Security Council to secure global backing for a plan to grant Kosovo "managed independence." The province, which Serbs consider their historical and religious homeland, has been under U.N. administration since a North Atlantic Treaty Organization air campaign forced Serbian troops out to end the ethnic cleansing of Kosovo's roughly 90% ethnic-Albanian population. The U.N. agreed to extend until Dec. 10 talks aimed at persuading Serbia and the Kosovar Albanians to agree on a status for the province. Serbian Prime Minister Vojislav Kostunica discussed plans for Kosovo with Mr. Putin in June at an investment forum in St. Petersburg. "I am staying here to discuss and to see how to increase Russian economic presence in the Serb economy," Mr. Kostunica said at a joint appearance with Mr. Putin, while also expressing appreciation for Russia's stance on Kosovo. In July, Mr. Kostunica's Serbian Democratic Party signed a cooperation agreement with United Russia, the main pro-Kremlin party in the Russian parliament. Last month, Mr. Deripaska, owner of Russian metals group Basic Element, met with Messrs. Kostunica and Djelic in Belgrade to discuss investment, including the sale of copper mine RTB Bor. Mr. Deripaska was disqualified from a March tender for the copper company after failing to meet the minimum bid. When the winner, Cuprom Romania, failed to meet its $400 million commitment citing labor-union protests in April, the government initially indicated it would sell to the second-place bidder, a consortium led by Serbian businessman Zoran Drakulic. Deputy Prime Minister Djelic confirmed that the government now plans a fresh tender. 'Better Offer on the Table' "We will be bidding. We've re-evaluated the assets and we can now put a much better offer on the table," said Geoffrey Cowley, chief executive of SMR, the mining division of Basic Element, adding that he expects the tender process to be wrapped up by the end of the year. Mr. Drakulic declined to comment. Mr. Deripaska has more than a Russian passport to offer. In the meeting with Serbia's leaders, he also discussed the possibility of Serbian companies getting work to build facilities for the 2014 Winter Olympics in Sochi, Russia, according to Mr. Cowley, who was at the meeting. Mr. Deripaska has a contract to rebuild Sochi's airport and to build the Olympic village, at an estimated cost of $1.5 billion to $2 billion. [Serbia]"The big Russian groups have just come of age, they want fair access to deals," said Mr. Djelic, adding that they won't get any special consideration. "We know there have been some countries discriminating against them, but that will not happen in Serbia." Fears that Serbia will make a strategic choice of Russia over the EU, or hand over key industries based on ties to Kosovo or ethnic-Slav identity, are misguided, says Balkan historian Misha Glenny. A long history of half-hearted Russian commitments in the Balkans has left Serbs too skeptical for that. Few Serbs believe their long-term future is with Russia, several borders away, rather than with the EU. Privately, Russian businessmen say the same and remain cautious about their prospects in the country. Russian support for Serbia's position on Kosovo, meantime, isn't that risky for Moscow politically even though it runs counter to the position of the U.S., Mr. Glenny says. Russia's true interest in the region concerns energy. "They have effectively been building up their interest in the energy infrastructure of southeastern Europe, where they now control 50% of all the pipelines, much of the oil and now are even getting into nuclear energy," Mr. Glenny says. Russia's goal, analysts say, is to build a new southern energy corridor to bring Russian oil and natural gas to market in Europe, bypassing troublesome transit neighbors Ukraine and Belarus, which lie to the north of Serbia. At the same time, large new Russian pipelines help undermine the financial viability of the EU's Nabucco gas-pipeline project, which would bring gas from the Caspian Sea region and Iran, bypassing Russia. Lukoil owns two oil refineries and more than 1,800 gasoline stations in Europe, the majority in Eastern Europe and the Balkans, including Serbia. A spokesman for Lukoil declined to comment on the tender for NIS. But he described the region as strategically vital for the Russian oil major as it seeks the refinery and transport capacity to sell high-value refined gasoline direct to consumers in Europe. "We started with the former Soviet countries, like Ukraine and Moldova. Now we are moving to the former socialist countries," where old ties remain and asset prices are affordable, the spokesman said. Write to Marc Champion at [EMAIL PROTECTED] http://online.wsj.com/article/SB118782426511305809.html?mod=googlenews_wsj
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