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Putin Pledges Three-Year Gas Supply to Balkan Ally Serbia

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(Bloomberg) --

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Russian President Vladimir Putin promised Serbian President Aleksandar Vucic an uninterrupted natural gas supply, the Kremlin said in a statement following a telephone conversation between the pair on Sunday.

Serbia will sign a three-year contract with Gazprom PJSC, Vucic told reporters in Serbia.

Serbia, which hasn’t joined international sanctions against Russia, is extending its contract with the gas giant, maintaining a balancing act of seeking European Union membership while also keeping close ties with the Kremlin.

Gazprom has been selling gas to Serbia this year at below-market rate of $270 per 1,000 cubic meters under a six-month extension of a 10-month agreement that expired in late 2021.

Vucic said the cost of a cubic meter of gas will be determined during additional negotiations with Gazprom, adding that he expects favorable rates. “I am grateful to our Russian partners,” he said.

Among the Cheapest

Gazprom’s price for the Balkan country will remain based on an oil formula, resulting in up to 10 times lower gas rates for Serbia compared to most other buyers in Europe, Vucic said. Only Belarus and Armenia are likely to enjoy better terms for Russian gas, he said.

Entirely dependent on Russia for gas, Serbia has sought to diversify its energy sources. But the landlocked nation of 7 million people says it may not be able to import gas from other suppliers before late 2023.

EU officials have repeatedly urged Serbia to align its foreign policy with the bloc and reduce its overall reliance on Russia. The government, dominated by Vucic’s party, has condemned Putin’s invasion of Ukraine at the United Nations but shied away from imposing sanctions.

Vucic has warned that the coming winter could be one of the most difficult since WWII. Finance Minister Sinisa Mali last week negotiated the use of 500 million cubic meters of gas storage in neighboring Hungary as backup to Serbia’s own depot of about the same size to secure energy security.

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