Serbia eyes on Azerbaijani natural gas to ensure its energy security (OPINION)
by Shahmar Hajiyev and Narmin Musayeva
The ongoing Russia-Ukraine war has changed the traditional energy map in Europe, and all European states eye on alternative energy supplies to ensure long-term energy security. The Republic of Serbia is one of the European states which aims to find alternative natural gas supplies to support its energy security and deal with economic shocks.
Analyzing the energy production and consumption of Serbia, it is worth noting that about 75 percent of energy comes from fossil fuels. So far, coal accounts for 68.5 percent, oil for 8.0 percent, natural gas for 3.1 percent, the hydro potential for 7.2 percent, and biomass for 11.8 percent, while geothermal energy, solar energy, wind energy, and biogas constitute around 1.4 percent. Coal production exceeding 30 million tons enhances the quantity of carbon dioxide in the atmosphere on an annual basis, which motivates Serbia to shift its energy policy by reducing emissions and setting up alternative routes on this matter.
Moreover, Belgrade is heavily dependent on Russian natural gas. Despite all the criticism from EU, after expiring of 10-year natural gas supply contract with Russia’s Gazprom on May 2022, Serbia secured a new three-year natural gas supply contract for 2.2 bcm/year with Moscow. According to the new gas agreement, Serbia will pay an extremely low price for gas, $368, in the next two quarters $420, and then $388 per 1,000 cubic metres. However, this price is more compared to the previous gas price with Gazprom. During the energy crisis in Europe, Serbia will need additional energy sources to ensure its energy security, and therefore, Belgrade started negotiations with reliable partners to diversify its energy supplies. Towards this end, the main goal of Serbia is deepening economic ties, especially energy, with Azerbaijan to receive the Caspian natural gas via the Southern Gas Corridor (SGC). For this purpose, construction works of the Serbia-Bulgaria gas interconnector (IBS) have already started, and this project will provide a direct link for the gas networks of Bulgaria, Romania, Greece and Hungary to the gas networks of other South Eastern European countries. It should be underlined that Belgrade will be able to import Azerbaijani natural gas and LNG from Greece via the IBS pipeline which is crucial for Serbia’s efforts to diversify energy supply sources and routes.
Touching upon bilateral relations between Azerbaijan and Serbia, it is worth noting that Baku and Belgrade have established strong political and economic relationship. The "Declaration on Friendship and Strategic Partnership between the Republic of Azerbaijan and the Republic of Serbia" and "Joint Action Plan on Strategic Partnership between the Republic of Azerbaijan and the Republic of Serbia" are very important documents signed between two countries. Also, one of the most important details in bilateral relations between Baku and Belgrade is the fact that both countries support each other’s territorial integrity and sovereignty.
In the economic sphere, cooperation between countries is developing year by year. In 2021, Serbia became the 71st foreign trade partner of Azerbaijan. Last year, the volume of trade turnover between two countries was around $9.23 million. In January–October 2022, Serbia became Azerbaijan's 68th foreign trade partner. The volume of trade turnover between two countries was $9.84 million, including the volume of import - $8.10 million, and the export - $1.74 million. Compared to the corresponding period of 2021, trade turnover with Serbia increased by 27.51% in January–October of the current year.
It should be specifically highlighted that the recent visit of the president of the Republic of Azerbaijan Ilham Aliyev to Serbia on November 23 2022, and the signing of the new documents deepen bilateral relations in many fields. Two presidents signed the “Joint Statement between the President of the Republic of Azerbaijan and the President of the Republic of Serbia”, “The Memorandum on the Establishment of the Strategic Partnership Council between the Republic of Azerbaijan and the Republic of Serbia” and its annex, “The Statute of the Strategic Partnership Council between the Republic of Azerbaijan and the Republic of Serbia”. All signed documents will undoubtedly develop economic ties between the two countries, especially in the field of energy. Azerbaijan as a reliable energy partner for Europe is playing a crucial role for the diversification of natural gas sources. Azerbaijan has been supplying natural gas to European energy markets via Trans Adriatic Pipeline (TAP) since December 31, 2020. The TAP project supports Europe’s initiative to develop gas Interconnectors across Europe. To this end, the opening of Gas Interconnector Greece-Bulgaria (IGB) on October, 2022 in Sofia where president of Azerbaijan Ilham Aliyev and Serbian president Aleksandar Vucic participated, can be characterized as a game changer for the region because the project will enable Serbia to receive natural gas from Azerbaijan in the near future. In fact, the IGB project is supported by the Trans-European Networks for Energy, and it is a project of common interest and a priority project under the Central and South Eastern Europe Energy Connectivity High-Level Group.
Moreover, earlier this year Baku and Belgrade also signed an agreement on cooperation in the energy and mining sectors. This agreement, which aims to rationally use the potential of both countries' energy and natural resources, provides for cooperation in the energy sector, especially natural gas and renewable energy sources, as well as the promotion of the mutual investments in mineral exploration, regulation, energy efficiency, establishment of joint ventures. The document also reflects the continuation of cooperation to support the implementation of the SGC. All developments indicate that Serbia is interested in decreasing its dependence on Russian natural gas, and the main goal of Belgrade is to buy the natural gas from Azerbaijan as soon as possible.
In the end, Azerbaijan has proved itself as a reliable energy partner for Europe for many years, and now the Azerbaijan-EU energy cooperation enters a new phase after signing “MoU on Strategic Partnership in the field of energy between the Republic of Azerbaijan and the European Union”. Until the end of this year around 11.5 bcm of gas will go to European consumers via the TAP pipeline. Baku will increase gas supplies to Europe and by 2027 the capacity of the TAP pipeline will be doubled to reach 20 bcm/year. Towards this end, productive cooperation between Serbia and Azerbaijan will continue to grow because Belgrade sees an effective mechanism by expanding energy cooperation with Azerbaijan. In this sense, Serbia’s partnership in the IGB as well as the IBS projects will highly contribute to energy security in the long term. For Serbia, the diversification of sources and gas routes is extremely important for its energy security and economic growth, therefore with the implementation of the abovementioned projects and strong partnership with Azerbaijan, Belgrade will be able to reduce its dependence on one supply source.
Shahmar Hajiyev, a senior advisor at the Center of Analysis of International Relations (AIR Center), and Narmin Musayeva, an intern at the AIR Center, especially for News.Az