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. Last Updated: 07/27/2016

Serbia Vows To Pay Back Gazprom

BECEJ, Yugoslavia — Serbia said Saturday it would privatize its oil and gas monopoly NIS over the next three to four years and that settling a debt to Gazprom would be the first stage of the reform.

"The first stage of privatization of Naftna Industrija Srbije [NIS] will start this year with a settlement of a $322 million debt to Gazprom," Serbian Deputy Energy Minister Vladimir Kostic told a seminar on NIS's future.

The announcement came only a week after President Vladimir Putin, accompanied by an economic and military delegation, visited Belgrade and agreed to promote ties with Yugoslavia with a gradual phase-out of traditional barter trade.

Kostic did not elaborate on the debt-settlement scheme. One of the options mooted in Belgrade is a debt-for-equity swap.

Kostic said the company's privatization would take three to four years and NIS itself would first have to be reformed.

"The intention is to transform NIS into a group of functional companies and then privatize them," Kostic said.

NIS holds a monopoly in exploiting domestic oil and gas fields and in wholesale trade of crude oil, derivatives and natural gas.

The company operates two refineries in Serbia, both of which suffered massive damage during NATO's three-month bombing of Yugoslavia in 1999.

The direct damage to NIS plants and infrastructure is estimated at $950 million, NIS's deputy general manager Rajko Tomanovic told the seminar in the town of Becej in the northern Serbian province of Vojvodina.

"The Pancevo crude oil refinery suffered the greatest damage worth $370 million," Tomanovic said.

In the 1980s, NIS was producing around 1.4 million tons of crude oil a year. After a decade of sanctions, mismanagement and NATO air strikes, the annual production has fallen to 800,000 tons, Tomanovic said.