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. Last Updated: 07/27/2016

NIS and South Stream Deals Sealed

ReutersPutin speaking with Tadic as Medvedev listens. Tadic trails a pro-Russia candidate in a Feb. 3 presidential runoff vote.
Russian and Serbian leaders on Friday sealed deals giving Russia control of Serbian oil and gas company NIS, and the right to route the South Stream gas pipeline through the country.

The deals were signed at a Kremlin ceremony presided over by President Vladimir Putin and First Deputy Prime Minister Dmitry Medvedev. The Serbian leaders present, President Boris Tadic and Prime Minister Vojislav Kostunica, had flown in for talks with Putin.

Tadic said at the ceremony that the deals had come after three years of talks.

"Serbia's strategic position in southeast Europe gives it a central role because gas will go through Serbia to other countries on the European Union's southern flank," Tadic said, adding that Serbia would thus be helping both Russia and the EU.

Putin reiterated Moscow's strong backing of Belgrade's campaign against independence for Kosovo, for which Tadic and Kostunica thanked him.

"The very close political ties that connect our countries have been converted into economic results," Medvedev, Putin's anointed successor in March's presidential election, said after the ceremony. "This is a brilliant breakthrough in our relations."

At the ceremony, Medvedev sat next to Putin in a break with normal Kremlin protocol. A Kremlin spokesman said the two men had to be seated together to counterbalance Kostunica and Tadic.

The deals came just days ahead of Serbia's runoff presidential vote on Feb. 3. The first round in the elections on Jan. 20 gave a narrow lead to pro-Russian nationalist Tomislav Nikolic, ahead of the more pro-EU Tadic.

Gazprom is understood to have been pressing hard to strike a deal before the second round. Analysts said Serbia's need for Russian support over Kosovo had been a factor in clinching the deal.

The Kremlin is betting on Tadic in the runoff, analysts say, as this would likely guarantee that the energy agreements would not be revised.

Nikolic, the nationalist candidate, is expected to visit Moscow for talks Monday, but a senior Kremlin spokesman on Friday said the Kremlin was not seeking to interfere in Serbian domestic politics, and that it was unlikely that Nikolic would get to meet with Putin.

Nikolic will hold talks with Russian lawmakers Monday, said Konstantin Kosachyov, chairman of the State Duma's International Affairs Committee, Interfax reported. He will not meet with Foreign Ministry officials, Interfax said.

Friday's deals give Gazprom's unit Gazprom Neft a 51 percent stake in Naftna Industrija Srbije, or NIS. Gazprom CEO Alexei Miller told reporters in the Kremlin that his company would modernize and increase NIS's refining capacity, but declined to put any price on the deals.

A handout for Serbian journalists at the ceremony said Gazprom had bought the stake at its initial offer price of 400 million euros ($590 million), and agreed to invest another 500 million euros to modernize the company, a level seen by many as well below market value, Kommersant reported Saturday.

Vladimir Vedeneyev, an oil and gas analyst at Bank of Moscow, on Friday valued NIS at $2 billion to $3 billion.

The South Stream deal will send at least one-third of the project's gas, 10 billion cubic meters per year, flowing through the Serbian branch of the pipeline.