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. Last Updated: 07/27/2016

Serbia Says No Strings Attached to $1Bln Russian Loan

BELGRADE, Serbia — Serbia's prime minister said Wednesday that a $1 billion loan from Russia won't come with political strings attached. The deal is expected to be signed during President Dmitry Medvedev's visit to Belgrade next week.

The loan is nonetheless widely viewed as an attempt to enhance Russian diplomatic and economic influence in the Balkan region. 
Prime Minister Mirko Cvetkovic denied reports that the Russians are conditioning the loan — intended to cover Serbia's budget deficit and pay for a new Belgrade ring road and subway — on an extension of their oil monopoly on the Serbian market.

Gazprom Neft purchased a 51 percent stake in Serbia's oil company NIS last year, with the deal allowing the Russians to have the monopoly over the sale of gasoline and gas in the Balkan country until 2011.

"I'm against extending any monopolies as this would jeopardize our European integrations," Cvetkovic told Belgrade's B-92 radio. He was referring to Serbia's goal to become a part the European Union and its free market.

Asked if there are any political conditions attached to the deal, Cvetkovic said, "No," adding that "the conditions are favorable" for Serbia.

Moscow's interests also include the South Stream gas pipeline that would bring Russian gas from the Black Sea to Europe. The route across the Balkans, including Serbia, would avoid Ukraine, with which Russia has pricing and political disputes, and competes with a U.S. and EU-backed pipeline called Nabucco.

However, Cvetkovic said that Serbia's strategic priority is the European Union, while Russia and the United States come equally second. 
Cvetkovic said that $200 million of the expected Russian loan will be used to finance Serbia's budget deficit, while the rest would go for major investments, such as the construction of a subway in Belgrade and a ring road around the capital.

He suggested that final terms of the Russian loan are still being negotiated, but added that the interest rate would be at a level currently offered on the world capital markets. He did not specify.

Cvetkovic also said new talks between the International Monetary Fund and Serbia are expected to start next week. 
Serbia has secured a 3 billion euro ($4.5 billion) standby loan from the IMF in March, but IMF officials have postponed giving it access to additional funds until the Serbian government furnishes details on how it plans to reduce its growing budget deficit.

Cvetkovic said that the cuts will be made through layoffs in the state sector rather than through the increase of the value added tax (VAT) as suggested by the IMF.