ECONOMY

Serb-Russian power tie-in?

BELGRADE – Serbia’s electricity monopoly is considering building new power plants jointly with Russia’s Inter RAO, sources told Reuters on Friday, in a deal that would give the Russians partial control of Serbia’s electricity market. A source close to the negotiations said the protocol will be signed today by Elektroprivreda Srbije (EPS) and Inter RAO, which is jointly owned by Russia’s former monopoly Unified Energy System (UES) and state nuclear energy corporation Rosatom. «It is not a binding document,» the source said, on condition of anonymity. «The protocol says the parties will do joint projects but there is no precise information on the projects nor on the investment share.» If a tie-in goes through, it will be the second major energy deal this year between Serbia and Russia, the Balkan country’s main big-power ally in the issue of Kosovo, a former breakaway province which seceded two months ago with Western backing. In January, Belgrade and Moscow signed a deal that saw Serbia included in the South Stream gas pipeline in return for Russia’s Gazprom’s taking a stake in Serbian oil monopoly NIS, a pact many analysts saw as politically motivated. A senior Serbian government source confirmed a deal was in the works, but noted that government approval could only come from the cabinet that takes over after a general election next month, not the current caretaker government. Polls show the May 11 election will be a neck-and-neck race between pro-Western liberals and nationalists who favor turning the country toward Russia. According to the protocol, Serbia has until mid-May to inform its Russian partner about potential joint projects, then Inter RAO must decide if, and how, it wants to get involved. The government source said the key item under consideration would likely be the construction of two 700-megawatt thermal plants in central Serbia to replace existing aging facilities. The project, estimated at a total 1.5 billion euros, is vital as Serbia will otherwise face serious power shortages by 2012. When Belgrade said last year it would call a tender, several firms including Czech CEZ where interested. The source said the two sides could also discuss the construction of several small hydropower plants on the River Drina – earlier slated as a joint project of Serbia with the Serb half of Bosnia. Analysts say that Serbia’s move toward Russia is partly a gesture against the United States and European Union backing for Kosovo’s secession, and partly a necessity, as a rise in nationalist sentiment has made Western investors hesitant. The country has been posting healthy growth of around 6 percent on average since the fall of nationalist autocrat Slobodan Milosevic in 2000 marked the end of a decade of isolation over its role in the Yugoslav wars. It has since attracted total foreign investment of $13.5 billion and hoped for a lot more. However, political uncertainty, diplomatic hard talk and often violent demonstrations since Kosovo’s secession have caused a sharp drop in capital inflows, with many investors waiting to see which way the country will be facing after the May election.