By Blerim Abedini- Center for Security Studies and Development-Macedonia(CSSD)
Russia’s investments in the energy sector in Serbia and Bosnia. Opposing forces to Russia’s return in Balkans. China’s strategic investments for long-term plans for a modern Silk Road as it for boosting exports to the region and by setting trade centers and businesses.
After dividing of ex-Yugoslavian Federation, seven states have faced political and economic instability due to broken economic relations influenced by Balkan’s war. Companies are suffering consequences by Balkan war which caused industrial sector as failed. Many states as part of big ex-Federation and ex-Soviet Union are suffering the same economic consequences related to broken chains of businesses.
China as East investor is making some progress in own economy. It is facing global challenge and has to compete in international markets. China need to expand its economic efficiency for improving social and economic life of own population.
Some statistics are indicators for Russian and Chinese involvement in Balkans markets.
Russia invests in the energy sector in Serbia and Bosnia. ‘Lukoil’ acquired 79.5% of Serbia’s Beopetrol in 2003. In summer 2007 the Russian company Metropol invested in the largest Serbian travel agency Putnik approximately 40 million Euro and took control over 75 per cent of its shares. In 2008, Serbia and Russia signed an agreement giving 51% of NIS’s shares to Gazprom Neft for €400 million and €550 million in investments until 2012. Also Russia invested in 2009 about 105.5 million US dollars in the reconstruction of the Djerdap hydroelectric plant. The joint venture South Stream Serbia AG was established in November 2009 (Gazprom holds a controlling 51 percent in the company, while Srbijagas owns 49 percent). JSC Russian Railways’ (JSC RZD) project in Serbia, is the first major Russian project in the region that is not related to energy. According to estimates by the German Institute for International and Security Affairs (SWP), in 2010, 32 percent of enterprises in the country were owned by Russian businessmen.
On May, 2013 Russia and Serbia signed the Declaration on Strategic Partnership. Serbia’s Hemofarm (pharmaceutical products) and Sintelon (synthetic flooring) have business interests in Russia.
South stream pipeline
Russian investment in Montenegro tends to be individual and recreational. But Montenegro’s joining anti-Russian sanctions in connection with the situation in Crimea confirmed the country’s intention to join the EU and NATO.
NIS (Petroleum Industry of Serbia) operates in ‘Republika Srpska’ which has joined the South Stream project. Sarajevo’s interest in Moscow will depend on its main investors as Austria, Croatia, Slovenia, and Turkey, to support the Bosnian economy. Furthermore, the Turkish presence in Bosnia and Herzegovina, as well as that of Arab countries is gaining attention. Bosnia and Herzegovina: Bosanski Brod oil refinery owned by Russia’s oil company Zarubezhneft. Russia invested Russia’s €350 million, or $475 million to rebuild the refinery after 2005. Zarubezhneft acquired Bosnia’s sole oil refinery, Brod, in 2007. Zarubezhneft and Serbian oil monopoly NIS, majority owned by Russia’s Gazprom Neft, agreed to explore oil fields in northern Bosnia.
In 2012, Russia and Macedonia signed an agreement on a visa-free regime. According to the National Bank of the Republic of Macedonia, Russian direct investment in the country amounted to 12.04 million dollars. Russia’s LUKOIL and Itera were interested in investing in Macedonia since 2005. Lukoil for ten years has a network of 27 filling stations with 400 employees and obtains 16% of oil market. Macedonia has agreement for joining the South Stream Project. Promising fields of Russian investment include agriculture, light industry, and tourism(Ohrid region).
By the end of 2011, Russian direct investment in Slovenia amounted to 90.7 million euros.
The largest purchases are the Russian company Koks’s 16.86 percent stake in the Slovenian metallurgical holding SIJ and a Russian investor’s majority stake in the tourism company Terme- Maribor.
During the same period (end of 2011), Slovenian investment in the Russian economy amounted to 336.1 million euros. This investment includes the pharmaceutical plant Krka-Rus in the town of Istra and the paints and varnishes enterprise Odilak (part of Slovenia’s Helios Group) in Moscow suburb Odintsovo.
By the year 2000, several Russian-Croatian major projects failed. They include the Druzhba (Russia) and Adria (Croatia) pipeline integration plan and the purchase of metallurgical works in Split and Sisak by Truboimpeks and Mechel (2001, 2003 and 2007). In 2008, as part of the USSR/Yugoslavia debt repayment framework, Russia delivered Mi-17Sh military transport helicopters worth $65 million to Croatia, in addition to equipment for the Sisak thermal power plant. Lukoil is also present in the country and has a network of gas stations and oil terminals.
Croatia had joining the South Stream Project (under an Intergovernmental Agreement signed on March 2, 2010). In 2013, Croatia joined the EU.
According to the Bulgarian National Bank, foreign investment in Bulgaria in 2014 was around 805 million euros ($974 million). About 22 percent, came from Russia’s firms with assets in Bulgaria as: LUKoil, Gazprom and Promet Steel. LUKoil’s operations, include oil refinery in Burgas, that has contributed with 25 percent of Bulgaria’s tax revenues.
Bilateral exchanges between Europe and China increased jumping from EUR 101 billion in 2000 to EUR 395 billion in 2010. China has focused on tapping the Balkan Peninsula’s unexploited business potential by making strategic investments for long-term plans for a modern Silk Road as it for boosting exports to the region and by setting trade centers and business. China has interest to enhance Balkan imports on regional mineral exploitation within its Minmetals Corporation as metal’s trader.
Across Serbia, Bosnia and Herzegovina, Macedonia, Kosovo and Montenegro, planned power-plant expansions — some already under construction, others are planned over the next decade — will boost coal-based generation capacity by 14.8 gigawatts, an increase of approximately 30 percent, according to a recent report by the nonprofit Change Partnership and International Energy Agency data. That’s up to 25 percent more power than the region actually needs too.
China has seen the region as a possible entry into Europe. In Serbia, China’s Bank recently dropped $608 million on a new 350-megawatt generator for the Kostolac power plant.
In Bosnia, meanwhile, it’s putting $833 million into a 450-megawatt unit at the Tuzla coal-fired plant. The China Development Bank has provided $385 million for a Bosnian coal. Chinese investors are funding similar construction in Montenegro and Romania.
China is exporting part of its coal industry to the Balkans. But as countries like Serbia look toward joining the EU, their coal plants exploiting may be in question. Full EU members have to meet strict efficiency and environmental requirements. Mileusnich, a policy coordinator at Climate Action Network Europe, estimates that Serbia will have to spend some $11.5 billion on implementing EU laws.
Russia and China between are looking to Balkan’s Peninsula as major factor for their approach to global markets.
A serious political struggle shows that, some forces, oppose to Russia’s return in Balkans within energy sector. Plans for the South Stream natural gas pipeline through Balkans, constituted Russia’s largest effort in which will open more jobs and investment to the countries. But Western sanctions have restricted Russia’s economy and have contributed to the fall of its currency, which has lost more than 40 percent of its value since the beginning of 2014. For that Russian President Vladimir Putin announced the South Stream as stopped. Russia is going further with construction of gas pipeline through Black Sea and Turkey. Military actions in Syria and economic sanctions by Russia to Turkey because of inter military incident will be questioned due to implementing of the bilateral economic agreements. So, Russia and its government has to go forward for finding new markets- outside Europe, for energy investment.
In the process, the Balkans might jeopardize their shot at a bigger prize: membership in the European Union because of environmental pollution issues. But that’s not the first thing on their minds, says Andreas Goldthau, a professor of public policy at Central European University. In regions like the Balkans where democracy is relatively weak and corruption abounds, governments are more worried about political survival, he says — and that means keeping energy cheap. “It’s about winning elections,” Goldthau has added.
Next: “Gruevski” or Zaev, who will sign or reject the Russian agreement?