“Against stupidity, the Gods themselves contend in vain.” — Schiller
So Serbia’s government has agreed to sell its oil and gas company, NIS, to Russia’s Gazprom.
By itself there’s nothing wrong with this. What’s stupid about it is the price. NIS has a market value of around $2.8 billion. The government is selling it to Gazprom for $400 million, plus the promise of another $500 million in investment over the next five years. In other words, Gazprom — a company not exactly strapped for cash — is getting a windfall of almost $2 billion, at the expense of one of the poorest countries in Europe.
Why is the Serbian government doing this? Several reasons, all of them bad.
1) Kosovo. Many observers see this as a quid pro quo to Russia for continued Russian support of Serbia’s position on Kosovo.
Of course, Kosovo is going to be independent anyway… no amount of diplomatic maneuvering will make two million Albanians ever accept Serb rule again. All Russia can do is maintain a veto in the UN. But a large minority of Serbs seem to be finding psychological comfort in knowing that “Russia is on our side”.
2) To embarass Boris Tadic. Recall that Prime Minister Kostunica hates President Boris Tadic, a lot. Tadic is runing for a second term. The runoff election is in two weeks. Tadic is known to oppose the Gazprom deal. Forcing it through at this time puts Tadic in a difficult position.
3) Because some of the other bidders — most notably Hungary’s MOL and Austria’s OMV — were offensive to Serb nationalist sensitivities. We can’t have our national energy company owned by Austrians! (Insert a long rant about the First World War and/or Hitler here.)
And that’s about it.
Oh, there are also a couple of nominal reasons. Gazprom is promising to put a branch of the South Stream gas pipeline — which will run across the Black Sea and through Bulgaria — up through Serbia. This will make Serbia a transit country for natural gas! This will earn money for Serbia, and make Europe pay attention to them again!
Of course, (a) it will only earn money for Serbia if the government negotiates a competent deal which, based on the deal they’ve just negotiated, is very unlikely to happen; (b) this won’t happen until 2013 at the very earliest; and (c) by the time it’s built, South Stream will be just one of five large pipelines from Russia to Europe — six if you count Blue Stream, which runs across the Black Sea to Turkey — and Serbia will sit on just one branch of South Stream. Meanwhile, Europe’s largest economies are busily trying to diversify away from dependence on Russian gas.
Mladjan Dinkic, Serbia’s Minister of the Economy, has decried the deal as “humiliating”. Which is pretty accurate. Among its other provisions, the deal requires Serbia to not apply EU environmental regulations until at least 2012. Not that Serbia was going to join the EU soon anyway, but still: it’s pretty much a public declaration that Gazprom doesn’t want to be bothered with nonsense like environmental concerns.
So, at best we have a really stupid deal, obviously and blatantly bad for Serbia, whipped up in a hurry by short-sighted politicians for vaporous nationalism and short-term political gain. I say “at best” because there’s an alternative explanation: Gazprom may simply have bribed its way to success. After all, why pay $2.8 billion when you can just pay $400 million in cash and $50 million in bribes to politicians? — I will freely grant that this is speculative. But Serbia is not a country where either politics or business are famous for clean dealing. And it’s worth noting that the one Minister who loudly condemned the deal — Dinkic — is independently wealthy.
N.B., if there was corruption, I’d be mildly surprised if it was as crude as outright bribes. I’d rather expect it to take the form of favors, featherbedding and kickbacks. This guy gets a hundred jobs for his home town; this other guy gets ten million worth of construction contracts; that guy over there gets the Gerhard Schroder treatment, a guaranteed cushy job with a fat paycheck once he retires from life in politics. It’s not hard, and the Russians have a home team advantage for this sort of thing.
All that said, it’s still just painfully stupid.
I like Serbia a lot, and I’d be happy to move back there one day. But sometimes it’s kind of depressing.