Serbia’s oil industry: caught between Russian influence and U.S. sanctions

Serbia’s oil sector, led by Naftna Industrija Srbije (NIS), remains tightly bound to Russian interests, with no major decisions made without Moscow’s approval. Serbian Prime Minister Đuro Macut met with NIS CEO Kiril Turdenev on 10 June to discuss energy security and supply chain stability, reaffirming Serbia’s reliance on its Russian partners, as stated by Macut’s office.

NIS: Serbia’s energy cornerstone

NIS, Serbia’s only oil and gas company, operates the country’s sole refinery in Pančevo, near Belgrade, with an annual capacity of 4.8 million tons, meeting a significant portion of Serbia’s energy needs. As a vertically integrated energy firm, NIS handles oil and gas exploration, extraction, refining, and trading, with operations extending to Bosnia and Herzegovina, Bulgaria, Romania, and Hungary. It stands as one of Southeast Europe’s largest energy systems.

Russian entities dominate NIS’s ownership structure: Gazprom Neft holds 44.85% of shares, Gazprom owns 11.3%, and the Serbian government controls 29.87%. This Russian majority has drawn U.S. scrutiny since January 2025, due to Gazprom Neft’s inclusion on Western sanctions lists stemming from Russia’s invasion of Ukraine.

U.S. sanctions and Serbia’s diplomacy

In January the U.S. Treasury Department sanctioned Gazprom Neft, its CEO Alexander Dyukov, and over 20 subsidiaries, including NIS, for “secondary risk” tied to Russian affiliations. However, following requests from Serbia and NIS, the U.S. has postponed sanctions enforcement three times, most recently until 27 June 2025. Serbian President Aleksandar Vučić praised the delay on Instagram, noting, “We thank our American partners for understanding Serbia’s position.”

To mitigate sanctions, Gazprom Neft transferred 5% of its NIS shares to Gazprom, which faces no Western sanctions, reducing Gazprom Neft’s stake to 44.85%. Despite this adjustment, Russian companies maintain majority control. According to Kompas-info, Russia has offered to sell an additional 6% of NIS shares to Serbia, lowering its stake to 49%, but has firmly stated no interest in fully divesting.

U.S. sanctions have significantly impacted NIS’s operations. In April, Austrian energy company OMV stopped purchasing fuel from NIS, choosing to supply its 64 Serbian gas stations with imports from its refineries in Austria and Romania, transported via Danube tankers. OMV also indicated to Reuters that it might source small quantities from other European suppliers.

To safeguard its workforce, NIS preemptively paid February salaries in advance, citing concerns over disrupted international payments due to sanctions by 28 February. An internal email, reported by BETA, desribes the move as a step to “maintain the financial and social stability of employees.”

Strategic workarounds

To respond to the sanctions’ challenge, Serbia and NIS are exploring several solutions:

Intermediary purchases: A foreign oil company, potentially Hungary’s MOL, could buy crude oil on the global market and resell it to NIS at a favorable price, with NIS processing it into derivatives.

Government agency: Serbia could establish an Agency for Oil Derivatives to manage oil imports and resell to NIS and other domestic companies.

Private company: A new private entity could be created to import crude oil for resale to NIS.

These strategies aim to secure NIS’s supply chain while complying with international restrictions.

The Hungarian connection

A new pipeline is planned to connect Hungary and Serbia, with the objective of fully meeting Serbia’s crude oil requirements by 2028.

During a press conference in April, Hungarian Foreign Minister Péter Szijjártó announced alongside Serbian Energy Minister Dubravka Dedović Handanović that Hungary’s entire natural gas import needs could potentially be satisfied through this pipeline. Szijjártó further indicated that construction could commence as early as late 2023 or by early 2026, with an anticipated annual capacity of 4 to 5 million tons.

The two nations reached an agreement in 2022 to develop this pipeline, which will supply Serbia with Russian Urals crude via the Soviet-era Druzhba pipeline.

While the European Union is actively working to reduce its reliance on Russian energy following Russia’s invasion of Ukraine in 2022, Hungary continues to receive approximately 80% of its gas from Russian sources.

Geopolitical balancing act

Serbia’s energy policy reflects a delicate balance between maintaining Russian partnerships and addressing Western pressures. Prime Minister Macut’s pledge to consult Moscow on NIS decisions underscores Russia’s influence over Serbia’s oil sector. Meanwhile, Serbia’s diplomatic efforts have secured repeated U.S. sanction delays, highlighting its commitment to protecting its economy.

As the 27 June sanctions deadline approaches, Serbia faces critical choices to ensure energy security and its decisions, to be taken soon, are likely to shape the future of its oil industry and its role in the region amid ongoing global tensions.

Edited by a.k.

Caption: Serbian Prime Minister Djuro Macut looks on during the meeting with EU High Representative for Foreign Affairs and Security Policy, Kaja Kallas in Belgrade, Serbia, 22 May 2025. EPA/ANDREJ CUKIC