Is the Serbian project to build a connection to the Druzhba pipeline sustainable?

Druzhba, the longest oil pipeline in the world since 1962 (4,000 kilometres), transports oil from Russia to Europe. It has two branches, the northern and southern. Bifurcating in Belarus, the northern part delivers oil to Poland and Germany, and the southern one, through Ukraine, to the Czech Republic, Slovakia and Hungary. The pipeline is used to transport Russian crude oil.

Due to European sanctions against Russia, as of 5 December, there is a possibility that Serbia will be banned from importing Russian oil via the JANAF Adriatic pipeline, which is the only way to deliver oil to Serbia.

Serbia is determined not to run out of Russian oil, which is currently the cheapest on the market, which is why the Serbian government announced last week its intention to build a pipeline that will be connected to the Druzhba section in Hungary. The plan would involve two options, one of which would cost EUR 100 million and the other EUR 240 million.

However, last week Serbian President Aleksandar Vučić spoke only about the first option, which implies that the future pipeline would stretch from Serbia to the Hungarian town of Algyő for a length of about 128 kilometres. According to Vučić, the construction would take about two years.

However, experts in Serbia have raised doubts as to how much Serbia really needs this pipeline, whether it is possible to realize that project and how sustainable it will still be. The Druzhba’ is exactly 60 years old. Energy expert Aleksandar Kovačević recently assessed that the connection to the Druzhba is not sustainable in the long term because that pipeline is at the end of its life cycle.

In the middle of last week, Poland announced that a leak had been detected in the pipeline. And while sabotage was initially suspected due to the recent gas leaks on the Nord Stream pipeline, the investigation showed that it was a ‘simple accident’. All it takes is an explosion in war-torn Ukraine to stop oil flow from Russia to Europe.

Political scientist and researcher Aleksandar Đokić told Bloomberg Adria that possible suspensions of transport through Ukraine would depend on the escalation of the war there, but that neither Russia nor Europe wants to stop the flow of oil and gas.

According to Ministry of Energy data, in 2021, Serbia imported crude oil from Iraq which accounted for a total of 47% of the total imported oil, 16% from Russia, 11% from Kazakhstan and 3% from Norway.

Last year, 23 per cent of the oil used in Serbia was domestically produced. The Ministry states that in 2022 a similar structure in imports was noted, but that in some months due to a more favourable price there was an increase in Russian oil imports. Currently, this ratio is 34 per cent oil from Russia and 66 per cent from other sources.

Political scientist Aleksandar Đokić says that Serbia has been reducing the share of Russian oil in total imports for years, adding that in the past 20 years, the peak of Russian oil imports was in 2008.

“The complete cessation of Russian oil imports would not cause an economic collapse in Serbia, but our country needs a transition period of several months to find new suppliers at the market price. Serbia got into trouble with its short-sighted policy of increasing oil imports from Russia this year. Now that this is no longer an option since December, other suppliers on the market are also aware of this situation and can demand a higher price for their oil,’ Đokić said.

In this sense, as he says, the announcement of the construction of the pipeline branch to Hungary could be a move to reduce the pressure of other oil suppliers on Serbia. Đokić recalls that the construction of this project was discussed in January this year, before the outbreak of war in Ukraine, and again in June, when the EU adopted the sixth sanctions package, which contained an embargo on Russian oil.

“To remind, EU sanctions allow EU members who are connected to the Druzhba pipeline to import oil from Russia during a certain transitional period but not to resell it to third countries, which means that Serbia cannot import Russian oil from Hungary without violating EU sanctions,” Đokić stressed.

He also says that if the leadership of Hungary and Serbia are really serious about implementing this project, it will definitely cause a conflict with Brussels and Washington. “At a time when Europe is separating from Russia and breaking its interdependence with it, Serbia boosting its ties with Russia clearly goes in the opposite direction and cannot go unnoticed at all,” he adds.

“It is hard to imagine that some western oil companies will finance such an undertaking, and even participate in its realization. Serbia and Hungary do not have the capacity to do so independently in a technical sense,” Đokić emphasises, listing another obstacle on the road to the construction of a pipeline to the Druzhba pipeline. He says that only Russian companies could do it, which are subject to technological sanctions and have problems with the implementation of similar projects in Russia because they depend on Western technology.

“The implementation of this project could take more than two years, during which it remains to be seen what the geopolitical situation in Europe will be like and what the European sanctions against Russia will do. Regardless of the announcements, the project itself should currently be treated solely as a theoretical possibility, and perhaps even as political marketing,” Đokić concluded.

(Bloomberg Adria, 17.10.2022)

https://rs.bloombergadria.com/ekonomija/srbija/12076/zasto-spajanje-srbije-sa-druzbom-nije-odrzivo/news/

This post is also available in: Italiano

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