Serbian and Russian officials have signed an energy deal they say will turn Serbia into a major hub for gas supplies to Europe and boost Russia's economic influence in the region. The deal was signed in Moscow, where Serbia's President Boris Tadic, Prime Minister Vojislav Kostunica, Foreign Minister Vuk Jeremic and other officials met President Vladimir Putin and their Russian counterparts. The agreement provides for the construction of a stretch of the South Stream gas pipeline in Serbia, including a major regional gas storage unit at Banatski Dvor. Under the deal Gazpromneft, the oil subsidiary of Russian gas monopoly, Gazprom, acquires a 51% stake in Serbia’s top oil and gas company, Naftna Industrija Srbije (NIS). The deal comes a week after Bulgaria joined the South Stream project, which is to have an annual capacity of 30 billion cubic meters of gas. The pipeline is to carry Russian gas via Bulgaria and Serbia to Hungary, Austria and Italy.

The Moscow visit comes amidst campaigning for the Feb. 3 run-off for the Serbian presidency. Tadic who heads the moderate Democratic Party, narrowly lost the Jan. 20 first round of voting to Tomislav Nikolic of the ultra-nationalist Serbian Radical Party—who has gained from fears of Kosova's imminent secession. (Balkan Insight, Jan. 25)

The State Department-funded Radio Free Europe/Radio Liberty takes an ominous view of the deal. "There is the possibility that Russia could start using energy as a political tool in parts of Central Europe, like it has done in the East with Ukraine," it quoted Mark Hester, editor of the UK-based journal Oil and Energy Trends.

RFE/RL also frets that the advancement of the South Stream project could spell the end of the competing Nabucco pipeline, an EU-backed project that would circumvent Russia by transporting gas from the Caspian and Central Asia to Europe via Turkey.

Last May, Moscow dealt a first blow to Nabucco when it signed an agreement with Turkmenistan and Kazakhstan to build a pipeline along the Caspian Sea coast to transport their natural gas to Europe via Russia. Then in June, Gazprom and Italy's Eni further undermined Nabucco by signing the initial deal to build South Stream.

"Nabucco is not dead, but it is a patient that risks dying," Federico Bordonaro, Rome-based energy analyst with the Power and Interest News Report, told RFE/RL. "[T]he economic viability of Nabucco now comes into question." (RFE/RL, Jan. 25)

See our last posts on the Balkans, Russia and the Eurasian pipeline wars.