Taking a page from the Chinese book of soft power, Mother Russia is moving in on Serbia with the end goal of state capture—and one of its key weapons in this game is Gazprom, combined with a treasure chest full of cultural capital.

Russia’s economic presence in Serbia is based on a collection of strategic factors that affect the Balkan country’s entire economy. It’s a strategy that was most noticeably launched with a 2008 agreement to sell Serbia’s state-run energy company, "NIS" (Naftna Industrija Srbije) to Gazprom at a below-market price.

Since then, Serbia has become entirely dependent on Russia for energy. Russia now dominates Serbian domestic production of oil and gas and fully controls the fuel market through Gazprom Neft and Lukoil.

And what it doesn’t produce domestically, again, it’s dependent on Russia. According to data from the Center for the Study of Democracy (CSD), Serbia imports about 65 percent of its natural gas needs from Russia and more than 70 percent of its crude oil consumption.

That was Russia’s first big strategic move on Serbia. The second was the solidifying one, when Belgrade’s 2012-2013 fiscal crisis gave Moscow a chance to anchor its presence through loans, contracts and investments.

“In our view, Russian state-administered and -controlled companies have won favorable repayment terms, gained preferential treatment to work in the country, and forced unnecessary energy purchases on the country’s balance sheet,” notes the CSD report. “The renegotiation of the natural gas contract has significantly changed the Serbian energy import scheme and has gone largely unnoticed by the public. A Russian-owned company effectively took control of the Serbian natural gas sector without much public discussion.”

The end goal is clear, and it’s already a done deal.

As Mark Galeotti, a widely published specialist on Russian security issues and the head of the Centre for European Security in Prague notes in a report for the EU Council for Foreign Relations, “The model therefore predicts that the overall Russian objective in Serbia will be state capture, trying to establish powerful networks of allies and clients able to dominate the country."”

Not only does Russia already have strong political links in Serbia, but it also has “considerable economic penetration”, Galeotti said in his paper, entitled “Do the Western Balkans face a coming Russian storm?”

According to a January 2018 report from the U.S. Committee on Foreign Relations, the director of Srbijagas, Dusan Bajatovic, is also the deputy chairman of the pro-Russian Socialist Party of Serbia and sits on a parliamentary Committee on Finance, Sate Budget and Control of Public Spending.

Why The Serbian Public Doesn’t Care

It’s state capture made easy for Russia, which has pushed through its end-game strategies without sparking public debate. At the same time, potential EU membership for Serbia typically involves a significant amount of public discussion.

In August this year, Serbia’s Ministry of European Integration conducted a public opinion poll asking its citizens, “Do you support Serbia’s EU membership?” That poll indicated that if a referendum on the issue would have been held right then, 55 percent of citizens would have voted for EU integration, and 21 percent against. Related: Why Oil Prices Could Still Go Lower

These are numbers that fail to correlate with the Russian capture of Serbia. At this point in our geopolitical present, it is an impossibility to align these two alliances. Yet, the people of Serbia see no contradiction. In fact, the entire country seems to be unaware of its Russian dependence.

In general, the EU has been omnipresent in Serbia for the last 20 years. The EU is the largest donor of non-refundable financial aid to Serbia in the last 16 years, contributing nearly $5 billion. And in March 2012, Serbia was granted “candidate country” status for the EU, with accession negotiations opened in June 2013. Brussels has also named Serbia the Balkan frontrunner to achieve membership by 2025. From this perspective, the position of the West, and of the EU in particular, in Serbia appears to be strong.

But data and figures aren’t always representative of the reality on the ground. This is a Gazprom country now, full on.

Serbia’s comradeship with Russia is perhaps best described by a 2015 statement by former Serbian president Tomislav Nikolic after meeting with Russian Foreign Minister Sergey Lavrov, when he said “When things are tough, a man remembers his mother, and Serbia is remembering Russia”.

There is a deep cultural and religious connection here with which the EU cannot compete, and over the past couple of years that has become much clearer.

“Russia has important influence in Serbia, which is due in large part to traditional ties, but also to the perception in the Serbian public of a strong Western anti-Serbian bias,” Aleksandar Mitic, president of Serbia-based Center for Strategic Alternatives, told Oilprice.com.

“On the other side, we can talk more about a decrease of influence of Western actors. The EU perspective is nowhere near [Russia’s] and the U.S. is not interested in any substantial economic programs in the region, rather satisfying itself with political-military control through NATO,” Mitic said.

But how much wider can Russia’s end-game extend here?

Arguably, Moscow’s room to maneuver politically in this region is limited by the fact that Croatia, Albania and Montenegro are all NATO members, while Macedonia has just received an invitation to join the club.

Serbia remains Russia’s potential bulwark against a region now defined by NATO—even if it’s a fragile set-up. That means that Serbia remains a key area of concern for the EU, U.S. and their allies. Nor is it just Serbia. There’s another wild card in the Balkans in the form of Republika Srpska—the Serb-dominated entity of Bosnia and Herzegovina, where Russian soft power is also spreading quickly.

Enter Kosovo

In this context, Kosovo is a key flashpoint. Why? Because Belgrade’s reliance on Moscow's support when it comes to Kosovo's status further empowers the Russians. Nothing is more psychologically important to the Serbian republic as a whole than the status of Kosovo, and only Moscow understands and supports this.

In 2008, the former Serbian province of Kosovo unilaterally declared independence, and Moscow reacted immediately, moving to veto the move at the UN Security Council to prevent Kosovo from gaining UN membership, which would have given it international acceptance and recognition.

It’s lost on no one that this was the same year in which Gazprom bought out the state-run energy company for below-market price. Nor is it lost on anyone that the Serbian president has met personally with Vladimir Putin at least 12 times since 2012, according to the U.S. Committee on Foreign Relations.

This is the Kosovo difference: The west ..., but the Chinese and Russians get it. This is the key to soft power.

As noted by the U.S. Committee on Foreign Relations, Russia’s influence in Serbia “manifests itself through cultural ties, propaganda, energy and an expanding defense relationship. Moscow also highlights deep roots between the countries through the Orthodox Church and a shared Slavic culture. This narrative has been carefully cultivated over the years such that Russian government disinformation campaigns find very fertile ground among the population of Serbia …”

The Committee also noted that “high-level attention by the United States has been noticeably diminished in the region since the fall of Slobodan Milosevic”, while Russian engagement with Serbia’s leadership stands in stark contrast to that of the United States”.

And the opportunities keep lining up for Moscow. Not only does it have tensions between Serbia and Kosovo upon which to feed, but it also has the status of Macedonia and the political conflict over the country’s name change, as well as the heated Bosnian parliamentary elections and a political win for ethno-nationalist and pro-Russian Bosnian Serb leader Milorad Dodik recently.

Serbia likes to think it’s still independent.

Indeed, as Mitic told Oilprice.com, “military cooperation between Serbia and Russia is part of Serbia’s strategic decision to proclaim military neutrality—that is, not to join any military alliances, including NATO and the Collective Security Treaty Organization [CSTO].”

Moscow is happy to have Belgrade think along these terms. It was also happy to agree to send Serbia six MiG-29s as a gift—even if it is an expensive one that require Serbia to foot the bill for repairs. Related: The Death Of Algal Biofuel

The West is now trying to playing a bit of catch-up in Serbia, but neutralizing Russia in the region will be a daunting task that will take much more than a visit this month by NATO Secretary General Jens Stoltenberg for a NATO drill in Belgrade.

Nor do paramilitary activities promoted by Russia help. In August, Serbian authorities found themselves in the tricky position of having to close down a paramilitary mountain camp in Zlatibor that had been organized by both Russian and Serbia far-right groups that included war veterans from both countries who were focused on teaching both children and adults how to use weapons to defend their country.

Serbia, it would seem, is now further away from the EU than ever, and Kosovo will ensure that distance because a precondition for Serbia’s accession to the EU is precisely recognition of Kosovo’s secession, which Belgrade says it will never do.

Nor is it just Kosovo, says Mitic. “Serbia would, for example, have to impose sanctions on Russia,” he said, and this is another no-go zone for Belgrade.

But Brussels is woefully inactive on this front, too. “There is absolutely no political consensus among the EU countries on future enlargement any time soon,” says Mitic. “Thus, even if [the other problems] get resolved, Serbia would still not enter the EU.”

The Russian Propaganda Machine

In the meantime, Russia’s media presence in Serbia has strengthened exponentially, with the establishment of the online magazine “Sputnik”—allegedly created by a presidential decree in order to “report on the state policy of Russia abroad”.

"This propaganda appears to have had an impact. Since Sputnik was launched in Serbia in January 2015, Russia’s favorability numbers among Serbians have increased from 47.8 percent to 60 percent in June 2017," the U.S. Committee on Foreign Relations report noted, emphasizing that Sputnik’s targets are diverse, including “both far-right and far-left elements of Western societies, environmentalists, civil rights activists, and minorities”.

The Western Balkans has long been a stage for competing world powers. It’s a historical tradition that the region simply cannot shake. It’s where World War I started, and everyone from world leaders to major investors should keep this in mind: What happens in Serbia next won’t be confined to Serbia. This is the world stage, and from Moscow’s point of view it’s a low-cost, high-yield endeavor. And the more chaos, the more opportunity.

The soft power such as that wielded by Russia in the Balkans and the Chinese in Africa—and elsewhere—is stuff of global dominance, and the West has a hard time competing when one of the main weapons of choice is the state-run company.

By Damir Kaletovic for Oilprice.com

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