Sanctions imposed on the Russian Federation have not only led to changes in oil supply routes but have also prompted pressure for ownership transformations in oil companies with Russian ownership. The Serbian oil industry, NIS, has been in the spotlight since it was added to the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctions list on January 10, 2025.
The latest report by MAT (Macroeconomic Analysis and Trends), issued by the Serbian Chamber of Commerce and the Economic Institute, evaluates NIS’s business performance, particularly focusing on the sanctions and the privatization process.
In NIS’s ownership structure, Gazprom Neft holds a 50% stake. The remaining shares are divided as follows: 29.87% is owned by the Republic of Serbia, 6.15% by Gazprom, and 13.98% by citizens, employees, former employees, and other minority shareholders. Due to the sanctions, trading of NIS’s shares on the stock exchange has been temporarily suspended.
The full implementation of the sanctions will begin on February 27, 2025. In the meantime, a working group has been established by the Serbian government to gather additional information from the US Treasury and explore possible solutions with Russian partners. NIS officially requested a 90-day delay for the sanctions from OFAC on February 4, 2025, supported by the governments of Serbia and Hungary. A week earlier, the Croatian oil pipeline company JANAF submitted a request to the US international body to allow JANAF to fulfill its contract with NIS, which involves transporting 10 million tons of crude oil.
NIS stopped importing Russian oil through JANAF in December 2022 due to the EU’s sixth sanction package, which prohibits the import of Russian oil via sea routes. To avoid sanctions, NIS altered its ownership structure in spring 2022, reducing Gazprom Neft’s stake to 50% and increasing Gazprom’s stake, which was not yet under sanctions. This allowed NIS to continue business with the EU and profit from discounted Russian oil.
NIS was privatized in 2008 based on an energy agreement with the Russian Federation, which also included the construction of a gas pipeline through Serbia and a gas storage facility in Banatski Dvor. The majority stake (51%) was sold to Gazprom Neft for 400 million euros, with an additional investment of 500 million euros promised by Gazprom Neft. Since privatization, NIS has invested over 4 billion euros, 30% of which was allocated for environmental projects.
Following privatization, NIS’s operational performance improved significantly, but sanctions have impacted results, especially after record results in 2022. In 2024, NIS reported a slight 1% drop in revenue, but net profit fell by 58%, and EBITDA decreased by 35%.
The privatization of NIS led to Serbia losing control over the management of the company, which is the only producer of crude oil and natural gas, the only oil refiner, and the owner of the largest retail network for gasoline in Serbia and the region.
According to KPMG’s study, NIS contributed an average of 5.1% annually to Serbia’s GDP and 2.6% to the country’s gross added value between 2010 and 2020. NIS was also one of the largest exporters, with an average annual export value of 262 million euros.
In 2023, NIS dropped from the top position due to a 20% decrease in business revenues, mainly from reduced domestic and international sales. However, NIS remains one of the largest vertically integrated energy systems in Southeast Europe, employing about 13,500 people, including those in HIP Petrohemija, where NIS increased its ownership stake to 90% in 2021.
NIS is also one of the largest contributors to the national budget, with taxes paid in 2023 totaling approximately 2 billion euros, accounting for about 12% of Serbia’s national budget.
Given NIS’s significance to the Serbian economy and the direct impact of sanctions on the country’s supply, the question remains on how to find a viable solution in the short term, conclude the MAT authors.
