The final version of the text of the Russian-Serbian energy agreement has been made public.

The details of the deal, signed yesterday in Moscow by representatives of the two countries, has been posted on the Serbian Government website.

The agreement specifies the terms of building a trunk gas pipeline across Serbia, the building of a underground gas storage in Banatski Dvori and the sale of a 51 percent stake in the Oil Industry of Serbia (NIS) to Russian Gazprom for EUR 400mn.

Gazprom or its offshoot company, together with the Srbijagas public enterprise, will form a joint company to construct a trunk gas pipeline, where the Russian side will have "at least a 51 percent stake in the founding capital," and the Serbian side "not more than 49 percent."

The property of the joint company cannot be expropriated, or nationalized or subjected to any other measures that would constitute misappropriation of property.

The underground gas reservoir in Banatski Dvor will have a capacity of at least 300 million cubic meters of gas, and a daily flowing capacity of at least 1.6 cubic meters of gas daily.

The Serbian government has committed itself to selling a 51 percent holding in NIS to Gazprom open stockholding company, or to its offshoot Gazprom Nefta, for EUR 400mn by December 31, 2008 at the latest.

Under the same agreement, talks on the sale should be complete by the end of the year, when the final contract will also be signed.

Russian analysts estimate that the Serbian government will try to increase NIS’s price in that time, and Gazprom may be prepared to offer up to EUR 700mn for a controlling stake.

Under the NIS sale protocol, the government commits to giving NIS favored status on the market for a period of at least two years.

President Boris Tadić said that the agreement had huge strategic significance for Serbia’s economy and industry.

“The future’s at stake here, where citizens will have a reliable supply of energy, and Serbian companies will work in favorable conditions. It’s also a question of the geo-strategic position of Serbia, a central country in south-east Europe, which puts this country at the forefront, as Russian gas will be flowing through Serbia to EU countries,“ said Tadić.

The agreement envisages the construction of the so-called Southern Stream pipeline that would pass through Serbia on its way to Bulgaria, Greece and Italy and would have a cubic capacity of "at least 10 billion cubic meters of gas."

In further talks, Russia and Serbia will discuss the conditions under which Serbia could increase its use of Russian natural gas once construction of the pipeline is complete.

The Russian partner will have a 51 percent holding in the company responsible for constructing the pipeline and the underground reservoir, under the terms of the contract.

Serbian and Russian companies will receive favored status when it comes to construction, and jobs will be awarded at tenders.

The Serbian government will stimulate the agreement through tax, customs and other relaxations, at least until the investors break even.

The energy agreement is concluded on a 30-year basis with the possibility of extension, while amendments can be introduced with the agreement of both sides.

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