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The USA has postponed the application of restrictions previously imposed against the Serbian oil company NIS, which until recently was controlled by Russia's Gazprom Neft and against which Washington imposed the toughest so-called “blocking sanctions”
On February 26, the Russian company Gazprom Neft announced that it had reduced its stake in the Serbian oil company NIS (Naftna Industrija Srbijes, Serbia’s Oil Industry) from 50% to 44.84%. The stake that was cut got transferred to Russian gas giant Gazprom, which increased its stake in NIS from 6.15% to 11.3%. These data were published by NIS itself in two documents (1, 2) posted on the Belgrade Stock Exchange website.
Since the Serbian company was controlled until February 26 by Gazprom Neft, which on January 10 fell under the toughest so-called “blocking” US sanctions, NIS was also under the threat of restrictions. However, immediately after the reallocation of shares between Gazprom Neft and parent company Gazprom, the USA postponed the imposition of restrictive measures for 30 days.
Serbian President Aleksandar Vucic stated this in the social network Instagram. Vucic said it was “another good news for the citizens of the Balkan country.” In his message, he also attached a US Treasury Department document stating that sanctions, scheduled to go into effect at 6 o’clock in the morning of February 27, have been postponed until March 28, 2025.
As oil and gas industry analysts explained to Pluralia, the operation of redistribution of stakes in Serbian NIS between Gazprom Neft and Gazprom is directly related to the introduction by the United States on January 10, 2025, in anticipation of administration change in Washington, of a large-scale restriction package against the oil and gas sector of the Russian economy, including blocking sanctions – the toughest ones – against the largest Russian Vertical Integrated Oil Companies (VIOCs), including Gazprom Neft.
The transfer of the NIS stake from Gazprom Neft to the parent company Gazprom, which is not subject to such draconian restrictions and continues to trade gas with several European countries, should allow Russia to retain control over NIS, in the development of which it has invested not only capital but also a lot of effort and innovative ideas.
Therefore, as reported by OFAC (Office of Foreign Assets Control, a division of the US Department of the Treasury, responsible for sanctions enforcement), Gazprom Neft, among others, was included in the SDN List (Specially Designated Nationals and Blocked Persons List, a list of individuals and entities subject to the toughest, most personal and blocking US sanctions). Various restrictions on Russia’s largest hydrocarbon companies have been in place for a long time, but blocking sanctions against vertically integrated oil companies were imposed for the first time on January 10.
Gazprom Neft is a Russian vertically integrated oil company. Its principal activities include exploration and development of oil and gas fields, oil refining, production and sale of petroleum products. The Company is among the top three Russian leaders in terms of oil production and refining volumes, and is one of the leaders of the Russian oil industry in terms of efficiency. Gazprom Neft is the first company to start oil production on the Russian Arctic shelf.
The main owner of Gazprom Neft is the Russian gas company Gazprom, which controls 95.68% of the company’s shares, with the remaining 4.32% in free float. The US has also imposed personal restrictions against Alexander Dyukov (pictured), Chairman of the Management Board of Gazprom Neft.
It should be recalled that the term “vertically integrated company” refers to an organization that controls not one, but simultaneously several stages of the supply chain that allow to obtain resources (raw materials), turn raw materials into the final product, and deliver it to the consumer. The purpose of vertical integration is to expand the scale of the business, strengthen market positions, and extract even more revenue.
To avoid the domino effect of sanctions against Gazprom Neft, the idea was to reduce its stake in NIS to below 50%.
Following the announcement of the sanctions, OFAC issued the traditional guidance to curtail transactions with Gazprom Neft and withdraw from their securities until February 27, 2025.
At the same time, a whole group of Gazprom Neft’s subsidiaries have also fallen under US sanctions: in particular, NIS, a Serbian subsidiary of Gazprom Neft, is directly mentioned in the SDN List.
Immediately after the imposition of blocking sanctions against Gazprom Neft, Belgrade began negotiations with Russian Federation and with the USA. One of the solutions to the problem was to reduce the Russian share in NIS to less than 50%.
Serbian President Aleksandar Vucic reported that the USA demands from Serbia “the complete withdrawal of Russian capital from NIS within 45 days.” At the same time, he recalled that the Serbian government sold control in NIS to Russia’s Gazprom Neft in 2008, and over the years, NIS has contributed to significant revenues for the Serbian budget, as well as to the development of many projects.
Vucic later spoke of “inaccuracies in the US sanctions documents on the issue of reducing the share of Russian companies or excluding them altogether.” If this concerns a reduction to less than half, Serbia needs to buy out 7%, Vucic explained, saying he was ready to buy out the Russian stake in NIS. He emphasized that Serbian authorities would not take action without Moscow’s approval.
NIS is the only company in Serbia engaged in exploration and production of hydrocarbons, it also owns a large refinery in Pančevo. The company dominates the Serbian market of petroleum products, and the NIS network of gas stations is also present in Bosnia and Herzegovina, Bulgaria, and Romania, with a total of more than 400 gas stations.
Thus, until February 26, 2025, Gazprom Neft owned 50% of NIS’ capital, and Gazprom owned 6.15%. Another 29.87% of shares are owned by Serbia, with the rest held by minority shareholders.
The reduction of Gazprom Neft’s participation to less than 50% has raised hopes for a favorable outcome of negotiations between Serbia and the new US administration led by President Donald Trump
To solve the problem, Gazprom Neft transferred a 5.15% stake in the Serbian company NIS to Gazprom. Now Gazprom Neft’s share in the company is 44.84%, while Gazprom’s share is 11.3%.
After that, as mentioned above, OFAC postponed the imposition of sanctions against NIS until March 28, which gave hope for a successful conclusion of negotiations between Serbia and the new administration of the United States under the leadership of President Donald Trump.
In particular, Belgrade expressed the opinion that the solution to the sanctions problem with regard to NIS could be the issuance of a special US license to it, following the example of the Russian Gazprombank in the case of the European sanctions, when this bank was allowed to carry out certain activities, primarily related to payment for gas supplies from the Russian Federation.
In the meantime, Serbia has formed reserves of oil products for 90 days, and NIS itself has reserves of fuel for another 90 days. Thus, in case of sanctions against NIS, the Serbian fuel market will be supplied with goods for 180 days. Earlier Hungary said it was ready to help Serbia in case of sanctions against NIS.
