Removing Russian burden from Serbia’s back

In making plans for aggression against Ukraine, Russia had to calculate the direct and indirect economic damage it would have to bear in response to its war effort. Assuming that such calculations were made, which any responsible country would do, Russia has evidently concluded that it can bear the economic and political damage, and in the end the conquest of Ukraine would outweigh as the greater benefit.

Serbia would have to make similar plans, which it certainly had, since it has not made a decision to join the European sanctions against Russia for ten months, thinking that such a decision would bring more harm than good. Needless to say, in this case, we are only talking about the economic effects and consequences of such a decision, but not about the value and civilizational reasons for imposing sanctions on an aggressor on a sovereign country. Serbia has not closed the door to the introduction of sanctions. If the introduction of sanctions is inevitable and if the damage to the Serbian economy is so great that it would not be possible to avoid without imposing sanctions on Russia. Therefore, we are still not talking about civilizational and value reasons.

While such calculations are made, a whole field opens up in which Serbia should reconsider its existing arrangements with Russia and, as in the case of sanctions, ask itself the question: does it really need those deals with Russia? Does keeping them alive bring any benefit to Serbia, or are they, in fact, a burden in the situation when Russia is isolated from Europe and the Western world? Even without the introduction of sanctions against Russia, Serbia can get rid of a lot of such burdens in a short time, looking exclusively at its own interest, economic first of all, but also political. Neither has anything to do with Russia today, if they even exist.

Ten years since it has been established, and the Serbian-Russian Humanitarian Centre in Niš has not stared to work properly. Its purpose has never been completely clear. It is difficult to find any specific action that led to its establishment, and there were plenty of opportunities. Perhaps this building in the very “courtyard” of the international airport in Niš should have been something more than a hub for responding to natural disasters and large-scale accidents for Russia, but that did not happen, primarily because of Serbia’s persistent refusal to accept to recognise diplomatic status and immunity of the Russian personnel. On the other hand, for a decade, the Niš Centre has been the source of constant suspicion that Serbia, in the heart of its territory, at a major intersection of international roads and railways, and right next to the second largest airport in the country, maintains a Russian semi-military intelligence post, which in a case of need could to turn into a real military base.

The senselessness of the Serbian-Russian centre has been confirmed several times, for example in November 2019, when a giant firefighting aircraft was called and paid in advance to extinguish a large-scale fire on Stara planina directly from Russia, not from Niš. The final proof of the uselessness of this centre and the final reason for its closure is the ammonia leak on the railway near Pirot, in the immediate vicinity of Niš. There was no Serbian-Russian centre there either.

Considering that there has never been any benefit from it, but only damage to Serbia’s international image, constantly exposed to the suspicion of cooperating with the Russian military intelligence installations, the closure of the Serbian-Russian centre in Niš remains the only option, and a job that can be done immediately without any emotions or costs. The biggest burden that Serbia can remove from its back and without sanctions against Russia is the reduction of Russian ownership in NIS below 50%. There is a constant “danger” that the company will be affected by some new cycle of European sanctions and its operations blocked, because it is still majority owned by Russian state giants. Serbian President Aleksandar Vučić spoke to The Financial Times in November about the possibility of nationalising part of the ownership in NIS, if the company was in danger of being blocked by European sanctions. Few large European oil companies that would take over risky Russian ownership, including Azerbaijan’s state-owned SOCAR, were also mentioned. It is the least risky for Serbia to do this work immediately, preventively, without waiting for a new European package of sanctions against Russia to come to its door and for production to stop.

Also, without any sanctions against Russia, it is possible to advance in the reorientation of the Serbian Armed Forces equipment from predominantly Russian/Soviet to Western manufacturers. This is the field in which Russia traditionally has the greatest influence on Serbia, followed by its political support for the Serbian position regarding Kosovo. In the circumstances when Russia invaded its first sovereign neighbour, and is under severe sanctions from the West, Serbian reliance on Russian weapons becomes a great burden and risk – not only for its political, but also for its security position. In this sense, it would be particularly effective for Belgrade to negotiate as quickly as possible with the Western manufacturers of fighter planes. This kind of work always has a political, security and economic component. Often the first one is the most important and leads to a deal.

The MiG-29 planes, with which Serbia has modernised its combat air force in the last decade, through arrangements with Russia and Belarus, provide security peace of mind until 2025-2026, which is tomorrow in this field. Vučić’s announcements from April that Serbia wants to buy 12 new Rafale aircrafts from France, 12 more used fighters from some other country, and he also mentioned Britain and the Typhoon, no longer have much reason to be postponed. Earlier announcements, that negotiations with the French Dassault, regarding the purchase of the Rafale, could start at the beginning of 2023, should be confirmed and accelerated as much as possible. Serbia’s transition from Russian to Western weapons could mean the removal of an important and unproductive burden from Serbia’s back and, of course, proof that it protects its political and security interests.

There remains one more connection between Serbia and Russia, which essentially simulates the developed economic relations between the two countries, since neither in terms of trade or investments are those relations even close to the top of Serbia’s balance sheet, let alone Russian. It is about the Russian loan and, based on it, the involvement of Russian companies in the construction and modernisation of railways in Serbia.

Never completely transparent, extended several times and with a constant question mark as to how profitable it is, this arrangement started back in 2013 with 800 million dollars, and six years later it was increased by 172 million dollars. Considering the complete blockade of the Russian financial system and its expulsion from the global financial market, it is necessary for Serbia to examine ways to get rid of this loan, by refinancing with another creditor or in some other way. Even if it suffered a financial loss in the short term, Serbia would be freed from the great burden of doing business with an extremely risky partner, who will certainly not have access to the international financial system for many years to come. Serbia does not need such a partner from whom everyone is running away.

For none of these moves, Serbia does not need a decision to impose sanctions on Russia. It can perform all these moves by itself, and it is obliged to do so, because it is in its best interest. Just as Moscow (probably) calculated its conquest of Ukraine and (probably) concluded that it would pay off, Serbia should behave in the same way when it comes to its political, economic and security calculations. Serbia needs to think about itself and its resources, and who will suffer the damage – I guess they already calculated it in Moscow before February 24.