Serbia said it would not sell its energy monopoly to Russia unless it gets firm guarantees from Moscow it will build a strategic pipeline through the Balkan country.

The 10 billion euro South Stream natural gas pipeline to be laid under the Black Sea would carry Russian natural gas to Bulgaria and Serbia before branching out to points in Western Europe.

Moscow officials have earlier this month pledged to complete the pipeline by 2015, two years behind the original schedule, despite the global financial crisis.

But Serbia's economy minister Mlađan Dinkić told Belgrade's B92 television late on November 30 that those guarantees were only "verbal" and that Russia's energy monopoly Gazprom has so far refused to sign a written contract to confirm it.

Gazprom is in talks to buy Serbia's state oil company, Naftna Industrija Srbije (NIS), and Dinkić warned the government would block the sale unless Moscow gives firm guarantees the pipeline would be built.

He said Gazprom plans to conduct a feasibility study by mid-2010, and that only after that analysis would the Russian company decide whether to build the South Stream pipeline.

"In that case, we have to protect Serbia's interests," Dinkić said. "If there is no pipeline, there will be no (sale) of NIS."

Analysts have questioned whether Serbia should now be selling off one of its most valuable assets at an undercut price without the pipeline guarantees from Moscow.

Last year, Serbia and Russia reached a tentative agreement by which Gazprom's oil arm, Gazpromneft, will purchase a 51 per cent stake in NIS for 400 million euro and invest a further 500 million euro in it by 2012.

However, in July the Serbian government said it wanted to renegotiate the sale of NIS, arguing the proposed price was not sufficient. In August, the auditors Deloitte & Touche said that the total price of NIS was 2.2 billion euro.

The South Stream would undercut an alternative project, the Nabucco pipeline planned to carry natural gas westward from the Caucasus. That project is backed by the United States and the European Union as a way to ease Europe's energy reliance on Russia.

Source: Balkan Insight