State-controlled Russian energy giant Gazprom has offered to purchase Petroleum Industry of Serbia (nis), Serbia’s largest state-owned petroleum company. Negotiations are moving forward; the Russians have reportedly offered the Serb government €400 million for a 51 percent stake in nis and promised to sink an additional €500 million into the company by 2012.

Moscow sweetened the deal further by promising Serbia that it will be integrated into Russia’s South Stream gas pipeline construction project, which will link Russia to the European Union via the Black Sea.

Although details of the agreement remain hidden, Serbian Prime Minister Vojislav Kostunica stated in a New Year address Monday that his government was “working to reach a strategic energy agreement with Russia.” Russian news agency Itar Tass reported yesterday that “Russia and Serbia may sign an inter-governmental agreement on cooperation in oil and gas sphere in Sofia January 18.” The deal includes Gazprom’s purchase of nis as well as other significant joint energy projects between Russia and Serbia.

Russia’s incursion into Serbia’s energy industry comes with significant strategic implications for not only Russia and the Balkan states, but also for Europe. “Serbia has recently turned to Russia for political support in its bid to prevent the secession of the separatist Kosovo province, shifting politically from the West toward Moscow” (Associated Press, Dec. 31, 2007; emphasis ours throughout). Serbia relies heavily on Russian support in its efforts to prevent Kosovo’s independence.

“Such a political shift by Belgrade allows Russia to make significant gains in controlling the Balkan energy networks, which Russia sees as a crucial corridor to providing natural gas and oil to Western Europe” (ibid.).

A number of contentious issues are boiling to the surface in Europe and Russia’s relationship, and Moscow’s incursion into Serbia’s energy industry will only heighten the tension. A stronger presence in the Serbian energy network will offer a strategic advantage for Russia, arming Moscow with another lever in its relations with Europe. This, however, will also serve to galvanize EU nations toward greater unity—and make more apparent to both Europe and Russia their need for a treaty.

To learn more about the strategic struggle unfolding between Russia and Europe, read “The Great Caspian Chess Match.”