The move ends months of temporary waivers and places Serbia’s energy infrastructure in precarious limbo. Serbian President Aleksandar Vučić announced on 25 September, during a media briefing in New York at the United Nations General Assembly, that U.S. sanctions against Naftna Industrija Srbije (NIS), Serbia’s largest oil producer and sole refinery operator, will finally take effect on 1 October.
The move, part of Washington’s broader crackdown on Russia’s energy sector in response to the 2022 invasion of Ukraine, ends months of temporary waivers and places Serbia’s energy infrastructure in precarious limbo. With NIS majority-owned by Russian energy giant Gazprom Neft, the sanctions could disrupt fuel supplies, spike prices, and force a painful divestment or nationalization process, exacerbating Serbia’s economic vulnerabilities as winter approaches.
NIS, often dubbed the “backbone of Serbia’s energy sector,” traces its roots to the late 19th century when kerosene imports from Romania first lit Serbian homes. The company’s formal predecessor, the Oil Exploration and Production Company, emerged in 1949 amid Yugoslavia’s post-World War II push for energy independence, marking the dawn of organized oil exploration in the region. By the 1950s, Serbia had discovered its first natural gas reservoir near Plandište, fueling rapid expansion. NIS became a state monopoly, controlling everything from upstream exploration to downstream refining and retail. Its crown jewel is the Pančevo Oil Refinery, located just outside Belgrade on the Danube River, operational since 1964 with an annual capacity of 4.8 million tons—enough to meet nearly all of Serbia’s domestic fuel needs.
The refinery, a sprawling complex of distillation towers, hydrocracking units, and storage tanks, processes crude oil imported primarily via Croatia’s JANAF pipeline, with plans for a Hungarian alternative still years away. Under socialist Yugoslavia, Pančevo symbolized industrial might, but the 1990s wars and sanctions left it dilapidated. A pivotal turnaround came in 2008 when Serbia, seeking foreign investment and modernization, sold a 51% stake to Gazprom Neft – Gazprom’s oil arm – for €400 million upfront, plus a €550 million commitment for upgrades by 2012. This deal, signed amid Serbia’s inclusion in the ill-fated South Stream gas pipeline project, deepened Moscow’s foothold in Belgrade’s energy landscape.
Gazprom Neft’s stake has since adjusted to 44.9%, with Gazprom holding an additional 11.3%, the Serbian government at 29.9%, and the rest with minorities. The infusion transformed Pančevo: a €500 million modernization program completed key phases by 2014, including hydrocracking and delayed coking units, boosting efficiency and environmental standards. Today, NIS employs over 11,000 people, operates 400+ gas stations across the Balkans under NIS Petrol and Gazprom brands, and contributes billions to Serbia’s budget as its top exporter.
Yet, this Russian lifeline has become a geopolitical liability. U.S. sanctions, first threatened in January 2025 under the Treasury’s Office of Foreign Assets Control (OFAC), targeted entities aiding Russia’s oil revenues. Serbia secured six waivers – initially 45 days, then extensions through April, June, and beyond – buying time for divestment talks. In February, Gazprom Neft transferred a 5.15% stake to parent Gazprom in a bid to shield assets, but to no avail.
The latest four-day reprieve, until 30 September, signals Washington’s patience has run out. Vučić, balancing Serbia’s EU aspirations with historic Russian ties, described the decision as “harsh” but inevitable. “The Americans extended the non-imposition of sanctions for only four more days. So from 1 October, we will have sanctions imposed on the Serbian oil industry,” he told reporters, per AFP.
The fallout could be severe. NIS supplies over 80% of Serbia’s wholesale fuel market, and sanctions will likely freeze U.S. dollar transactions, complicating crude imports and payments. Experts like Goran Radosavljevic, secretary-general of Serbia’s National Petroleum Committee, warn of immediate shortages, payment bottlenecks, and broader economic ripple effects, including inflation and supply chain disruptions.
Serbia’s reliance on Russian crude – routed through Croatia – adds irony: Zagreb, an EU member, could face its own dilemmas if flows halt. Vučić acknowledged the “extremely high price” Serbia will pay, vowing fairness to both Moscow and Washington while ruling out outright nationalization.
“We have been extremely fair to our Russian and American partners. We will try to be fair, but people should know that we will pay an extremely high price,” he said.
Options include Gazprom divesting shares to non-sanctioned buyers or Serbia buying out the Russian stake, though funding remains unclear amid a €30 million half-year loss already chalked up to sanctions and falling oil prices.