Mali: new MOL proposal on Pancevo, NIS answer due any day

Finance Minister Sinisa Mali said on June 2 that talks with Hungary’s MOL on taking over Russia’s stake in oil company NIS have made progress, and that Serbia is now waiting for a reply to a new proposal. The statement comes four days before the deadline the US Office of Foreign Assets Control (OFAC) has set for closing this round of negotiations.

According to Mali, Serbia has forwarded MOL a new proposal dealing with the operation of the Pancevo refinery and several other open questions. The Pancevo refinery, the country’s largest oil processing facility, remains the central sticking point in the whole process, since the stability of the domestic fuel market depends on its supply.

What exactly is Serbia waiting for from MOL?

Mali framed the message in terms of timing: the proposal has been sent, the ball is in the Hungarian company’s court, and a reply is expected very soon. That puts the MOL talks into their final phase ahead of June 6, the date through which the OFAC clearance for this round of discussions on buying the majority stake in NIS remains valid.

“We expect to get feedback from the Hungarian company today or tomorrow,” Sinisa Mali said.

The minister also stressed that Serbia did not cause the NIS crisis, but that it stems from a wider geopolitical context and sanctions imposed over Russian ownership in the company. The open issues, in his words, concern above all the continuity of the refinery’s operation and the terms on which MOL would take over the Russian assets.

• The new proposal sent to MOL concerns the operation of the Pancevo refinery.
• Beyond the refinery, several other points in the talks remain open.
• A reply from the Hungarian company is expected on June 3 or 4.
• The OFAC deadline allowing this round of negotiations expires on June 6.

Optimism ahead of the June 6 deadline

Mali closed his message by voicing the expectation that this round of talks would wrap up within the deadline. After the previously reported 14-day extension of the OFAC window, Serbia now reckons the outcome of the talks with MOL on the Russian stake could be known by the end of the week.

“I am optimistic that we can close this round of negotiations by the end of the week,” the finance minister said.

The backdrop to that optimism is tense. The Pancevo refinery is already running in a reduced mode after crude supply was cut earlier, and on June 1 the government extended its ban on exporting oil and oil derivatives until July 2 to keep fuel on the domestic market. The outcome of the MOL talks now determines whether the refinery gets a path to stable supply or stays in a technical holding pattern.

For the domestic market the stakes are direct: if the sale of the Russian stake to a buyer outside the sanctions regime is agreed, room opens for processing to resume in Pancevo. If MOL’s reply does not come, or no deal is reached by June 6, the uncertainty that has pressured Serbia’s entire energy chain for months remains in force.

Will MOL’s answer arrive in time for the NIS negotiation round to actually close by the June 6 deadline?