Serbian Deputy Prime Minister Aleksandr Vulin hinted during the Eastern Economic Forum in Russian Vladivostok in September that Moscow and Belgrade need to solve issues related to the gas supply contract set to expire in 2025. Despite Western sanctions, Russia still plays a crucial role in supplying Serbia with natural gas “on time and based on very good conditions”, the Serbian minister said.  

Although the continuing Russian gas supplies to Europe pose a serious dilemma within the region, some EU member countries like Hungary, Slovakia and Austria, as well as non-members like Serbia, do not hesitate to maintain energy partnerships with Moscow. 

As such, Belgrade officials are preparing to extend the gas deal with Russia for another year. The original deal was signed in May 2022, shortly after the Russo-Ukraine war erupted. Moscow agreed to sign the deal on favorable conditions for Belgrade while cutting off gas supplies to Finland, Poland and Bulgaria. 

Europe sought alternative gas suppliers to tackle the energy deficit and hurriedly reduce reliance on Moscow. However, it is not yet clear whether the EU plans to shut off the Russian supply pipeline that crosses its member countries. Russia provides 2bn cubic metres (bcm) of natural gas via the Balkan section of the TurkStream pipeline working at capacity. This dependence on Russian gas could potentially hinder the EU's efforts to reduce its reliance on Moscow and diversify its energy sources.  

Unlike some EU member countries, Serbia is highly dependent on Russian gas. The EU has not taken any bold steps to punish or pressure Serbia to avoid the extension of the gas deal with Russia. Nevertheless, in 2023, Serbia agreed to import additional gas volumes from Azerbaijan in an effort to diversify the local market, including the inauguration of a new pipeline link via Bulgaria. This move to diversify its energy sources could potentially reduce Serbia's dependence on Russian gas. Since 2024, Azerbaijan began supplying Serbia with 400 bcm of natural gas, with an additional agreement to supply an extra 1mn cubic metres of gas on a daily basis from November 2024 to April 2025. 

As Azerbaijan’s gas exports represent less than 15% of Serbia’s domestic gas consumption, Belgrade still considers Russia’s Gazprom the main source of gas supplies. However, this diversification strategy could be a step towards reducing Serbia's reliance on Russian gas. Moreover, the EU's criticism and expectation of Russia's waning influence in the energy market of the Balkans, particularly in Serbia, is unlikely to be justified soon, considering that its main energy companies are under Russian majority ownership.

Consequently, Europe’s enormous efforts to wean itself off Russian fossil fuels have not yielded major results due to the pragmatic foreign policy strategy of certain countries like Serbia, which opted to remain connected to Moscow's energy and reap the cost benefits. Given the favourable conditions of the original agreement, Serbia's enthusiasm for securing a deal with Russia seems rational.

Although Russia's long-term energy dominance in the Balkan region seems undented due to regional countries' diversification attempts, Serbia's renewed gas deal could prolong Moscow's presence in the local energy market for a while, even though the continuing Russian gas shipment will become more costly, emboldening other states to seek cheaper solutions. Considering this factor, Belgrade inked a gas agreement with Russia based on a fixed price, shielding itself against extra costs, which is now likely to be renewed on the same terms. 

However, the expected decline of Russia's state revenue from oil and gas to $117.53bn between 2025-2027 due to the heavy tax burden on energy giant Gazprom is a cause for concern. This may push Moscow to reconsider the price it charges Serbia once the contract comes up for renewal in 2025. 

Moreover, like leading EU member states, Serbia put enormous efforts into switching to alternative energy sources in the near future. By 2026 Serbia expects to have more than 1,500 megawatts (MW) of green energy within the framework of the Integrated National Energy and Climate Plan, which outlines a vision through 2030 and 2050. The successful implementation of the strategy will enable Serbia to dramatically decrease dependence on fossil fuels, particularly Russian, thus resolving one tough political dilemma.

Fuad Shahbazov is a policy analyst covering regional security issues in the South Caucasus. He was a research fellow at the Center for Strategic Studies and previously a senior analyst at the Center for Strategic Communications, both in Azerbaijan. He was also a visiting scholar at the Daniel Morgan School of National Security in Washington, DC. He tweets at @fuadshahbazov.