The Washington Post has reported that Russian and Serbian officials have announced a huge deal that will result in the Russian state gas monopoly, Gazprom, building a $15 billion natural gas pipeline branch in Serbia along with a significant gas storage facility. This branch is part of the larger project known as South Stream, which will carry Russian natural gas under the Black Sea from Russia to Bulgaria and branch to Serbia. Serbia chose the Gazprom deal over the U.S.- and E.U.-favored Nabucco pipeline that would route natural gas from the Middle East and Caspian Sea via Turkey. In a separate agreement, Gazprom has also offered to buy 51% of Serbia’s state oil company. This deal has not been finalized currently, but it is expected to be carried out easily.
When combined, these two deals effectively place Serbia's energy supplies completely in the hands of Russia. The West opposed this deal because it would make Europe more dependent on Russian gas supplies, thus giving Moscow a strong diplomatic weapon in the region. Serbia apparently inked these deals because Moscow is sympathetic to Serbian desires to crush Kosovo's attempts to emancipate itself as an independent state. In fact, the talk between Serbian officials and Putin at the official announcement was completely centered on the future of Kosovo, and had very little to do with energy.
The West has supported Kosovo's bids for independence since the U.N. stepped in to quell the conflict in Kosovo in 1999. It looks like Russia is taking advantage of Serbia's political instability in order to gain more power in the European energy market, and the West sees any Russian power-grab as a threat to the stability of energy supplies in the region. The real issues behind these energy deals seem to have less to do with energy and more to do with the apparent rebirth of Cold War tensions.
Considering the advantage Russia has in its massive oil and gas reserves, could Moscow prove victorious this time around? Or will the world be able to shift to alternatives with fewer political consequences before tensions get that high again?