A Bad Omen for the CEE’s ‘Political Turn’
27 June 2022
Snowfall reveals traces of the regime’s long-term wrongdoings.
The first abundant snowfall in Serbia this winter caused outages at the country’s two biggest coal power plants leaving approximately 136,000 users without electricity, heating, or water.
The capacity and security of the electric power system were significantly diminished due to poor quality coal, mixed with mud and clay, which damaged the power plants. The energy collapse forced the Serbian government to cover — by unprecedented import — almost 1.5 GW of current consumption, amounting to over 25 per cent of electricity needs, significantly increasing the burden on already shattered public finances.
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The regime’s initial damage control tactic, aimed at avoiding responsibility, was two-fold: implying that the outages were the consequence of sabotage, as well as that the inclement weather caused even more severe damage to other countries. Both ‘lines of defence’ were extensively echoed in the pro-government media.
However, due to past experiences when the regime suggested that sabotage occurred in previous cases such as the collapse of a support wall on Corridor 10 or damaged electricity installation in a newly built COVID hospital — allegations that were never proven — the initial damage control tactics largely fell flat.
Faced with such a situation, officials reluctantly accepted partial responsibility for the energy crisis, admitting that large and urgent investments in the electricity system are needed in order to avoid similar problems in the future.
The crisis highlights not only the ecological and technological deficiencies in Serbia’s current energy mix but also deep systemic problems within Serbia’s public sector as well as shady dealings with Russia ahead of a combo election next April.
Taking into account that technological incidents at the TENT power plant complex have continued after the recent major breakdown — a sequence that could lead to another power supply crisis, the government’s intent to continue with the lithium mine project, as well as the citizens’ resolve to oppose it, Serbia is on the brink of a very hot political winter that could seriously weaken the regime before the April 2022 elections.
The electricity system failure caused by the first heavy snow exposed various deficiencies of the almost 10-year long rule of President Aleksandar Vučić’s regime. The crisis occurred at a very sensitive moment, less than four months before the combo elections in Serbia — parliamentary, presidential and in the capital of Belgrade.
The technical aspect of the crisis became the most apparent, dependence on fossil fuels — particularly on the TENT power plants which produce 55 per cent of Serbian electricity. This along with the instability of the electricity distribution network and the absence of a proper quality control system of the coal used for producing electricity shows the antiquated nature of Serbia’s main source of power.
There was an increased public awareness that due to neglect and lack of investment in the electric power sector Serbia has become an electricity importer instead of being a significant exporter, even with the comparative advantage of rich lignite coal reserves.
The gas issue also brought to the table the geopolitical aspect of the crisis. Serbia is completely dependent on Russia for its gas supplies. Having in mind significant increases in gas prices, the fact that Serbian gas consumption has doubled in the last few years, as well as the upcoming peak of the heating season, it was of crucial importance for the government to make a deal with Russia on importing gas under the same, privileged conditions.
At a meeting in Sochi with President Putin, Serbian President Aleksandar Vučić secured the gas price for Serbia at an unchanged 270 dollars per 1000 cubic meters, as well as an increase of delivered gas in the next six months.
It remains an unknown what will happen after that period, but Vučić received an important gift from Putin ahead of the elections that should secure the heating season. At the same time, the President succeeded in presenting himself to the citizens as a respected and capable leader who enjoys the friendship of the Russian President and brotherly Russian people.
Nevertheless, Serbia will probably have to compensate Russia for the pre-election gift. Immediately after the Sochi meeting, media reports about three potential new major bilateral cooperation projects emerge.
These being the construction of a nuclear power plant in Serbia by Russia’s state nuclear construction company Rosatom — including Russian companies in constructing the Belgrade urban and suburban railway system and the Serbian Army purchase of Russian Kornet anti-tank missile systems.
The last one could have serious negative implications on Serbian relations with the West. These projects would result in an increased Russian presence and influence in Serbia, the process that started in 2008 when Gazprom Neft purchased majority shares in Serbia’s national oil and gas company (NIS). NIS was sold below market price in return for Russia’s support on the Kosovo issue and the promise that the South Stream gas pipeline — which was cancelled in 2014 — would be built over Serbian territory.
Another aspect of the crisis is the problem of cadres. The incompetence fostered by political appointments to the highest managerial positions in the state-owned electric utility power company Elektroprivreda Srbije (EPS) resulted in the lack of motivation of qualified engineers who have either been continuously leaving the company or avoiding greater responsibility.
The epitome of the problematic government management cadre policy is Milorad Grčić, Director of EPS. Widely known as a barbecue restaurant owner, Grčić was appointed acting director in 2016 contrary to the Law on Public Enterprises, not fulfilling neither the education nor job experience requirements. Moreover, the Law does not allow anyone to serve as an acting director for more than a year, but Grčić has been performing the duty for almost five years.
This extreme case of incompetence and lawlessness has shed a brighter light on a broader problem of the public sector. More than 70 per cent of publicly owned companies on the state level — to which the Law on Public Enterprises applies — have acting directors or directors whose mandate is not in accordance with the law.
Acting status is a way to keep these directors under direct political control, since the Government can dismiss them without any explanation, at any session while directors chosen in a regular procedure can be dismissed only when it is proven that they performed badly according to objective indicators.
Yet another serious problem with the public sector is public procurement. Namely, according to the State Audit Institution, in 2020 publicly owned companies spent 1.1 billion euros contrary to the stipulations of the Law of Public Procurement. EPS alone misspent approximately 300 million euros.
Before the collapse of the energy system in December, it was already well known that coal combustion is the largest single source of air pollution not only in Serbia but in the entire region with thermal power plants as the largest polluters.
Four out of six top polluting thermal power plants in Europe are located in Serbia emitting up to seven times the amount of sulfur dioxide allowed by the Energy Community Treaty signed in 2005. Therefore, it comes with no surprise that with more than 10,000 people who die every year due to air pollution Serbia tops the list in Europe.
However, what the crisis has revealed is that EPS has been adding fuel oil to low-quality coal in order to increase the energy output. Such a practice additionally increases air pollution and deteriorates the public health situation.
Increased awareness about electricity production methods, as well as management incompetence, has strengthened calls for the accelerated transition from coal to renewable energy, increased the resistance to announced plans to open a nuclear power plant in Serbia and has overall emboldened the ecological movement in Serbia.
The energy crisis occurred in a very sensitive political moment for the regime just a few months before the elections, amid rising ecological protests throughout Serbia, mainly against the implementation of the Rio Tinto lithium mine project in Western Serbia.
Even before the outages, the regime was concerned about the energy issues ahead of the heating season — in mid-November, high energy prices pushed inflation to 6.6 per cent.
Serious problems at the two thermal power plants brought about a potential additional problem for the regime in the pre-election period — a nightmare scenario of a possible breakdown of the entire electric power system and power cuts.
Therefore, the authorities put extra effort in trying to ensure citizens that both energy and financial stability are guaranteed. One of such government measures that preceded the crisis was keeping electricity prices for business customers unchanged.
The highest Serbian officials are increasingly nervous also because of the symbolic value of the Kolubara mine, which supplies TENT with coal, as it is where the overthrow of the Milošević regime started on October 5, 2000. Hence, the main goal of the regime is to navigate till the elections with the least damages accrued, primarily by maintaining the stability of major utility systems.
Nonetheless, the unexpected high financial costs of securing such stability will probably shrink the regime’s manoeuvring room for election-related purposes. Such a situation may even prompt the authorities to reschedule elections.
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