US Sanctions and Their Effects
The Austrian energy company OMV has ended its business relations with the Serbian energy company Naftna Industrija Srbije (NIS) due to US sanctions against the Russian energy giant Gazprom Neft. NIS is majority-owned by Gazprom Neft and plays a central role in Serbia’s energy supply, operating the country’s only refinery and covering about 80% of the national demand for gasoline and diesel.
Sanctions Against NIS
The US Treasury Department has designated NIS as a sanctioned entity, which means that Gazprom Neft was given a deadline to sell its stake in NIS. This deadline has been extended twice by 30 days each time.
Reactions from OMV and Eko
OMV and the Greek energy company Eko have announced that they will organize their supply in Serbia independently of NIS. OMV will import fuels from other European refineries and transport them to Serbia via the Danube.
Effects on OMV and the Serbian Market
Serbia has limited transportation capacities, making it difficult to completely replace NIS’s production with imports. The country’s daily diesel demand is around 44,000 to 49,000 barrels, while the gasoline demand is about 14,000 barrels.
Adjustments from NIS
NIS has changed its procurement strategy and is now purchasing crude oil through the spot market, as long-term contracts are no longer feasible.
Stock Price and Investor Perspective
Despite the challenges posed by the termination of business relations with NIS, OMV’s stock has recorded gains. This could be attributed to the company’s long-term strategic plans, such as the transition to a circular economy-oriented chemical company and the establishment of the chemical giant Borouge Group together with Adnoc.
Investors continue to see OMV as an attractive investment opportunity, particularly due to its favorable valuation compared to other companies in the industry.
Overall, it appears that OMV, despite the current challenges posed by US sanctions, is capable of adapting to changing market conditions and continuing to pursue its strategic goals.