For Serbia's authorities, the clock is ticking: By November 25, the government must decide what to do with the oil and gas company Naftna Industrija Srbije (NIS) — a decision that raises major energy security, financial and geopolitical dilemmas that Belgrade can no longer postpone.

The Russian state-owned oil company Gazprom Neft holds a 45% stake, and another Russian firm, Intelligence, an 11.3% stake in NIS, putting it in the crosshairs of US sanctions aimed at preventing Russia from using energy revenues to fund its war in Ukraine.

These sanctions have been postponed no less than eight times since January but finally came into effect on October 9.

Their impact was felt immediately: US measures disrupted the flow of crude oil via the JANAF pipeline, leaving Serbia's refinery with only enough supplies to process until the end of November, according to Serbian officials.

Impact on Serbia's energy security and financial stability

NIS occupies a strategically crucial position in Serbia's energy system. It operates a refinery in Serbia and supplies more than four-fifths of the country's gasoline and diesel, as well as nearly all aviation and heavy fuel.

Shutting down a refinery, warned energy expert Milos Zdravkovic, would have catastrophic consequences for the economy.

"NIS employs around 14,000 people. They [NIS] contributed around €2 billion ($2.3 billion) to Serbia's budget [state coffers] in 2023 and €2.08 billion in 2024. This is crucial for our GDP and budget, and we can't do without it," Zdravkovic told DW.

But there is even more at stake: NIS is subject to secondary sanctions, which means that any company or bank doing business with it could also be affected.

Jorgovanka Tabakovic, governor of the National Bank of Serbia (NBS), has confirmed that NBS has received warnings that it could fall under secondary sanctions if it works with an entity already under measures.

"I hope those sanctions won't happen because that would mean a blockage of all payments," said Tabakovic.

What solutions are being explored?

The only way out of the crisis is a permanent change in ownership, in other words the exit of Russian shareholders from NIS.

Serbia is now trying to find a solution.

Energy Minister Dubravka Djedovic Handanovic has said that Gazprom Neft has agreed to sell its stake in NIS.

She emphasized that the name of the third-party buyer is not being disclosed at the present time because negotiations are ongoing.

Would the state buy Gazprom Neft's stake?

Serbian President Aleksandar Vucic has said that if the agreement with this third party falls through, the state will buy the stake.

"If we don't have another solution, no matter the cost, we will find the money. We will negotiate with the Europeans and everyone else," said Vucic, adding "We will secure the funds… I want to avoid confiscation, nationalization and the seizure of assets at all costs."

Economic journalist Radojka Nikolic estimates that such a purchase would likely cost Serbia between €1.5 billion and €2 billion.

If financed from the state budget, the country might have to delay other projects, such as the Expo 2027 project, or the construction of a national stadium. Alternatively, it could incur additional debt or draw from budget reserves.

"That would be a very bad signal, because foreign exchange reserves exist to guarantee the state's current liquidity," Nikolic told DW. "It's quite risky. It sends out a very bad message. Reserves are not such a guarantee. They could be used for something else."

Geopolitical dilemma

Because Serbia is energy-dependent on the East and financially dependent on the West, the government's decision on NIS raises a series of interconnected dilemmas that Serbia can no longer avoid.

"We are between a rock and a hard place. On the one hand, US sanctions are halting the refinery's operations. On the other, we rely on Russian gas. That's an even bigger problem because Serbia consumes 2.8–3 billion cubic meters [98.8–105.9 billion cubic feet] of gas annually, of which 1.73–1.75 billion goes to industry. Gas cannot be bought at a newsstand, so, you can't get it whenever you want," energy expert Milos Zdravkovic explained.

The government in Belgrade is trying to cushion the situation on both fronts.

President Vucic has publicly boasted about "sweetening" relations and attempts to appease the West.

Recently, Serbia even accommodated the interests of US President Donald Trump's family by passing a law that would accelerate the process of getting permits to turn a former army headquarters into a luxury complex. The project is linked to Trump's son-in-law, Jared Kushner.

At the same time, Belgrade is trying to avoid angering Moscow and ensuring the continuation of gas supplies by taking a cautious approach to NIS.

Tricky balancing act

Analysts warn that such a strategy is becoming increasingly difficult to defend.

Any delay or unclear message could directly affect financial aid decisions, investments and relations with partners who have grown increasingly wary of Belgrade's "multidirectional diplomacy."

"Politically, it's more important to separate from Russia, at least in terms of energy," Radomir Diklic, president of the European Movement in Serbia, told DW. "It will be painful, but we've already been living in a precarious state for years, so, hopefully we will recover afterwards."

Diklic fears, however, that the government may act in its own interests rather than those of the country.

Radojka Nikolic believes that regardless of short-term measures to stop the immediate crisis, the long-term solution would be for the US to enter Serbia's energy sector.

"I am convinced that whatever transaction takes place now — there has been some talk of Arab funds — this can only be a temporary, short-term solution. The long-term solution will surely be the entry of American capital into Serbia's entire energy sector. […] Now, the question is how the implementation will look," said Nikolic.

Diplomatic skill and a willingness to compromise on all sides will define not only Serbia's international position, but also its internal stability in the months ahead.

"Serbian policy has been guided by the 'Whatever will be, will be' principle," says Zdravkovic. "There will be oil. It's just a question of the price. Pumps will operate, we will import — as Bosnia and Herzegovina imports, as Croatia imports. It will affect the standard of living. And as for gas, if supplies are cut off, it will be really difficult. You cannot compensate for that," he warned.

As energy dependence and geopolitical pressures tighten their grip, Serbia's failure to act decisively could leave its future at the mercy of others.

Edited by: Aingeal Flanagan