An important moment in history. A new era.
Strengthening of the regional cooperation through Berlin process and implementation of the Reform Agenda ensures Serbia’s further European integration. The Agreement with the US on strategic cooperation in energy (the first ever on strategic cooperation between the two countries) opens doors to a series of new agreements and rounding off the strategic partnership with the world’s largest economic power.
When it comes to accelerating European integration, a series of positive and encouraging steps have been taken. First, the leaders of the Western Balkan economies (Serbia, Albania, Bosnia and Herzegovina, Montenegro, North Macedonia, Kosovo*) adopted the Joint Declaration of the Berlin Process in mid-October, reaffirming good neighborly relations and regional cooperation, recognizing that democracy, fundamental rights and the rule of law are preconditions for political stability, positive business environment and the region’s economic prosperity.
The European Commission approved the reform agendas of Serbia, Albania, Montenegro, North Macedonia and Kosovo* after the positive opinion of EU Member States. In their ambitious Reform Agendas, the five economies of the Western Balkans have committed to a socio-economic and fundamental reforms to be undertaken in order to stimulate growth and convergence with the EU.
The meeting in Berlin was an opportunity to review the results of the ten-year long cooperation within the Process and to highlight the achievements Western Balkans achieved in approaching the EU. Among the impressive achievements (tools) that brought these countries towards the integration into the Union are: the regional economic space, the common regional market, the regional agreement on roaming, agreements on mobility, the Green Agenda, youth cooperation, the Partnership for the Climate of the Western Balkans and Germany, the Digital Summit, Transport Community Agreement, Green Corridors, Improvement of Cooperation in Energy Security and Energy Transition, Research and Innovation, Investment Forum of Chambers of Commerce, Enterprise Development and Innovation Fund and Research Fund. The success of the Summit in Berlin is also considered to be the new action plan for the common regional market, which German Chancellor Olaf Scholz claims is a fundamental document for further deepening the economic integration of the region. The meeting in Berlin was just a prelude to a series of events that bind Serbia (and the Western Balkans region) even more tightly to the EU.
First, the European Commission approved the reform agendas of Serbia, Albania, Montenegro, North Macedonia and Kosovo* after the positive opinion of EU Member States. In their ambitious Reform Agendas, the five economies of the Western Balkans have committed to a socio-economic and fundamental reforms to be undertaken in order to stimulate growth and convergence with the EU within the framework of the Growth Plan in the period from 2024 to 2027. The Commission’s decision was a key step to enable payments of six billion euros under the EU Reform and Growth Instrument. “It is our road map to bring the economies of the Western Balkans closer to ours. And to give their companies access and means to compete in our single market“, said Ursula von der Leyen, head of the European Commission. Based on the methodology of the European Commission, the first tranche for Serbia is about 112 million euros, out of a total of 1.58 billion euros, which will be available by the end of 2027, if it achieves everything foreseen in the Reform Agenda.
On Serbia’s reform progress, Von der Leyen made a statement during her visit to Belgrade: “I want to thank you for the excellent work done when it comes to the reform agenda. Serbia is one of the most advanced countries in the accession process. You are well on your way to becoming part of the single euro payment zone next year. The partnership between Serbia and the EU is getting stronger. We are opening the door to the EU single market for Serbian companies, and in return certain reforms need to be implemented. I believe that the future of Serbia is in the EU“. Such flattering assessments have not been heard from the highest European officials for a long time.
Following day, the Growth Plan for the Western Balkans has become operational. The Plan is designed to offer Serbia the opportunity to finance its own reforms with European funds to adjust its economic, social and political performance to European rules and values. Brussels seeks for payments to start as soon as possible, with the President of the European Commission expecting this to happen before the end of the year. The first 112 million euros tranche awaits Serbia by the end of the year. That tranche is pre-financing, and the rest will be processed gradually according to the reform agenda’s timetable. In order to receive all 1.58 billion euros, Serbia committed to implement a total of 98 measures listed in the reform agenda in four key areas: business environment and private sector development, green and digital transition, human capital and rule of law. Next year, Serbia will be able to withdraw 428 million euros, of which 122 million will be non-refundable, if it strengthens the capacities of the gas transport network and implements the OSCE recommendations in amending the election laws. Among the preconditions for the use of funds are respect for democratic mechanisms and the principle of the rule of law.
Serbia’s interest in diversification of energy supply sources, additional investments in energy infrastructure and more efficient development of renewable energy sources was announced in Belgrade less than a month after the signing of the Agreement in Washington.
The European Commission’s congratulations to Serbia on receiving an investment rating, was not a mere courtesy. Getting the investment rating assigned by the S&P agency is important news for the state and private companies. One detail from S&P’s explanation deserves additional attention. The Agency warns that a possible risk to the preservation (and future raising) of Serbia’s rating is the supply of energy products and therefore suggests urgent energy diversification so that Serbia does not depend on Russian gas. S&P assesses that it is an existential and security issue for Serbia.
Part of that energy diversification was demonstrated by Serbia through a new global positioning and strategic partnership.
The process of designing and opening a strategic partnership with the US is running almost parallel to the cementing of European integration. The Agreement on Strategic Cooperation in the Energy Sector served as an “icebreaker” for the future comprehensive strategic connection between Serbia and the US. After the signing in Washington, this first agreement on strategic was one a series of planned strategic agreements between Serbia and the US. The negotiations that shaped the Agreement lasted several years, with the experts from five American agencies participating confirming the seriousness coming from the US side. The agreement allows American companies to invest more in sustainable clean energy technologies in Serbia and to compete equally on the Serbian market. The goal of the Agreement is to accelerate the abolition of electricity production from coal, which means that Serbia will more quickly join international efforts to reduce the emission of harmful gases and pay less tax for their emission. It will not affect the reduction of Serbia’s dependence on Russian gas because it does not apply to projects involving fossil fuels, but it opens the door to investment in the development of nuclear energy in Serbia.
Agreement on strategic cooperation in the field of energy with the US (the first ever agreement on strategic cooperation between the two countries) opens doors to a series of new agreements and rounding off the strategic partnership with the world’s largest economic power.
In the business and political circles of both countries, the Agreement was assessed as the beginning of a new era of cooperation between Serbia and the US, one of the important moments in the history of relations between the two countries and an extremely important step in deepening the cooperation between the two governments and encouraging the cooperation of the private sectors of the two countries.
Until September 18, when the Agreement was signed, Serbia and the US did not have a single agreement on strategic cooperation, nor did they have an agreement on strategic partnership. Serbia already has such agreements with the Russian Federation and the People’s Republic of China (with which it also signed an agreement on a comprehensive strategic partnership).
It is interesting that immediately after the signing of the Agreement, its practical implementation began. Serbia’s interest in diversification of energy supply sources, additional investments in energy infrastructure and more efficient development of renewable energy sources was made real in Belgrade less than a month after the signing of the Agreement in Washington.
The acceleration of European integration and strategic partnership with the US undoubtedly has a positive impact on Serbian private companies. As part of its support for reforms in Serbia, the EU is opening its market to companies from Serbia and allocating significant capital to strengthen the competitiveness of Serbian companies.
In addition to the Forum, the consortium of the South Korean company Hyundai Engineering and the American UGT Renewables signed an agreement with the Government of Serbia on the construction of high-capacity self-balanced solar power plants with battery systems for electricity storage in Negotin, Zaječar, Odžaci, Leban, Leskovac and Bujanovac. With this project, energy transition goals will be achieved, Serbia’s international obligations fulfilled, the import of electricity eliminated and long-term supply of consumers at economically affordable prices ensured. It is understandable that solar power plants are in the forefront of public interest, but the key element is a battery system for storing electricity with a total installed power of no more than 200 MW/400 MWh. Battery systems for electrical energy storage are a relatively new model of energy security development and only a small number of the most developed countries build and use them.
According to experts in this field, the six solar power plants are one of the largest projects in Europe, and when they start operating, they will drastically change Serbia’s energy portfolio. The fact that this project can be an example for many American companies to enter the Serbian market is important.
In mid-October, the biggest Serbia-Japan Business Forum was held in Belgrade, with more than 100 Japanese companies participating, mostly from the information technology, energy and environmental protection sectors. The President of Serbia, Aleksandar Vučić, attended the Forum and announced the establishment of the Belgrade-Tokyo air route in the next six months to help open doors to new partnerships in strategic sectors.
The acceleration of European integration and strategic partnership with the US undoubtedly has a positive impact on Serbian private companies. As part of its support for reforms in Serbia, the EU is opening its market to companies from Serbia and allocating significant capital to strengthen the competitiveness of Serbian companies to participate. On the other hand, the partnership with the US in energy enables Serbian private companies to get involved and cooperate with leading American companies in energy transition projects and to have long-term security in the supply of electricity through the construction of clean energy sources as a significant prerequisite for successful business.
Author: IPESE Research Team
Featured image source: EU in Serbia
