Russia-owned Bosnian Oil Refinery Reopens

Sarajevo _ Bosnia’s oil refinery in the northern town of Bosanski Brod has restarted production after three years, following investment by its new owner, Russia’s state oil giant, Zarubezhneft.

The reopening ceremony on Thursday was broadcast live on the television of the Serb-dominated Bosnian entity of Republika Srpska. All top Bosnian Serb officials were present at the ceremony.

Local and Russian officials welcomed this development as a major economic breakthrough, not only for the country but the region itself – especially so at the time of the fast-approaching global recession.

Bosanski Brod refinery and accompanying oil-processing facilities in the neighbouring town of Modrica were one of the leading business enterprises in the 1970s and 1980s across the whole former Yugoslavia. Yet the facilities suffered serious damage during the war and the company lost both most of its suppliers as well as the market.
 
Bosanski Brod Oil Refinery struggled for years and piled up debts until it finally had to shut down production three years ago. In 2007, Republika Srpska government made a direct deal with Russia’s Zarubezhneft, which paid a total of €125.8 million for a 75 percent share of Bosanski Brod Refinery, 66.75 percent share in Modrica Oil refinery and a 70 percent share in Banjaluka Petrol. The buyer also pledged to repay the debts of these three companies, exceeding €72 million Euros, and invest a further €600-700 million in the modernisation of the Republika Srpska oil industry. 
 
However, some economic experts, local media and non-governmental organisations criticised the Republika Srpska government for circumventing public tenders and striking a non-transparent direct deal with the Russian firm. Experts also criticised the deal also because in the first phase the oil refinery will be producing products which are not in line with the latest European environmental requirements. Yet all admitted the importance of the deal for the country and for the oil refinery which effectively collapsed, and its workers who were left without work and salaries for years.
 
The reopening of the Brod Refinery is mainly seen as a result of the aggressive privatisation and business policy of the Republika Srpska government. Meanwhile, the government in the other Bosnian entity, the Croat and Bosniak (Bosnian Muslim)-dominated Federation, is seen as still completely blocked by political infighting and unprepared for the worsening economic and social environment in the country.
 
The Federation government on Thursday announced 29 percent increase in prices of natural gas, retroactively from November 1, due to the sharp increase in the prices of the Russian supplier, as well as increased transportation costs. This increase is expected to trigger a domino effect in prices of all goods and services that depend on natural gas for production or heating.