The adverse economic environment of the past few years had a negative impact on the cooperation between Russia and Serbia, with the current trade turnover still below the 2013 level. Despite that, bilateral trade has been gaining momentum as of recently, with the Russian companies continuing to make investments in new projects and exploring business opportunities in Serbia. The traditionally firm political ties between the two countries make it possible to unlock the potential of economic cooperation and take it to a brand new level.
In 2016, the trade turnover between Russia and Serbia amounted to USD 1.6 billion. While the trade volumes are growing, the current figure is still below the level of 2013 (USD 1.974 billion). The turnover increased by 1.3% in 2016, and by 17.2% year-on-year in Q1 2017.
In these new conditions, Serbian imports were the driving force behind the economic collaboration build-up, as they went up by 12.8% in 2016 and 29.5% year-to-date.
Serbia was unwavering in its decision not to join the Western sanctions against Russia. After Russia introduced an embargo on EU food imports, Belgrade was quick to capitalise on the new business opportunity. 2016 was the first year when Serbia made it to the Top 5 of Russia's fruit suppliers, with fruits now accounting for one quarter (26.9%) of Serbian exports to Russia.
The primary Russian exports to Serbia are oil and petroleum products (35%) and rolling stock (11.15%). The respective industries also attract the largest number of investments from the Russian businesses.
For example, after acquiring a controlling stake in Naftna Industrija Srbije (NIS), Gazprom Neft turned a loss-making company into the Serbian economic powerhouse and one of the country's major taxpayers.
The Russian company plans to continue investing in Serbia focusing on exploration, mining and retail sales development projects.
In the near future, Serbia plans to significantly increase its gas imports, with Russia being the most obvious choice for a trade partner.
The existing gas contract with Gazprom Export provides for the annual supplies of 1.5 billion cubic metres. In May, Serbian President Elect Aleksandar Vučić said that his country needed to raise gas consumption to 6 billion cubic metres in order to provide an effective incentive for higher industrial output.
The strategic location of Serbia at the crossroads of South Europe makes its road and transportation infrastructure an attractive investment target for Russian businesses.
Russian Railways has recently completed reconstruction on the rail line between Vinartsi and Djordjevo in Serbia, which is part of the X Trans-European Corridor. The increase in train speeds from 50 km/h to 120 km/h will allow for a much greater cargo flow through Serbia.
Previously, Russian Railways showed interest in acquiring European railway operators, including those from Serbia. This means that the company is not only taking part in railway reconstruction projects, but also looking for opportunities to manage rail infrastructure in Serbia.
Vladimir Putin and Aleksandar Vučić have met recently to discuss high-potential production projects in mechanical engineering, agriculture and pharmaceuticals with an eye to exporting the manufactured goods to third-party countries.
Serbia is the only non-FSU country that has a free trade agreement with Russia, and it is currently in talks to create a free trade area with the EAEU.
Serbia has straightforward registration procedures for the companies and offers a favourable tax regime. In addition, it provides investment incentives. There is a 10-year corporate income tax moratorium for large investments and a 5-year moratorium for investments that are especially valuable for Serbia, as well as an exemption from customs duties on imported equipment.