Petroleum Tycoons

Each forecaster has his mysterious spells and his own indicators of the future. I have a friend who adheres to the same formula in his foretelling of the economic and political moves of Belgrade authorities – ‘Zagreb, plus six months’. Last year, he the same friend of mine drew my attention to Croatia’s Prime Minister Racan’s endeavours to monopolise the import of petroleum and its derivatives – justifying the problems with the state budget. He then told me that we would have the same situation one day – the profitable business with petroleum would be transferred from ‘suitable thieves’ to the jurisdiction of the ‘national company’. I suspected that prognosis – relying, above all, on my own critical estimation that our national petroleum company was itself the nucleus of criminal and fraudulent transactions.

I remember that I reminded my friend of that thriller in which Marlon Brando, as a manager of a big US oil company says to an ostensible hero of the ‘American national interest’ defender against the ‘Arabian oil conspiracy’: ‘Hey man, try to understand that in this business, we are those Arabs you have so much against to!’

Now that the DOS (the Democratic Opposition of Serbia) Government with Djindjic as Prime Minister, decided to ‘temporarily’ monopolise the import of petroleum and its derivatives in favour of the state NIS (the Petroleum Industry of Serbia) and against the ‘organised state crime’, I find myself in an inconvenient position – first, to put forward a hypothesis: is Djindjic leading those ‘Arabs’ disguised in democracy, i.e. is it all aimed at calming down the more and more recurrent strikes in the state services. Although he had something else in mind, Djindjic definitively takes the credit for being so courageous, since dirty business with petroleum caused the death of more people than did most ideological disputes.

Still, if we come within reach of the problem in a different way, we have to see why the government renounced the charging of the taxes (about 1.2 billion DM of state dues is usually missed out) to a number of recent importers – that is, why the state is not capable of carrying all that out, unless petroleum arrives only by way of the former ‘Yugoslav pipeline’ in Krk. The new Federal Customs Bureau Director Vladan Begovic simply admits that this service is so corrupted, and that he had to give notice of dismissal to the entire sector of internal control – and that the state borders (with the Republic of Srpska in particular) are insufficiently controlled. The weak point of this argument is that the state borders will remain to be insufficiently controlled, and the same inspectors will keep doing their job in probably the same way – so, the question is whether the state budget can be filled better without a better financial police and a more rigorous penalising of financial swindle. In short, perhaps the main cause of monopolisation of import should be sought for, not in the combat against the ‘illegal’ petroleum underground, but in the area of various kinds of help to the ‘legal’ national company, which covers only about 35% of the overall transaction of petroleum derivatives at gas stations, which mark a 60% drop of sale in the last six ‘democratic months’. Of course, NIS did not fall into decadence in the course of the last six months, but was being destroyed systematically during Milosevic’s reign, due to the outer sanctions and various internal obligations (to distribute petroleum on loan to the military and other budget consumers, to sell derivatives to the fitting buyers, to sponsor the ruling political parties and their para-political and para-military formations, etc.) Now, as this company is endowed with a monopoly over most profitable import businesses, it turns out that, as a consequence of what went before, NIS is so ineffective and exhausted, that it will not be in position to pay the necessary taxes – since it would mean that it would have to credit its consumers. It means that we have to look for the cause of Djindjic’s decision elsewhere.

If it is necessary to raise the prices in NIS’s international transactions – Djindjic has chosen the quickest, though not the best way. Apparently, when you sell a monopoly over something, it seems that you profit most from selling the real capital – but that is not the most appealing way for well-off purchasers. They prefer to get hold of a monopoly by way of a less conspicuous preparation of the ground. Truly speaking, if the sale is supposed to cover some previously created debts, the outcome may be much more profitable – but there are certainly long-term losses.

The question remains: why did Kostunica’s associates receive Djindjic’s decree on petroleum with such disapproval? Perhaps, because that decree undermined Kostunica’s agreement with Banjaluka on ‘special relations’ between the two ex-SFRY countries, since the majority of Serbian petroleum tycoons ‘co-operate’ with the Republic of Srpska, where the traditional repugnance towards taxes was also the economic platform of Serbian patriotism. However, history reminds us that the Oil Refinery in Brod was founded (built between 1887 and 1892) – apparently to enable the import of crude oil from Russia and Romania by way of the Sava river, at a low customs tax rate, while, in fact, the refined petroleum was widely sold, exempt from the high customs tax imposed by Austro-Hungarian Monarchy (until 1903, when the oil industry in the Monarchy was cartelised). Now, whom will the Brod Refinery vend petrol to? Perhaps, to Sarajevo again?