Russia Loans $1.5 Billion to Serbia

Russian President Dmitry Medvedev brought a $1.5 billion loan to recession-hit Serbia on Tuesday, as Moscow sought to expand its political and economic influence in the Balkans with the first-ever visit to Belgrade by a Russian president.

The loan deal — approved during Medvedev's one-day trip — adds to Russia's growing clout in Serbia, which relies on Moscow's diplomatic support in the U.N. Security Council to oppose the secession of Kosovo, Serbia's former province. About 60 countries have recognized Kosovo's independence, including the U.S. and most of the European Union.

Serbian President Boris Tadic thanked Russia for the loan and for its support in trying to overturn Kosovo's declaration of independence made last year.

"Having in mind our centuries-old relations, now we are developing very important economic ties," Tadic said, adding that both sides have "identical views" on many international issues.

Medvedev praised "strategic" cooperation between the two countries, especially the planned construction of the South Stream natural gas pipeline that would bring Russian gas to Europe via the Balkans.

"The project, which is important not only for Russia and Serbia, but to Europe as well, is an example of the strategic cooperation between our two countries," Medvedev said.

Serbia badly needs the Russian loan, in addition to the $4.5 billion standby credit it has tentatively agreed with the International Monetary Fund, to cover its growing budget deficit amid the global financial crisis and to restart major infrastructure projects, such as the construction of a highway and a subway system in Belgrade.

Moscow has taken a special interest in Belgrade's fortunes. Russia not only shares cultural, ethnic and religious roots with Slavic, Orthodox Christian Serbia. Serbia's conflict with the U.S. and Europe over Kosovo became a symbol of the evaporation of Russian influence in eastern and central Europe in the decade after the breakup of the Soviet Union.

Russia was furious over the 1999 NATO bombing of Serbia, which then-President Boris Yeltsin denounced as a return to the "Stone Age." But Moscow was powerless to stop the air campaign and felt forced to recognize a peace deal that put Kosovo, a mainly ethnic Albanian province, under the control of the U.N. and the Western alliance.

Vladimir Putin, the former Russian president and current prime minister, has based his political career in large part on restoring Russia's pride, and Serbia has become an arena for Moscow's effort to resurrect its former status as a world power. Mainly, that means Russia has used its veto-wielding seat on the U.N. Security Council to protect Serbian interests, while strengthening ties to the country with energy deals.

Last year, Russia's state-controlled gas monopoly OAO Gazprom bought Serbia's major oil and gas assets, and agreed to route through Serbia its proposed South Stream pipeline.

The South Stream route across the Balkans would avoid Ukraine, with which Russia has pricing and political disputes. It competes with a U.S. and European Union-backed proposed pipeline called Nabucco that would send Europe natural gas from Caspian Sea nations, not Russia, to diversity Europe's natural gas suppliers.

Gazprom also has purchased a 51-percent stake in Serbia's oil company NIS, a deal that gives Russia a monopoly over the sale of gasoline and natural gas in Serbia until 2011.

However, political relations between Serbia and Russia have not matched the ethnic and religious ties, as Belgrade seeks to integrate with the West, including joining the EU.

Moscow has reluctantly supported Serbia's EU bid, but firmly spoken against its possible NATO membership.

The United States would like to see Serbia in the Western military alliance because that would add to security in the Balkans, which is still reeling from the bloody ethnic conflicts of the 1990s.

Medvedev also will attend celebrations marking the liberation of Belgrade from Nazi occupation in World War II by Soviet and local communist fighters. He will address Parliament and visit the seat of the Serbian Orthodox Church.

On the eve of the visit, Russian diplomats demanded that Belgrade authorities restore the names of streets formerly named after the Red Army generals who took part in the 1945 liberation of the city.

The names were changed after the fall of President Slobodan Milosevic in 2000. Milosevic had maintained close ties with Moscow.