Prime Minister Cvetkovic gave an interesting comment on the assessed value of The Petroleum Industry of Serbia (NIS): “If you bought a wheel, you would pay more for it then if you were to buy it with a whole car. By assessing the value of NIS, you determine the value of the wheel, and by assessing the whole arrangement you get the value of the car.” Vice-president Djelic was more precise: “We will not allow for the price of the oil arrangement to jeopardize the whole package” There are other elements of our relations with the Russian Federation which could be improved within the economy and which would generally improve Serbia’s position.”

Cvetkovic probably wants to say that when a car is sold, the profit is not calculated for each single part individually, including the wheel. However, whether the wheel was cheap or expensive is not an easy thing to establish, because you were not buying a wheel – you bought a car. It is much more important to determine whether NIS and the pipeline construction relate to each other like the car and wheel. Because, to slightly misapply Chernyshevskiy – if you buy Shakespeare and a sausage, you are likely to pay for those separately. Because they are not complementary, at least not as goods.

Cvetkovic, at least according to these statements, is selling a much smaller package than Djelic. The contents of this package are not yet determined. They are so diverse that the package probably cannot be defined. It includes “the elements of our relations with the Russian Federation” which, it is apparently suggested, are not limited to those “within the economy”. In any case, this package has a value which is not determined by a price, because it cannot be allowed for a particular price of a possession, which by the way is being sold, to jeopardize the whole package.

The inclination for selling packages is probably the best reason why politicians should not be in sales or be selling politics.[1]

It is important to put these statements on paper and remember them, because we are dealing with the most scandalous job so far.[2] Because we are talking about the economists, consultants, bankers and businessmen, currently in the Government of Serbia, it is important to analyze the excuses they provide and which tend to, at least in Cvetkovic’s case, incorporate elements of expertise.

Firstly, the wheel and the car. We are talking about products which are partly complementary. If you are buying a car, you must also buy a wheel. A demand for cars is also a demand for wheels. This has serious consequences on the price of cars and wheels, but this is not what Cvetkovic had in mind.

The price of a whel depends on the demand for cars, but the wheel manufacturer has no reason to sell his wheels at a lower price to the car manufacturer just because he will fit them to a car and sell them as a part of the automobile, and not as wheels. The car manufacturer will not include additional profit for wheels which are now being sold with the automobile, like a wheel salesmen would do. This, however, does not mean that the wheels on the automobile will be cheaper from the wheels bought separately. Because a car needs to be put together and there are many other things to consider.

So this claim by itself is not correct, at least not unconditionally, and it is most probably meaningless (because it is difficult to determine the price of the so called connected goods). But this is not the subject, because it is not wheels and cars that are being sold, but The Petroleum Industry of Serbia, gas storage and everything else connected with the construction of the gas pipeline. And, this is the most important point – all those things are not interrelated as cars and wheels. Why? Because gas and oil are in part substitutes and not complements. What makes this difference so important? Because the prices of substitutes tend to move in the same direction. So if the price of gas is rising the price of oil is also rising.

And why is this important? Because the value of the property or investment depends on the price of the final product. So, if you are selling the right to build and use a pipeline together with The Petroleum Industry of Serbia, their total price should be at least equal to the sum of their individual prices, and it could easily be higher if there is interest to buy all those things. Therefore – just the opposite from what Prime Minister Cvetkovic claims to be the case.

As for Djelic’s statement, things are even worse, because there we have pure politics. He is not sellinf cars and wheels, but buying relations. After this statement I cited above, he added something in the vein of “I think I said enough.” Cvetkovic tried to find an excuse for a bad price of a scandalous arrangement, while Djelic says how the price does not even matter. It is general relations that matter. This should be taken as – Serbia is not selling its energy resources, it is buying “relations with the Russian Federation”. If you look at it that way – it is really a bargain, right? And it is predictable what can be bought this way, both politically and commercially.

Translated by Ivica Pavlović

Pešč, 06.09.2008.


  1. This an unedited version of an abridged article published in Blic. What follows was added for this article
  2.  I wrote a blog entry on the subject under the same title on Blic’s website as soon as the agreement was announced

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Vladimir Gligorov (Beograd, 24. septembar 1945 – Beč, 27. oktobar 2022), ekonomista i politikolog. Magistrirao je 1973. u Beogradu, doktorirao 1977. na Kolumbiji u Njujorku. Radio je na Fakultetu političkih nauka i u Institutu ekonomskih nauka u Beogradu, a od 1994. u Bečkom institutu za međunarodne ekonomske studije (wiiw). Ekspert za pitanja tranzicije balkanskih ekonomija. Jedan od 13 osnivača Demokratske stranke 1989. Autor ekonomskog programa Liberalno-demokratske partije (LDP). Njegov otac je bio prvi predsednik Republike Makedonije, Kiro Gligorov. Bio je stalni saradnik Oksford analitike, pisao za Vol strit žurnal i imao redovne kolumne u više medija u jugoistočnoj Evropi. U poslednje dve decenije Vladimir Gligorov je na Peščaniku objavio 1.086 postova, od čega dve knjige ( Talog za koju je dobio nagradu „Desimir Tošić“ za najbolju publicističku knjigu 2010. i Zašto se zemlje raspadaju) i preko 600 tekstova pisanih za nas. Blizu 50 puta je učestvovao u našim radio i video emisijama. Bibliografija