Balkanalysis.com

Balkanalysis on Twitter

Italian Security in the MENA and Balkans, Part 7: Montenegro

By Matteo Albertini and Chris Deliso

This, the seventh and final installment in our present series, assesses the modern economic, security and diplomatic relationships between Italy and Montenegro.

Italy’s relationship with Montenegro is unique and fundamentally conditioned by historic ties and the maritime situation of both countries on the Adriatic. This geographic reality – with all the good and bad factors it entails – is complemented by a cultural legacy in which Italy’s presence is felt also through the Catholic Church. In the post-Yugoslav years, diplomacy, politics and church affairs have frequently become interwoven in the Italian-Montenegrin relationship.

Although diplomatic relations between the two republics began only in 2006, as a consequence of the independence of Montenegro, Rome and Podgorica (once Titograd) have a long history of bilateral relations.

Montenegro’s most legendary leader (once dubbed “Europe’s father-in-law”), King Nikola Petrovic-Njegos, strengthened diplomatic support for his short-lived kingdom by marrying his sons and daughters off to members of Europe’s royal families. In fact, his daughter Elena married Italian King Vittorio Emanuele III in 1896, inaugurating decades of good relations between Italy and Montenegro. These relations were only partially marred by the Italian occupation during WWII. As reported widely by media, during the 1990s Montenegro attracted the interest of Italian institutions mainly concerning cigarette smuggling between Bar and Bari: a trafficking route which allegedly involved top officials of the then-Federal Republic of Yugoslavia.

The stigma of organized crime that started with the “tobacco mafia” stories has, more than anything, compromised Montenegrin leaders’ ability to create truly independent policies: though it may be the best-known owing to its active investigations of leaders by anti-mafia police, Italy is far from the only foreign power that has sought to influence Montenegrin politics, policies and business in the last 25 years.

The cumulative result of this tendency has been a slow but steady movement towards Western institutions, as was seen most recently in this past summer’s NATO accession. That had been preceded by a fierce influence campaign by media from foreign countries who all referenced the country’s reputation as the reason for why it needed to join NATO – or would be a liability to it.

Especially in the decade following independence in 2006, Montenegro has signed many agreements with Italian and European institutions. Amongst the latter, the 2010 Stabilisation and Association Agreement and the 2012 memorandum on the succession of Montenegro are important to note. They followed historic bilateral treaties between Yugoslavia and Italy (and confirmed 18 previous agreements).

On the economic side, it is also important to note the recent contract between the government of Montenegro and the Italian company A2A, regarding the management of Montenegrin Electric Society, EPCG. This document represents (as the agreement with FIAT does for Serbia) a rare case of an international treaty made between a state and a private company. This agreement has increased the Italian economic presence locally.

Italian Diplomacy in Montenegro

Since 2013, the Italian ambassador in Montenegro has been Vincenzo del Monaco. This was a very interesting choice, considering that he is one of the few Italian diplomats with experience in the Italian armed forces, having worked in the Carabinieri before starting a diplomatic career in 1997. Subsequently, he was posted in Beijing (from 2001 to 2005), and worked in the Economic and Commercial Office, before being appointed as First Secretary of the Italian delegation to the European Union until 2009, when he was nominated diplomatic counselor of the Italian Presidency.

Italy maintains a Podgorica mission composed – according to April 2016 data – of 12 members. However, two of these (the military and police attaches) reside in Belgrade. This reaffirms the historic reality of police and military cooperation involving a joint perspective, as with operations against drugs and cigarettes smuggling rings composed of Serbs, Montenegrins and Italians.

While this diplomatic deployment may seem numerically modest, one should also remember that Montenegro has a population of only 650,000. Thus, when considering also cultural groups, international organizations, businessmen and the Catholic  Church, Italy is well-represented in Montenegro. It has something similar to, but smaller than, the leading role it has (as discussed earlier in this series) in Albania. Rather, Italy has above-average diplomatic representation in Montenegro.

Considering Montenegro’s small population, the discrepancy is quite interesting, especially when it comes to today’s ‘Great Powers.’ As such, Russia has 15 diplomats in Montenegro, while the US has 13 persons and China, nine diplomats (Turkey also has nine staff in Podgorica). The sharp decrease in US presence (a year or so ago it still had 20 accredited diplomats) is unusual and might indicate that with Montenegro’s NATO accession, the main task has been accomplished.

Many important European and world countries do not have embassies in Podgorica, instead covering the country from Belgrade. And even those with an embassy or consulate in Montenegro also divide their resources between Serbia and other countries, as does Italy. Among those countries with locally-based embassies, France has four persons (with another five based in Belgrade and one in Zagreb), while Germany has six (with another four based in Belgrade and one in Sarajevo), Surprisingly active Hungary keeps eight diplomats, and one attache in Belgrade. Greece has six diplomats in Montenegro, all locally-based.

Italy’s diplomatic representation in Montenegro is thus double the European average, While not on the same level as Russia, it is competitive with China, the US, and indeed all other countries. The strong Italian deployment benefits traditional maritime ally Britain, which only keeps a couple of people in Podgorica (though it has several affiliated diplomats covering it from several other nations).

Finally, Italian diplomacy in Montenegro has a strong inter-cultural component. For example, there is the XIV Italian Language Week, held under the patronage of the Italian president. Among the events, the embassy in Podgorica organized a “traveling exhibition of Italian cinema,” with film showings in Podgorica, Bijelo Polje, Niksic and Cetinje in October and November.

Italian-Montenegrin Economic Relations

As is the case with Serbia, current trade levels between Italy and Montenegro attest to the deep collaboration between the countries: according to the latest data published by Monstat (the Montenegrin Statistic Institution), in the period January-July 2015, Italy and Montenegro trade exceeded 100 million euro, with a positive balance of trade for Italy of almost 39 million euros. Italy is the fourth-largest exporter in Montenegro after Serbia, China and Bosnia-Herzegovina, and is the second-largest recipient of Montenegrin export after Serbia. Italy imports mainly metallurgic products and machinery, while exports to Montenegro are primarily textiles, clothing, and alimentary products.

Over 30 significant Italian companies are currently active in Montenegro, mainly in the energy sector, with A2A and Terna dominating the internal market, despite some allegations and scandal which also involved the Montenegrin Parliament, and were reported in Italian media in October 2014. The bilateral business relations of Italy and Montenegro are regularly supported by business forums like this one. The longtime prime minister, Milo Djukanovic, has also stated in interviews his positive opinion of Italian trade and overall relations with his country.

Italian Moves on the Montenegrin Energy Scene, in the Context of the Larger Energy War

Italian energy giant ENI, which we discussed in regards to its Libya activities earlier in this series, is also active in Montenegro. In a historic decision of February 2016, the Montenegrin government awarded a 30-year oil and gas concession to ENI and Russian energy giant Novatek. Undoubtedly, the pairing raised some eyebrows in certain Western capitals, but in a sense it just cemented a relationship that had been anticipated in earlier planned scenarios.

The final contract between ENI and Russia’s second-largest gas company was signed on September 14, 2016. According to Reuters, “the contract for four blocks covering an area of 1,228 square kilometers has been awarded in line with the terms of a 2014 tender, which initially covered an area of 3,000 square kilometers. Each of the partners will have 50 percent interest in the exploration licenses.” The prime minister, Milo Djukanovic noted that the country will establish “a fund for oil and gas, adopting Norwegian energy model, based on which the country claims ownership over oil in its land.” Drilling is expected to begin this year.

This agreement is particularly significant if we take into account the chronic confrontation between the US and key EU states with Russia over European energy supply. This antagonism has been seen in recent years particularly in regards to two projected pipelines. The (for now, cancelled) Russian South Stream, which would have passed under the Black Sea through Bulgaria and Serbia, was the first. In February 2012, Gazprom announced that Montenegro would join the project (as one of several Balkan states expected to get a gas connector).

The Montenegrin government had planned since October 2011 to join this Russian project. It is important to mention, for the historical record concerning Italian energy strategy, that the agreed investor competition as of 2012 included ENI at 20%, along with Gazprom (50%), Wintershall (Germany, 15%) and EdF (France, 15%). The whole project was of course crushed in 2014 when the US and EU put tacit pressure on Bulgaria to back out.

When this occurred, ENI withdrew from the South Stream project. This left only the American-backed Trans-Adriatic Pipeline, from Azerbaijan to Turkey, Greece and undersea to Italy. As of August 29, 2016, the shareholders of TAP also included an Italian public energy company: along with BP (20%), SOCAR (20%), Fluxys (19%), Enagás (16%) and Axpo (5%), the gas infrastructure and regasification company Snam S.p.A. owns 20% of the venture. This fact, and ENI’s new re-emergence with the Russian Novatek in Montenegro, indicates that Italian energy companies are aggressive and well-positioned for operations in Montenegro, and indeed the Eastern Adriatic in general.

Where Montenegro comes back into the picture here is the proposed TAP connector, the Ionian Adriatic Pipeline (IAP), planned to pass northwards along the Eastern Adriatic coast from Greece. In late August 2016, an MoU was signed by Albania, Bosnia-Herzegovina, Croatia, Montenegro and Socar. The construction of this pipeline fits in with a general trend we have long noted, both in terms of EU funding structures and even religious activities, that will establish an ‘Eastern Adriatic’ zone of Western-oriented territories, Rather than the misleading and amorphous term ‘Western Balkans’ we are so used to hearing about today, the Eastern Adriatic zone of control was historically the dividing line between the Eastern and Western Roman Empires, and was heavily influenced by Italy (with the Venetian Republic and so on) and the Austro-Hungarian Empire. So while in official rhetoric and pledges involving the EU, we will continue to be told of a focus on the “Western Balkans,” in practical terms the most development will occur on the historically Western-influenced Eastern Adriatic shores.

The energy game here will thus be of constant interest, especially considering that we expect (for other reasons) US relations with the key player in all of this – Azerbaijan – to steadily worsen in the next year. This Caucasus country had always been the cornerstone of US energy policy when TAP was first suggested, as an alternative to Russia, while Turkey was also considered a dependable ally for transit. But the trajectory of US policy in the recent period is increasingly at odds with the two key countries involved in TAP.

Thus, the survival of Turkey’s Erdogan, and his apparent rapprochement with Vladimir Putin are rekindling hopes for a Turkish Stream pipeline that would transit the Black Sea and resurface in Turkish Thrace, thereafter passing westward through the Balkans. While Putin had proposed this pipeline in 2014 as a replacement for the mooted South Stream, the poor relations between Russia and Turkey over Syria froze the project- until, that is, the July 15 coup attempt led Erdogan to reconsider the value of his Western allies.

On September 15, a senior Gazprom official announced that the two countries will sign an agreement on offshore construction in early October, by the time of the World Energy Forum in Istanbul. Cumulatively, these developments (among many others) indicate an intensification of Great-Power struggles which will play out across John Kerry’s so-called ‘line of fire,’ of which the Balkans are definitely a part.

For Italy, therefore, Montenegro will remain a useful base of operations not only for investment in energy, but as a hub for gaining economic and political intelligence on a variety of energy-related potential projects. Montenegro may just be located on a peripheral pipeline extension route, but even this is a crucial element for the EU to get all its ducks in a row for the continent’s energy master plan. Thus the investment and intelligence presence of the US, Russia and China here all make it an important place to keep monitoring- especially for the country that sits right across the sea from it, Italy.

Italian Support for Innovation

Italy’s support for research and innovation in the country was reaffirmed in a recent memorandum signed between Italian company AREA Science Park and Montenegro, through the sponsorship of Italian Friuli Venezia-Giulia region. According to Friuli’s president, Debora Serracchiani, “this agreement makes research a driving force for competitiveness in the international market. The agreement supports the creation of new companies in Italy and Montenegro.

For the Italian region, the agreement will allow a better exchange of knowledge and skills, while for Montenegro the cooperation with AREA could help the country to implement the ambitious National Plan for Investments in Innovation.

Police Cooperation

It is far beyond the scope of this brief overview to delve into all the details of Italy’s investigations and indictments that stemmed from drugs and cigarette smuggling in 1990s (and later) Montenegro. Suffice it to say that the alleged involvement of high-level politicians in both Montenegro and Serbia hindered police and security cooperation between Italy and Montenegro Unreliability, mistrust, and the need to protect important figures created obstacles for joint police investigations of mafia activities. As Balkanalysis.com reported in 2011, the “Adriatic Connection” between Italian and Balkan smuggling outfits grew in those years and significantly affected bilateral relations. Since then, the situation has improved, even if the ruling forces in the country have not really changed in over 20 years.

Since 2010 Italy has sent police liaisons to Montenegro, located at the Italian Embassy, to improve police and security cooperation. Another Eastern Adriatic consolidation trend, one that also reflects realities of organized crime, is now being seen in the increased cooperation of Italian police with their counterparts in Montenegro, Kosovo and Albania. Under the IPA Project, Montenegro was granted 20 million euros from the EU to enhance security agencies and refugee management. On 5 April 2015, the Center of Tarvisio-Thorl Maglern hosted EULEX officials and colleagues from Montenegro, Albania and Kosovo, with the future plan to establish a Center for Police Cooperation between the three countries in Plav.

It was planned that this center would help the exchange of information, risk analysis and improved cross-border cooperation. Support for this initiative had previously been given at a Rome summit of 20 October 2014, in which Italian Interior Minister Angelino Alfano and Montenegrin Minister of Justice Dusko Markovic also cited other areas for improving bilateral police and security cooperation.

Underworld Killings as a New Area of Focus for Italian Intelligence in Montenegro

A high-profile recent case on which Italian police and intelligence are sure to be investigating was the assassination of Montenegrin organized crime figure Dalibor Djuric on 22 September. He was shot by a long-range sniper, through a wire fence while exercising in a prison yard in Podgorica. According to Balkan Insight, “the assassination is the third drugs-related killing in a few months, after a bomb blast killed two alleged members of drug gangs in September… Five people have been killed since early 2015 in apparent clashes between the rival Skaljari and Kavac clans, named after neighbourhoods in Kotor.” The sniper’s shot had come from a hilltop. A burned-out car with Italian license plots was later found by police nearby.

In this 2011 report, we discussed how mafia groups that emerged from the 1990s wars later developed a new and more ‘Italian-style’ model of discretion and white-collar business activities. However, it seems the recent spate of underworld killings in Montenegro has to do broadly with the fallout of several major drug busts, that are squeezing gangs’ profits and space for movement while providing motivation for fratricidal revenge. This has followed the increasing law-enforcement efforts of Italy, the USA, South American countries and others in Europe.

In a way, therefore, the success of judiciaries in trying alleged drug lords with white-collar businesses in Montenegro has also ironically created a new kind of hard-security risk in terms of armed combat on the streets of Montenegrin towns. This is hardly beneficial for the country’s image or all-important tourism economy. So we can expect Italian intelligence to also focus more on the ‘ground war’ aspect of organized crime as much as on the usual investigation of international trade routes and partners.

Italy’s Position on Montenegro’s NATO Membership

Since Montenegro’s independence in 2006, Italy has remained a great supporter of its Euro-Atlantic integration. Italy supported its NATO membership, before and after it was invited to join the alliance in December 2015. On 20 May 2016, Russia condemned this invitation, stating that it could raise new tensions between Moscow and Brussels. Russian government spokesman Dmitry Peskov stated, according to Reuters, that Moscow considers “the enlarging of the NATO as a wrong idea, since this process won’t translate into better security for Europe.”

On the other hand, the Secretary General of NATO, Jens Stoltenberg, stated that “Montenegro is already contributing to NATO, UN and EU operations, promoting regional cooperation and implementing important reforms; giving to Montenegro the possibility to become a member will ease the political process inside NATO itself. It will bring more security and stability in the region […] and will be a clear signal that NATO’s doors are always open to nations that share and promote our values.”

Russia objected to this declaration. While considering Montenegro a “traditionally friend country,” Moscow was disappointed by the government’s decision. Foreign Ministry Spokeswoman Maria Zakharova called the decision a new attempt to change the strategic-military balance in Europe, “especially in light of the alliance game started to isolate our country.” However, analysts knew that Russia was hardly surprised by Montenegro’s (inevitable) choice to join NATO, and had made contingency plans. One interesting conjecture, that cannot of course be proven, is that Russia’s annexation of Crimea was partly a precautionary measure against the potential loss of its ‘warm-water port’ on the Adriatic.

In any case, Western diplomatic sources in the Balkans have stated for Balkanalysis.com that Russia’s declared opposition to Montenegrin NATO membership could be just a pretext for defending its general international role, since Moscow, aside from energy supplies, does not have any real means of leverage to condition local politics and future decisions.

Italy and other Western countries have planned that in the long term, Montenegro’s NATO membership will help to expand the rule of law and limit the influence of both organized crime and foreign intelligence services on local actors. It is interesting to note that the intensification of rival mafia assassinations has massed around the time of Montenegrin accession to a Western bloc (NATO) closely resembling the similar experience of Bulgaria before joining another (the EU).

The Mysterious Convergence: The Church, Italian Intelligence and Montenegro

Montenegro became an independent state on June 3, 2006, following a referendum three months before. According to official 2015 data, the first ambassador to present his credentials (on March 30, 2007) was Enrico Tuccillo- representative of the Sovereign Military Order of Malta. (For unknown reasons, the 2016 list gives his accreditation date as April 29, 2008). A veteran lawyer with close relations to the Catholic Church, the Naples-based Tuccillo had successfully defended  Milo Djukanovic’s right to diplomatic immunity, in the latter’s long battle with the Italian state over the cigarettes smuggling affair of the 1990s.

In the bigger picture, this affiliation is important as it reveals another aspect of Italian interest – and sophisticated ability to work international systems – present in Montenegro. The Knights of Malta, a Rome-based chivalrous order and one of the very few given official status by the Vatican, maintains diplomatic relations with over 100 countries. The Montenegrin state possesses several priceless ancient Christian relics that once belonged to the SMOM, who have tried (and will continue to try) to ‘win back’ these state heritage items.

Since the early 1990s, the policy of driving a wedge between Serbs and Montenegrins has been a Western goal and part of this has come through the creation (first as an NGO, later as a religious body) of a ‘Montenegrin Orthodox Church,’ to rival the established Serbian one. Structures within the Church and Italian intelligence have helped guide this process of church-building, diplomatic sources have stated for Balkanalysis.com, with different sides looking for their own interests. The Knights of Malta regarded an independent church that could claim all religious heritage in the country as advantageous to their obsession with reclaiming relics. In the big picture, the Western plan to bring Montenegro into the desired Eastern Adriatic bloc was partly envisioned as a geopolitical one involving religion. While that process is not yet finished, already 30 percent of Montenegrins support the MPC. Today, a similar attempt to divide the Orthodox Church in Macedonia – again, for geopolitical goals – is being promoted by Western intelligence services in the context of the political crisis.

Montenegro, despite being small in size, has an outsized importance for rival intelligence services due to its maritime placement between Croatia, Serbia, Kosovo, Albania and Italy. This has brought many interests to the table. As the authors noted in an ebook, The Vatican’s Challenges in the Balkans, Hungarian intelligence in Montenegro has played an invaluable support role for the Vatican- something particularly ironic considering that in the 1970s Hungary had been tasked with conducting hostile intelligence activities against the Vatican, for the Soviet Union.

As was the case with Serbia, Italy’s main intelligence interests in Montenegro are firstly economic, and second police- and security-related. Keeping track of major energy deals and the preparations that go into them (as well as intelligence and counter-intelligence on potential business partners and foes) is an important task, as is monitoring the Montenegrin security services for Russian penetration. As in Albania and Croatia, Italy can use its superior HUMINT capacities here to benefit its allies, chiefly Great Britain. For the latter, this need will intensify in a post-Brexit situation.

The second trend worth watching in future regarding Italian intelligence and Montenegro is expected developments with Latin America. drug smuggling and the Montenegrin-Serbian diaspora are two issues of focus relevant in this context. But the three-way relationship is richer. Italy has a significant and historic relationship with Argentina, for example, which continues today- the pope, after all, is an Argentine of Italian descent.

Argentina was the second country (following the Knights of Malta) to have an ambassador offer his credentials to the newly-independent Montenegro, when Domingo Santiago Cullen did so on 9 November 2007. It also hosts a large Montenegrin and Serbian diaspora, and is a key site of activity for the renegade Montenegrin Orthodox Church (in fact, before becoming pope, Archbishop Bergoglio met with MOC leaders in Argentina). In addition to the high-profile issue of cocaine smuggling from Latin America through cooperation of Italian, Serbian and Montenegrin groups, these issues are all of relevance to larger Italian interests.

Fortunately, Italy will be well-represented down south. Relatively few Italian intelligence officers have intimate experience of both Montenegrin and South American issues, so it is advantageous for AISE that its operative in Montenegro through 2013, Filippo Candela, will probably be running the Buenos Aires station. If cleared, this prestigious promotion decided in March will follow two turbulent (but apparently successful) years in Macedonia. (We covered the publicly perceived Italian role in Macedonia’s political crisis in the third part of the current series). The appointment will improve Italian intelligence’s abilities to ‘put all the pieces together’ concerning all of the Argentine-Balkan areas of common overlap mentioned above.

Conclusions

Italian diplomatic, economic, intelligence and security relations with Montenegro represent perhaps the most interesting (if not the most significant) case of Italian influence in the MENA and Balkan regions.

For here there are numerous overlapping interests of Italian and foreign investors, including the ‘energy game’ and Montenegro’s connected pipeline projects, as well as the strong moves of outside powers like China in infrastructure development and the UAE in high-end tourism.

While still a haven for organized crime with deep connections to Italy, Montenegro is also now a NATO ally – with all of the interests that invities – and a strong base of activity for the Vatican and related Italy-based groups like the SMOM. But above all, Montenegro is a playground for very wealthy individuals from all over the world, representing divergent political, business and intelligence interests. Often Hollywood exaggerates a stereotype, but the decision to partially set the remake of Bond classic Casino Royale in Montenegro does reflect a certain reality about the kind of visitors it attracts.

Finally, while some Western states have simply bemoaned the influence of corruption and crime in Montenegro’s political life, the tiny and mountainous enclave has never functioned as a perfect democracy, though it has always been independent-minded. Socialist Yugoslavia brought a temporary exception to this historic identity- one seen most vividly in the exploits of King Nikola, and again in that of his modern-day successor, Milo Djukanovic.

It is thus not surprising that the historic periods of maximum Italian influence in Montenegro have been precisely at those when it has existed as a sort of glorified fiefdom. And so, while Western sticklers for democratic processes and rule of law have frequently been frustrated and ineffective here, Italy has been more persuasive- specifically because it understands Montenegro less as a state than as a ‘manageable paradise.’

Chinese Investment Developments in the Balkans 2016: Focus on Montenegro

By Bilsana Bibic

On 7 July 2006, Montenegro (then a newly independent state) established diplomatic relations with the People’s Republic of China. China had recognized Montenegro’s sovereignty less than a month before. Since then, China’s relationship with Montenegro and other ex-Yugoslav countries has progressively evolved.

According to Loïc Poulain’s article China’s New Balkan Strategy (2011), China invests in Southeastern Europe in order to “circumvent the EU’s anti-dumping regulations and export products directly to a market of some 800 million people”. According to the same article, the Balkans, with their free-trade agreements and strategic positioning, are crucial for the resurrection and extension of the ancient Silk Road which would reduce the time needed for Chinese products to reach Europe.

Even though China’s grand Balkan scheme is somewhat doubtful, the intensification of Chinese investment in the region speaks to an increasingly growing interest. The best manifestation of this is the “16+1” initiative which started in 2012 and which seeks to improve economic relations between China and 16 European countries, including Albania, Bosnia, Croatia, Macedonia, Montenegro, Serbia, and Slovenia. At the last summit of the “16+1” platform in December 2014 in Belgrade, China promised a $3bn investment fund for Central and Eastern Europe.

Montenegro: Fleet Renewal and Highway Investments

Despite all of this, China is not a top investor in Montenegro at present. As a recent article concerning the Central Bank of Montenegro report on FDI notes, top investors are Norway, Italy, Hungary and Russia (in that exact, surprising order). However, the China Exim Bank loans for the construction of the Podgorica-Kolasin motorway section (total cost 809.6 million euros) and for the renewal of the Montenegrin ship fleet (total cost circa €100 million) are in no way negligible.

In fact, Prime Minister Djukanovic had already in 2013 deemed the motorway project “the most important infrastructure project for the future economic development of Montenegro”. The financing agreement for the motorway project entitling China Road and Bridge Corp (CRBC) to build 41 kilometers of the 169.2 kilometers Bar-Boljare motorway was signed on 30 October, 2014. The conditions are favorable. The €689 million loan is given for 20 years, with a 6-year grace period and a 2% fixed interest rate. The project is exempted from taxes and custom fees under the Law on Major Highway and requires that at least 30% of the work be assigned to local companies.

Controversies

However, the project has been a fairly controversial topic in Montenegro itself. In March 2014, the World Bank withdrew its budget support loan while the IMF warned of dangers to fiscal stability. The EBRD 2015-2016 Transition Report deemed economic growth of Montenegro in 2014 “disappointing”. Moreover, public debt has been gradually increasing (70.56% GDP in 2016 and growing) while the repayment of debt is requiring greater funds each year.

MP Mladen Bojanic spoke of the other risks involved in the motorway project in an interview in November 2014, noting the currency risk (the loan is denominated in US dollars), the risk of construction quality, the risk of failure to fulfill the deadline (set for 2019) and so on.

There is also a risk that most of the work will be done by Chinese personnel, at the expense of the local Montenegrin workforce, and the fact that many investors are government-owned companies which could “raise eyebrows… in Brussels”, according to a Forbes article from June 2016.

Budget and Exemption Issues

The controversy surrounding the construction of the motorway Bar-Boljare partially stems from the way in which the Parliament of Montenegro approved the project in the first place. Namely, a new law on fiscal responsibility was passed in 2014 as a way to improve public finance management. However, the motorway was termed a project of national interest which allowed for higher deficit and debt in its case, despite the newly adapted law. In order to accommodate obligations related to the motorway project, the Montenegrin government introduced measures of fiscal tightening – a 2% VAT increase, a 4% income tax for above-average earnings and more.

Debt and Developments

These measures, however, are not entirely negative. Their timing and extent, according to the EBRD 2015-2016 Transition Report indicate that they are a sign of “progress in consolidating public finances in Montenegro”. For example, the 7 cents tax on gasoline and taxes to be introduced on coffee, alcohol, carbonated drinks, tobacco etc. are very unpopular but are also a way to prepare for the repayment of the motorway project loan.

In the same vein, the steadily increasing public debt is concerning. However, the motorway project – the main reason for its increase – is “an investment which will positively affect Montenegrin economy”, according to the Central Bank of Montenegro governor Milojica Dakic. The first beneficiaries of the motorway project are the owners of domestic construction companies – the contract stipulates that these companies are supposed to do 30% of the work. According to Ivan Brajovic, the Minister of Transport and Maritime Affairs, 25.16% of the work has been subcontracted so far, while 684 workers have been engaged in the construction.

Some worries, however, remain. The official start of the motorway project was supposed to have been on May 11, 2015. However, the first leveling of the concrete for the Moracica bridge, marking the real beginning of the works took place very recently, on June 3, 2016. The delays bring into question the possibility of finishing the project within the agreed deadline and budget. However, as Brajovic noted, the state has protected itself from delays caused by the contractor. According to him, “the value of agreed penalties reaches 5% of the total project value.”

Other Chinese Projects in Montenegro

Aside from the motorway project, China has one more significant investment in Montenegro, and two more potential investments. They are summarized well in a recent article by Central European Initiative and consist of:

Renewal of the ship fleet

Energy projects (potential)

Blue Corridor Motorway project (potential)

The renewal of the ship fleet began with a loan from China’s Exim Bank worth €56 million. Montenegro used this money to buy two ships, made by Chinese Poly Group. The first two ships were delivered in 2012 for the Montenegrin maritime company, thanks to a 3% fixed interest loan with a 5-year grace period and 15-year maturity. The second two ships were ordered the same year but under slightly different arrangements – 20-year maturity and 2% interest rate for a loan worth around 41 million euros.

According to the above-mentioned article by Central European Initiative, the potential investments in the energy projects in Montenegro consist of the construction of hydropower plants on the Moraca and Komarnica (5 in total) with combined costs of €664 million, and a new unit of a thermal power plant in Pljevlja, worth €326 million. The Chinese Companies Consortium delivered an offer for the power plan unit in March 2013. However, the project was not followed through.

Finally, there is the possibility of Chinese investment in the Blue Corridor motorway project, stretching along the eastern shore of the Adriatic and Ionian seas. The Memorandum of Understanding between Montenegro, Albania and China’s Pacific Construction Group Corporation Limited was signed in November 2015. However, there have been no other concrete developments on this project so far.

Conclusions

As a strong economy with favorable loan conditions and an alternative to the European Union’s more rigid investment funds stipulations, China is an increasingly important partner for the Balkan countries. Its growing interest in the Balkans and Montenegro can be seen from the above examples. China’s interest in the Balkans might as well be, as Poulain’s China’s New Balkan Strategy suggested five years ago, primarily a way to expand the Chinese exports. However, its investments in Montenegro suggest that both sides benefit. The concerns surrounding the motorway project and other Chinese investments, however, should not be ignored. With the ongoing works and continued partnership, the extent of the benefits Montenegro will reap in the long run remains to be seen.

Brain Drain in Montenegro: from Data Assessment to Possible Solutions

By Bilsana Bibic

In the context of youth unemployment, Montenegro places better than other countries in the region. For example, ILO WESO Trends for 2015 predicts a 38.8% youth unemployment rate for Montenegro, in comparison to a 47.5% rate for Serbia and 57.7% rate for Bosnia.

This, however, does not mean that Montenegrin youth are better off on the labor market. According to Vijesti, there were around 30,000 unemployed individuals registered with the Bureau for Employment in March this year. 14,000 of them were young people. And, if we are to judge on the basis of the capital, Podgorica, the majority has a higher educatio degree.

Statistical Data on Brain Drain and the Labor Market

A new IMF special report underlines the incomplete reform process in the Western Balkans, and warns of the risks of a further unemployment increase. Montenegro, which compares favorably to new member states but lags behind EU average in almost all areas, is mentioned as being the country with the sharpest increase in poverty since 2008 (together with Albania).

A sure sign of the inefficiency of the labor market is the constant emigration of the most highly-skilled members of the population. While an exact number of highly-skilled Montenegrins abroad does not exist, the 2014 Study on Diaspora notes that 2,605 individuals living abroad (6.2%) have a university degree.

This data, however, is based on the 2003 census. Other newer data, based on the 2013 census, is still lacking. An important step in solving this issue in Montenegro is the Scientific Network Project which the Directorate for Diaspora conducts in cooperation with the Ministry of Science. However, though laudable, the project lacks a vision of interpretation of data in order for it to be useful to the various actors in the field, as Aleksandar Jacimovic, the acting president of OMSA noted in comments for Balkanalysis.com.

Action Plans, Education and Challenges

The Action Plan for Employment for 2015 gives further insight into the internal causes of brain drain and the situation on the labor market. A high level of unemployment paired with inactivity of the labor force, lack of entrepreneurship incentives and the active informal sector are the top challenges.

An issue specific to Montenegro is the regional difference in unemployment and development levels between the southern/central and the northern regions. As Al Jazeera Balkans notes, while the country’s unemployment rate in March 2014 was 15%, northern Montenegro’s rate was 25%.

Due to a lack of opportunities, youth increasingly migrate from the northern and into the central and southern parts of Montenegro. This leads to a twofold brain-drain phenomenon: one in relation to foreign countries, and the other, an imbalance within the country itself. Most jobs, however, especially in the southern region, are seasonal, short-term and only a few necessitate a higher education degree. Thus, for the majority of highly-educated unemployed youth, the situation is a stalemate.

Another big challenge for Montenegro is the quality of higher education. The labor market demands skills which education currently fails to provide. HEIs are inadequately funded, especially in relation to research activities, resources are scarce (human resources, accessibility of data and academic materials, etc.), while research capacities are underdeveloped (in relation to methodology and data processing). Moreover, issues surrounding plagiarism make students mistrust the ability of HEIs to provide them with adequate personal and academic development.

As a consequence, young people go abroad, seeking quality education and opportunities for professional advancement. Nevertheless, these factors are a matter of personal desire of a particular individual as much as a necessity. Sometimes, the main inspiration for departure is the curiosity and desire to study and work abroad.

At other times, reasons surrounding the economic and social situation prevail. Recently, a politization of youth and the resulting decline in their political engagement has become an acute problem in the region. The discourse on politization in Montenegro, though present, still awaits wider public debate and research. Participation in political parties as a way of securing a job, nepotism, and promotion on the basis of non-professional criteria are taken for granted. For those who wish to be employed on the basis of merit and treated professionally, the option of emigration is sometimes the most feasible.

Existing Institutional Mechanisms for Countering Brain Drain in Montenegro

Montenegro has various mechanisms in place that are supposed to deal with the question of brain drain. Legislation includes a (now-expired) National Youth Action Plan, Strategy of Cooperation with Diaspora 2011-2014, an Action Plan related to it and a Draft Law on the Cooperation of Montenegro with Diaspora.

Meanwhile, the country’s scientific system is regulated by the Law on Scientific and Research Activities from 2010, and also by the Amendments of the Strategy for 2012-2016. Montenegro also has a Directorate for Diaspora which has existed under its current structure since 2011.

The implementation mechanisms are numerous. The Ministry of Science publishes regular calls for national and bilateral projects in the field of scientific and research activities. The first Center of Efficacy was established and the financing of the first Scientific and Technological Park in Montenegro is underway.

Moreover, the Ministry of Science, in cooperation with the Ministry of Education, co-finances scientific and research activities. In this regard, the new National Program of Scholarships for Excellence is quite remarkable. Some 1.26 million euros will be invested in the financing of talented Montenegrins studying and researching at renowned HEIs abroad.

In relation to bridging the gap between the labor market and education, the Bureau for Employment’s Professional Training Program, now in its third year of implementation, is a theoretically sound mechanism. The new program – Youth are Our Potential – is also worth mentioning.

Practical Shortcomings and Private-Sector Tendencies

However, even though such official implementation mechanisms to increase youth employment and reduce brain drain do demonstrably exist, a discrepancy between theory and practice is still present, as the data on unemployment and brain drain clearly demonstrates.

Indeed, as Aleksandar Jacimovic pointed out, the new National Program of Scholarships for Excellence has a time limitation (it ends in 2017), offers only co-financing rather than full financing of studies and makes return to Montenegro a condition of funding. The Professional Training Program, on the other hand, has failed to produce significant results so far. Out of 7,500 individuals who have completed the program, 2,000 (26.6%) got a job offer.

For many employers, this program represents a way to acquire a free labor force. It is common for a company in need of two employees to ask for up to 12 trainees, while then failing to provide any of them with the necessary support. As these examples demonstrate, Montenegro needs quality, not quantity in terms of results from the government’s mechanisms.

NGO Activities and Preferences for a ‘Brain Circulation’ Model

An important NGO working with these issues is OMSA. The organization works with government bodies, lobbies for various interests of the community of Montenegrins who are studying abroad, and is an important interlocutor on new initiatives and projects.

In the past, they have worked on making all of the funding available to Montenegrin students studying in Montenegro also available to those studying abroad. They are engaged in the Montenegrin Empowerment tool project aiming to collect data on the Montenegrin population abroad born after 1980 in an interactive and accessible manner, which would consider career development. They are considered to be a strong advocate of transforming the idea of brain drain into brain network and understanding the decision to go abroad as an individual career decision of high risk.

In a country with a large discrepancy between the ways brain drain is understood among various national and international actors, such advocates are essential. The Montenegrin Directorate for Diaspora shows a positive shift in this regard. The Directorate acknowledges the need for the brain drain question to be considered in a new manner, and focuses its efforts on developing knowledge networks.

In this sense, it moves towards the brain circulation model, which is more flexible and better aligned with the complex migratory trends of highly skilled populations and away from the traditional brain drain/brain gain models. The brain circulation model, unlike the traditional models, acknowledges the positive impact of brain drain. It understands mobility as a personal choice, allowing for development of mechanisms which do not seek to permanently re-locate highly skilled professionals to their country of origin but to create knowledge networks.

Conclusions

Montenegro is still far from bridging the gap in attitudes and perceptions, and shifting the long-term brain drain policies towards a model of brain circulation that some advocates consider the ideal one. The regional differences within the country, based on unequal development and investment, will have to be addressed as well to remedy the basic brain drain problem.

In regards to making the domestic labor market more appealing to Montenegrin students currently studying abroad, a temporary positive discrimination in employment, tax and housing areas could possibly show results. A reassessment of the national approach to financing HEIs, study and research programs would also be constructive. HEIs need more funding to be directed towards research activities.

On the other hand, according to experts like Aleksandar Jacimovic, mechanisms of financing study programs with the aim of investing acquired knowledge into Montenegro need to be separated from those which aim to stimulate the global presence of Montenegrin citizens in various fields.

Finally, and most importantly, as Aleksandar Jacimovic succinctly puts it, “the administration needs to completely dedicate itself to the development of human capital, placing strengthening of youth and collaborative culture at the center of all actions and to constantly remove all limits and barriers for creative and proactive action imposed by the system.”

Emerging Water Industries in Greece

By Ioannis Michaletos in Athens

Water management is attracting the attention of businessmen in Greece, especially when it is related to the water cycle and energy production. Dams, water transmission pipelines, water depots, and seawater desalination plants are all included in the five-year plan that the Karamanlis administration has relayed recently to the press, as a plan to develop this very lucrative sector.

Greece‘ss national plan was drafted by the Ministry of Public Works, along with the national Directorate of Hydro-management and the Athens National Technical University.

This national program includes both large and small hydro-projects, since Greece has significant hydrodynamic potential, most of which is concentrated in the western and northern sections of the country, where major rivers such as the Acheloos, Arachthos, Aoos, Haliakmon, Stymonas and Nestos flow. At the same time, Greece makes excessive use of electricity, almost 40% more than any of its Balkan neighbors. Greece also imports substantial amounts of electricity per annum, especially from Bulgaria.

Most European countries have reached the highest potential of their hydrodynamic reserves. Greece is an exception; only one-third of the economically exploitable hydrodynamic resources are being exploited. Therefore, the country has significant unused domestic reserves, and can thus create a long-term strategy in this field.

The National Program Management and Protection of Water Resources includes measures for better distribution of water in the 14 designated water departments in the country, which, as announced by Minister George Souflias, include large and small projects for water diversions or transfers and for electricity production. These projects include around 22 large hydroelectric structures and about 300 small hydropower ones.

In order to meet the needs of the more arid regions of the country, a system of small and large dams along the rivers and pipelines transporting water from one water compartment to another will be constructed. For coastal areas and islands, seawater desalination plants have already started to be built, some of them using hybrid technology, meaning they are powered by renewable energy resources such as solar and wind power.

These major projects will be designed so as not to disturb the water balance areas. Yet all the evidence suggests that this is inevitable, as water in the coming years will become a more precious and expensive commodity than oil.

The diversion of the Acheloos River to the Thessaly region has almost been completed, at a cost of over 700 million euros. As a consequence Thessaly’ss farmers will enjoy a significant boost in their production (mostly wheat, corn, potato and cotton), with a 300 MW electricity production facility.

The water department with the largest surplus is West Central Greece, while the deficit is evident in Thessaly. Other departments with water deficit are the Eastern Peloponnese and the Aegean islands.

With Greece’ss current pace of growth, it is calculated that by 2030 the northern Peloponnese, eastern and central Greece, Attica, central Macedonia and Thrace will start facing problems, if the government’ss envisioned plans are not implemented. For the time being, the wet winter of 2008-09 has resulted in a spectacular increase in water reserves to such an extent that there are plans to export water to the Middle East. Last year Greece exported water to Cyprus when the latter faced a drought.

Today, the main issues associated with water management in Greece are:

-unequal distribution of water resources in western Greece due to heavy rainfall in comparison with the eastern parts;

-the uneven seasonal distribution of water resources, winter being the only significant rainy period;

unequal distribution of water demand in the country, with Attica, Thessaloniki and Patras requiring most of the resources during winter, in addition to the most visited tourist islands of the Aegean in the summer;

-leaks in water distribution networks, affecting up to 20% of pipeline networks, pose an additional problem and require new pipeline infrastructure.

Already, Greece has reached scientific and bi-governmental agreements with the EU countries plus Iceland in order to import much needed know-how regarding water management issues.

It is telling that the country is ranked in the last place among 24 European and Mediterranean countries, having at present only 46 large dams. Spain (ranked 1st) has 1196, followed by Turkey with 625, France with 569, and Italy with 524.

The Greek government moreover is now geared to privatize segments of the hydro-infrastructure. The water and sewerage companies in both Athens and Thessaloniki are high on the list next to privatization.

The Ministry of Finance seems to be planning a gradual reduction in the percentage held and in the state companies EYDAP (Athens) and EYATH (Thessaloniki). Currently, the government holds 70% of the share capital of EYDAP (60% government and 10% of the ATE state bank) and over 70% of EYATH. According to all available information those percentages will fall to 40% by next year. The capitalization of the former is around 400 million euros, and of EYATH, around 200 million euros.

Already, French multinational Suez Environment has expressed keen interest to invest in Greek companies. Since both of them hold significant real estate along the two biggest Greek cities, there are ample opportunities for investing in the sewage management sector, the next big thing in the contemporary “Green business” trend. Certainly, the water business is going to become a well known feature in Greece and elsewhere in the Balkans, as major investors start to move into an emerging and very lucrative sector.

Looking for More Balkanalysis.com Publications?

Find Balkanalysis.com articles in the Central And Eastern European Online Library (CEEOL)

Buy Balkanalysis.com articles and e-books for Amazon Kindle

An Independent Montenegro?

By David Binder

The United Nations has 191 members. Four of those which have joined since 1991 were constituent republics of the former Yugoslav Federation. So who could be surprised if the world body grows to 200 in the next few years, with some of the newest additions again emerging from the mess that was made of Yugoslavia?

Montenegro, anyone? To be followed by Kosovo? Sandzak? Vojvodina? Bay of Kotor? Tuzi?

You smile. Yet we have entered a new age of atomization, with the UN leading the race as a growth industry, trailed a bit lamely by the European Union and the North Atlantic Treaty Organization. All three groupings are in the business of legitimizing the splitting off of chunks of older, larger state entities.Montenegro, population 690,000 – a new mini-state? At least it could boast three times more population than Vanuatu, which joined the UN in 1981, and ten times more than Andorra, which joined in 1993.

Weighed on the scales of world events, the May 21 referendum on independence of Montenegro may amount to something between a sigh and a hiccup. But for those who know a little and care more about the Balkans it is something of greater gravity.

This is so because Montenegro represents an essential part of the Serbian cultural space. Montenegro’s princes of the Petrovic-Njegos dynasty made their link to Serbia abundantly clear from 1697 onward. Two of the most accomplished contemporary writers have underscored this attachment. Milovan Djilas said in 1993 (to me as I am sure he said to others): “Montenegrins are basically Serbs.” And just last month Matija Beckovic, a friend of Djilas, branded the referendum “the greatest insult to the national consciousness of Montenegro.”

For the last 15 years, Montenegro has been ruled by what earlier was called a petty despot (the usage is considered old-fashioned). Now we call such a person a crook. That characterization emerges from indictments involving international tobacco trafficking in the law courts of three countries, in which Milo Djukanovic is named as a conspirator.

But tobacco smuggling is only part of Montenegro’s dark side under Djukanovic. Exposes of sex trafficking have revealed the involvement of officials of his government. His territory is also crossed by transit routes for drugs and weapons. Just two years ago, an opposition journalist, Dusko Jovanovic, was killed by a gunman who remains free today.

Concerned by the high bar set by the European Union for winning the referendum – 55 percent of the vote – the Djukanovic forces were found trying to buy votes in March.

To a degree in the 1990s the Clinton Administration helped to advance the career of Djukanovic. It overlooked his origins as the proteges of Slobodan Milosevic, while backing his separatist ambitions at critical junctures during the Yugoslav civil wars.

Djukanovic still has opportunistic advocates here in the persons of Mitch McConnell, the Republican from the tobacco state of Kentucky and one of the most powerful men in the Senate; Morton Abramowitz of the Century Foundation and Janusz Bugajski of the Center for Strategic and International Studies, now director of the board of a lobby group set up to push the Kosovo Albanian independence project in Washington. The other two are also vocal supporters of Albanian causes.

The Bush Administration has been cooler than its predecessor toward Djukanovic. This was demonstrated when four members of the Montenegrin opposition were cordially received at the National Security Council and the State Department in April despite last minute bungling of their preparations.

There are bizarre polarities in this existential moment of the onetime mountain kingdom – ranging from the sublime to the criminally suspect. This was prefigured perhaps in the contrasting subjects of the two main literary works of the Prince-Bishop Petar Njegos – The Mountain Wreath and The False Tsar Scepan The Small.

For instance, some polls show the voters of Montenegro are divided on the independence issue. Yet the 300,000 Montenegrins who reside in Serbia, are not permitted to vote in the referendum. This means that the small minorities of ethnic Albanians, Bosnians, Muslims could swing the outcome in favor of independence.

A mid-April poll conducted for the Podgorica government indicated that 55.9 percent of surveyed citizens of Montenegro will support independence in the referendum. This reminds one of a Belgrade joke on the subject:

In a tavern a Serb is asked whether he would prefer an independent Montenegro or a unified state comprising Serbia and Montenegro. He replies: “I would prefer another beer.”

These two polls might make a metaphor for the referendum: the public opinion testing, ritually practiced almost daily in self-styled democracies almost as a substitute for actual elections, versus the joke about the poll.

On that note, let us consider how Milo Djukanovic might deal with Montenegro’s residues of Serbian culture in case he wins the referendum. He could rename the country Djukanistan.

*David Binder (born 1931) was a correspondent for The New York Times from 1961 until 2004. He specialized in coverage of central and eastern Europe, based in Berlin, Belgrade and Bonn. The current piece was published in Belgrade’s Politika on May 11, 2006.

Reflections on Milosevic

By David Binder

No Serbian leader had such renown since the time of Prince Lazar and Tsar Dusan. No Yugoslav except Tito had such international recognition. One must concede that to Slobodan Milosevic and, at the end of his days he appeared to relish that prominence immensely – the sole reminder of his years in power over the shredded country he left behind.

But keep in mind, his notoriety was manufactured largely outside of Serbia, outside of the larger Yugoslav frame, by adversaries who became enemies slavering over his final defeats and rejoicing in his incarceration.

“Butcher of the Balkans!” (who was it that coined that ludicrous epithet reminiscent of World War I or World War II propaganda?) “He was a monster!” trumpeted Richard Holbrooke adding, “Sometimes monsters make the biggest impact on history. Hitler, Stalin. And such is the case with this gentleman.”

Note the sly addition of “this gentleman” – because Holbrooke, the failed diplomat, had not merely shaken the putatively bloody hand of the monster, he had also smoked fine cigars and drunk excellent whisky with him, again and again.Wesley Clark, the failed general – the U.S. Army retired him after his troubled stint as NATO commander – faintly echoed Holbrooke calling Milosevic a “petty Hitler.”

Why such preposterous exaggeration? Because it provided a venomous rationale justifying the United States and its allies to subject Milosevic’s Serbia first to severe sanctions and then to bombs, rockets and uranium-laced munitions. Of parallel importance, it elevated Madeleine Albright, Bill Clinton, the Holbrookes and the Clarks to the status of giant-killers.

No wonder that the Hague Tribunal’s chief prosecutor bemoaned the death of Milosevic. Without such a star-quality defendant in her dock, Carla del Ponte would have a hard time generating attention and publicity for what for many if not most has become a tiresome expenditure of resources and time. Amid the Milosevic post-mortem frenzy and with the logic of a Hollywood producer, she told anyone who would listen that it was now more important than ever to bring the fugitive General Ratko Mladic and his political collaborator Radovan Karadzic to trial.

The first time I reported about Milosevic was in autumn 1987 when he politicked his way to the top of the Serbian Communist party and began to manipulate the media through his adjutants. A Belgrade colleague told me how Milosevic had brutally threatened Azem Vlasi, the Kosovo leader, using vulgarities about the Albanian’s mother. Vlasi replied: “I do not say that about your mother, but I do not forget what you said about my mother.” As soon as he could Milosevic had Vlasi, the one Albanian who might have preserved Kosovo for Yugoslavia, thrown in jail.

In 1988 I sought an interview with Milosevic. I got only as far as Mihailo Crnobrnja, at the time his adviser on economic policy, who said he had a strong impression Milosevic was striving to assume the mantle of Tito. “That is his ambition,” Crnobrnja emphasized.

In following years I asked six times for an interview with Milosevic. He never replied. The only time I encountered him was in January 1993 when I followed Cyrus Vance, the international mediator, to the Federal Executive Building in New Belgrade. Milosevic shook hands with us journalists, but he declined to answer questions.

Another snapshot from 1993: I was strolling on a Washington street with P.J. Nichols, a State Department Yugoslavia specialist and one of the principal architects of the punishing economic sanctions instituted against Serbia. We talked about the Yugoslav wars.

All at once, his eyes glistening with missionary zeal, Nichols put a hand on my elbow and declared: “I have a vision! A vision of a worker from Rakovica, who grabs a pistol and goes up and shoots Milosevic!” I shook my head: “You’ve got that wrong, P.J. The workers in Rakovica are some of Milosevic’s strongest supporters!”

Now in looking back on the astounding career of a provincial politician who now ranks as one of the 20th century’s leading villains, I remind myself of what he was and what he wasn’t.

Milosevic did conduct himself as a petty despot.

His actions turned Serbia into a kind of prison.

By action here and inaction there he fostered massive corruption at the state level and below, some of which is still flourishing.

He also left Serbia behind in a condition of economic and political weakness unmatched since the Ottoman conquest and occupation.

But he did not himself start four Balkan wars.

He did not strive for a “Greater Serbia.”

He did not play a part in the massacres around Srebrenica.

He did not mastermind the expulsion of Albanians from Kosovo.

Nor could the Hague prosecution, with all the time and all the resources at its disposal, have proven any of those charges.

So what will the judgment of history be on Slobodan Milosevic?

It took Sidney B. Fay, an American historian, a decade after the end of World War I to demonstrate exhaustively and definitively that Germany did not by itself precipitate World War I, with his The Origins of The World War. But that was much too late to prevent crippling reparations and other punitive actions by the victorious entente powers, or their deadly impact on postwar German politics.

But I suspect it will take historians much, much longer to redress the current one-sided version of the true causes of the wars of Yugoslavia and the real nature of Slobodan Milosevic’s part in them.

………………………….

David Binder (born 1931) was a correspondent for The New York Times from 1961 until 2004. He specialized in coverage of central and eastern Europe, based in Berlin, Belgrade and Bonn. The current piece was published in Belgrade’s Politika on March 22, 2006.

Balkan Defense Overview: Developments and Prospects

By Ioannis Michaletos in Athens

In this comparative analysis of defense procurement in four key Balkan states, Greek consultant Ioannis Michaletos gives an overview of the factors influencing government arms buildups, restructuring and modernization of forces at a key moment for the region.

At this time the Balkans is one of the most heavily armed areas in Europe and it remains one of the crucial regions for geo-strategic analysis, as far as the international balance of power is concerned. It is a peninsula that is sufficiently close to Russia, the Middle East and Western Europe alike to become important in cases of power shifts like the major one that happened after 1989, and the collapse of the Soviet Union. Defense developments in the region are thus of profound interest for everyone involved in forecasting, analysis and policy making. This article considers defense procurement trends in four Balkan countries: Greece, Turkey, Bulgaria and Serbia & Montenegro.

Preliminary: Reasons for Reform

The reason for the reforms in all states being considered is to keep costs down, whilst simultaneously achieving greater mobility, flexibility and quick response capabilities. On numerous occasions NATO defense ministers have stretched the importance of the above features for all modern armies. Three of the Balkan states considered here are NATO members, while the fourth (Serbia & Montenegro) would like to be someday. The reason for structural reforms that are proving unpopular due to the increased number of redundancies is the largely American vision of NATO as a rapid reaction force deployable quickly in non-traditional theaters, such as Afghanistan, as part of the new “war on terror.’ Of course, when countries save money by trimming staff, they also have more money to purchase expensive new weaponry produced by America (and the leading EU countries).

There has been much debate regarding the role and relevance of the new European rapid reaction force that came into effect in 2003, vis-a-vis NATO, and what this might imply for the EU’s plans for future policing of the continent and perhaps, elsewhere. It is composed of units made up of its respective members, which contribute mobile structures, heavy firepower and professional troops. Therefore all countries that would want to contribute to the European force should have the above infrastructure- another reason for reform among the two Balkan newcomers. But first let’s discuss the established regional powers, Greece and Turkey.

1.) Greece

In Greece, a significant trend is currently going on in the defense sector: the reconstruction of the General Staff’s services. This involves the standardization of the operational, logistical, personnel and defense planning structures of the Greek army, navy and air force. For this reason a considerable disbandment of directorates and departments have occurred, and at the same time a new law was passed by parliament in 2003, which eased the seniority-based promotion system for officers, giving more attention to merit-based appointments.

A reduction of the army’s general staff personnel by about one-third has been accomplished, and respectively the top positions from brigadier ranks and above. Furthermore, a new planning format for active combat units has been introduced that rely on smaller, mobile and more actively manned units has been introduced. The navy and air force have also performed operational cost-cutting and consigned older ships, planes and armor to the scrap heap, in order to keep costs down and at the same time allow invest in high technology. All of these reforms are in keeping with NATO strategy for reducing troop sizes throughout the alliance member states and redirecting funds to next generation military technology.

On the procurement side of things, the Hellenic army has invested heavily in the Leopard 2HEL armored tank, a German-made model of Krauss-Maffei Wegmann. The total cost for 170 units was 1.7 billion Euros. The tank is considered the best in the world in terms of battle survival prospects and force projection.

Another notable procurement has been the 20 tactical transport helicopters from the French-German NH industry, at a total cost of 657,500 million Euros. Procurements in the Greek navy include 4 U214 submarines made by the HDW shipyards in Hanover, Germany, at a cost of around 1.5 billion Euros. Also, 5 small corvettes are being constructed in the Elefsis yards in Athens, based on a British design, at a total cost of around 740 million euros.

In the Greek air force, considerable attention has been given to new planes and for this reason, after some debate, 80 F-16’s have been ordered from the American firm Lockheed Martin, as well as 15 Mirage 2000-5 from Dassault, and 12 C-27J Spartan transport planes from the Alenia-Lockheed consortium. Lastly, 4 AWACS of the EMB-145H Erieye type were procured from a consortium of Ericsson and Embraer. Approximately 10 billion euros were spent over the period 2000-2005 for military procurements, with the aim of creating forces that rely more on technology and mobile structures. Another 6.5 billion are planned for increasing armaments between now and 2010. There is also talk of Greece planning to acquire some 60 new fighter planes; for the moment the Eurofighter model seems to be the favorite.

2.) Turkey

Turkey has plans to severely reduce its armed forces and create a semi-professional army in the coming decade. Because the devastating Izmit earthquake in 1999 and the banking crisis in 2001, not all previous defense procurement plans have been realized. But the most important ones have. A major one here involves the 4 Boeing 737 AWACS that are going to be delivered between 2007 and 2008. Another notable Turkish arms purchase is the 1600 Eryx antitank guided missile launchers stipulated in a 485 million Euro agreement with EADS.

The forthcoming plans for the Turkish armed forces include greater attention for sea power, and according to analysts and officers as well, Turkey wants to expand its naval capabilities and construct a navy that would be strong enough to have continuous and parallel activity in the Black Sea, the Aegean and the Eastern Mediterranean. It is notable that for the first time Turkish attention is being directed into the naval strategic sphere.

On the more usual terrain of ground war, Turkey for its part has plans for 1000 new armored tanks. Its main aim is to be able to manufacture them itself domestically, something that few countries can do, with the major military contractor Otokar.

Both of these countries, which are considered to be long-standing adversaries, have bought weaponry worth around 100 billion Euros over the past 20 years, mainly from the USA, France and Germany. The EU is a major player in their armament and will increasingly become one for the other Balkan states. According to European Defence, “the European defence industry is valued at about 30 billion euros and employs 800,000 people both directly and indirectly.”

3.) Bulgaria

At the time, Bulgaria is mainly preoccupied with the reduction of its armed forces, following the mandates of NATO. After its recent inclusion in the alliance, Bulgaria is projecting that the total cut will reach 50% of its active forces. Simultaneously, Western armaments are going to be introduced in order to phase out Bulgaria’s Soviet-era weaponry. This is the first time since the creation of the Bulgarian state in the late 19th century that the country seems to be abandoning the preservation of strong troop numbers, changing its historic role to achieve other strategic goals, namely NATO standards and the forthcoming EU accession.

In May 2004, the government unfolded a plan for the armed forces called “Vision and Development for the Armed Forces-2015.” It ordains the procurements of certain armaments worth 1.5 billion Levas for the period 2005-2007, for ground and air forces as well as new, high-tech electronics systems. The acquisitions show Bulgaria’s strong desire to re-orient its arsenal away from old Soviet-made gear and towards Western production, not surprising in light of Bulgaria’s imminent entry into the EU.

Among the goods were included 12,900 vehicles from the Daimler-Chrysler group, 12 AS-532AL Cougar helicopters and 6 AS 565MB Panther ones from Eurocopter. Another 8 C27j Spartan transport planes produced by Alenia Aeronautica are to be ordered, and the Belgian navy will provide 1 Wielingen-class corvette. The electronic systems will be obtained from various producers.

4.) Serbia & Montenegro

Years after the wars of the 1990’s in the former Yugoslavia, the country still faces relative geopolitical isolation as far as defense procurements are involved. Since Yugoslav times, there has been no notable change in Serbia & Montenegro’s arsenal. It is more than certain that in the coming years there is going to be a significant reduction in its armed forces, for economic reasons as well as because of NATO aspirations. In fact, according to a recent report, by 2007 compulsory military service will be phased out as Serbia & Montenegro moves towards a fully professional army.

However, there hasn’t been much news regarding new procurement, except perhaps for a procurement scandal that shook up the Serbian defense ministry this year. But Serbia, once a great military producer as the major industrial republic of the former Yugoslavia, may well seek to again manufacture what armaments it can domestically. It is assumed that production capacity has been mended following the heavy damage inflicted by NATO in its 1999 bombing campaign. With its existing defense facilities and factories, Serbia & Montenegro is capable of producing a wide range of ammunitions, electronics, anti-armor and anti-aircraft missiles.

The estimated total size of the army of Serbia & Montenegro is 55,000 personnel. This includes non-combat units, paramedics, telecommunication, civil and aircraft defence battalions and units of virtual mobilization, usually situated in the countryside.

Of this total, 28,000 soldiers are on constant active duty. The Serbian army has a unique and quite effective mobilization scheme, in which the armed forces are composed of a three-part force designed for quick mobilization in time of need. The active units are always on call; they are followed by secondary ones, and finally reserves who keep their weaponry and uniforms at home. In a time of total mobilization, they can all appear in the units to which they were originally assigned at the time of their compulsory military service. This is a non-centralized structure very flexible for small states. Similar systems operate in Switzerland and Cyprus.

However whether this system can survive the expected downsizing and phasing out of compulsory service remains to be seen. In geopolitical terms, the country is a purely continental power, and its main preoccupation is to command a considerable and well organized infantry and army in general. It is highly likely that this role will be severely strained in the future and it is more than certain to expect grumbling from army officials as their role is gradually reduced.

Such reductions will also lessen the country’s traditional geo-strategic capabilities, perhaps the most significant regional trend given the possibility that war with Kosovo Albanians, who are now becoming increasingly well armed, could break out again at some point in the not so distant future. Further, should Montenegro break away from Serbia as has been increasingly forwarded, the end result would see Serbia totally landlocked and Montenegro left without any realistic means of defending itself in the case of any potential conflict with its own Albanian secessionist elements. Reducing Serbia’s historic role of military superiority in the Balkans will have far-reaching ramifications for the regional balance of power.

Conclusion

The current article on defense balance in the Balkans covers only in general terms recent developments; there are many other interesting facts that cannot be examined in only one news article. Everyone interested in European security must pay attention to this region, since apart from its greater geopolitical importance it is the only place in continental Europe that has had recent experience with war. With the resolution of Kosovo’s final status still to be decided and various tensions still simmering away, it is still impossible to confidently predict a peaceful future for the Balkans in the 21st century.

Appendix: Breakdown of Military Resources by Country

Greece

Defense Budget: 7.5 billion euros

Troop Numbers, Army: 99,000
Troop Numbers, Navy: 19,850
Troop Numbers, Air Force: 24,705
Tanks: Leopard & M48 types- 1400
Artillery: M270 & RM70 types- 152
Combat Planes: F-16, F-4, A-7 and M-2000 types- 333
Attack Helicopters: AH-64 Apache type- 20
Frigates: MEKO and Kortenaer types- 13
Submarines: U-209 type- 8
SAM’s: 1332 total [Patriot PAC-3 (6 units), S-300 (2 units), Nike Hercules (3 units), Crotale (9 units), TOR M-1 (25 units), OSA-AK (31 units), Hawk (7 units), Sparrow (12 units), Stinger (1237)]

Turkey

Defense Budget: 9.5 billion euros

Troop Numbers, Army: 402,000
Troop Numbers, Navy: 51,000
Troop Numbers, Air Force: 51,000
Tanks: Leopard, M48 & M60 types- 3,432
Artillery: M270&T-122 types- 42
Combat Planes: F-16, F-4 and F-5 types- 443
Attack Helicopters: Cobra and Super Cobra types- 39
Frigates: OHP, KNOX & MEKO types- 20
Submarines: U-209 type- 11
SAM’s: 3739 total [Stinger (3648 units), Rapier (83 units), Nike Hercules (8 units)]

Bulgaria

Defense Budget: 1.0 billion euros

Troop Numbers, Army: 28,280
Troop Numbers, Navy: 4,400
Troop Numbers, Air Force: 15,600
Tanks: T-72 type- 429
Artillery: BM-21 type- 222
Combat Planes: MIG 29, 23, 21& Su 25k types- 206
Attack Helicopters: Mi-17 type- 24
Frigates: 0
Submarines: 0
SAM’s: 661 total [S-300 (2 units), S-75 (22 units), S-125 (34 units), Strela-10 (20 units), Strela-2 (500 units), 2K-12 (32 units), 2K-11(27), Osa-AK (24 units)]

Serbia & Montenegro

Defense Budget: 0.9 billion euros

Troop Numbers, Army: 55,000
Troop Numbers, Navy: 3,500
Troop Numbers, Air Force: 10,000
Tanks: M84, T-72 & T-64 types- 630
Artillery: M77 & M63 types- 72
Combat Planes: MIG-29, 21 & Orao types- 125
Attack Helicopters: Gazelle type- 65
Frigates: 0
Submarines: SAVA type- 1
SAM’s: 994 total [Strela 1 (113 units), Strela 10 (17 units), Igla 1 (200 units), 2K-12 (6 units), S-75 (8 units), S-125 (8 units), Strela 2M (650 units)]

Recommended Links

Some of the sources for this article, as well as other interesting facts, statistics and geo-strategic related information can be found on the following websites:

Research Institute for European & American Studies, Athens

Institute of Defence Analyses, Athens

Geopolitics.gr

Strategy.gr (in Greek)

Armada Publishing, Zurich

International Institute for Strategic Studies (IISS), United Kingdom

International Assessment and Strategy Center (IASC), Washington

Center for Strategic and International Studies (CSIS), Washington

Greek Ministry of Defense (in Greek)

Turkish Ministry of Defense (in Turkish)

Bulgarian Ministry of Defense (in Bulgarian and English)

Serbia & Montenegro Ministry of Defense (in Serbian and English)

Looking for More Balkanalysis.com Publications?

Find Balkanalysis.com articles in the Central And Eastern European Online Library (CEEOL)

Buy Balkanalysis.com articles and e-books for Amazon Kindle

Organized Crime and Montenegro’s Construction Industry

By Vanja Calovic*

According to the 2005 TI Global Corruption Report “estimates of the total size of the global construction market are around US $3,200 billion per year.” This turnover has thus made the construction industry very attractive for organized crime structures. As for Montenegro, the public largely fears that the money taken out of the country during the transition process is coming back in, and is being laundered through construction of buildings by the transition “winners.” At the same time, this is the reason why those who dare speak about corruption in the construction industry are very few.

In the Montenegrin construction industry there is an obvious presence of the Russian oligarchs who are especially interested in the construction of hotels and residential buildings on the coast. The experiences of other countries show that this kind of business is very attractive for organized crime syndicates, because it is both highly profitable and a favorable means of money laundering. Russian criminal groups have rich experience in this field.Inadequate implementation of laws and undeveloped national companies enable the formation of monopolies and establishment of control over the process of planning and developing space by the mafia. In such a situation, politics becomes just another kind of business.

Montenegrin and Russian officials have confirmed several times that during the sanctions imposed on Yugoslavia, money was transferred from Montenegro to Russia, and that the public was never informed regarding the amount of money involved and the way in which it had left the country. According to daily newspaper Vijesti on October 6, 2004 Prime Minister Milo Djukanovic lamented:

“between 100 and 150 million euros are kept in outside banks or in accounts outside Montenegro. We must encourage people to invest the money into business. If the money does not come from criminal activities or something similar, which is the task of the authorized bodies to determine within the defined legal procedure, then these people should not have any fears.”

Ironically, Djukanovic himself has been accused of corruption in the past. In July 2003, he was accused by Italian prosecution for having links with the Italian mafia. According to the London Guardian, “the prosecutors’ office in Naples named Mr Djukanovic as a linchpin in the illicit trade which used Montenegro as a transit point for smuggling millions of cigarettes across the Adriatic Sea into Italy and into the hands of the Italian mafia for distribution across the EU.”

As a sort of response to the prime minister’s statement, Russian Emergency Services Minister Sergei Soygu pointed out the context of the investments on October 19, 2004. According to Vijesti, Soygu said:

“since Montenegrin and Serbian business transferred most of their money to Russia during the sanctions, nobody in Russia said that it was dirty money obtained owing to the war. We tried to support development of the Montenegrin business as much as we could.”

Since control of property and determination of origin of capital invested in the economy has not started functioning yet in Montenegro, the public largely fears that the money is being returned and laundered through the construction of buildings, both by the Russian and Montenegrin “winners” of the transition process. There is no data as to whether there have been any investigations of money laundering in the construction industry, however.

International experience show that money laundering in the construction industry is especially present in administrative and industrial centers where population migrations from inland are evident, something which naturally causes increased demand for homes and thus more construction activities. Construction companies can hire sometimes illegal immigrants in order to avoid paying taxes and fees, something which enables a higher competitiveness through reduction of costs, but which also encourages trafficking in human beings.

Construction and Trafficking in Human Beings in Montenegro

At present, there is an ongoing trial for organized crime in the Higher Court in Podgorica that started in January 2005. The trial concerns the criminal act of trafficking in human beings, on the basis of the indictment of the Special Prosecutors for fighting organized crime. According to the indictment, between April 2003 and August 17, 2004, four Montenegrin citizens were dealing with trafficking in human beings in an organized way, with the purpose of gaining profit.

The crime of abuse by forced labor was leveled against the indicted persons for their appalling treatment of several dozen Ukrainian construction workers who they had lured to Podgorica under false promises. They established companies called “Pavlo-V” and “Mojmilo-Kompani” in order to import foreign workers for their construction sites, known as “A.D. Gorica” and d”Lunex-Monta.” The Ukrainians were forced to work 12 hours a day for 2 months- without ever receiving any pay.

According to the indictment, one of the accused owned a company that cooperated with 2 uncertified Ukrainian tourist guides who had been indicted for trafficking in human beings in Ukraine as well. They put an advertisement in a newspaper offering construction work in Podgorica, and offered a salary of between 500-1,000 euros a month. The interested workers had to pay 800 euros, allegedly for passports and for arranging their stay and work in Montenegro.

Then the Ukrainian workers were transferred by bus to Montenegro, where their passports were immediately taken away from them. They were kept in the huts of A.D. “Gorica” and provided only the most basic food. When the workers asked for their salaries, they were threatened that they would be deprived of food and accommodation if they refused to work, and were warned that they would be abused. Thus, they were kept in the position of slaves, according to the indictment.

Spanish Police versus the Construction Industry: Operation “White Whale”

A relevant case from Spain illustrates another dimension of the problem. In April 2005, the town of Malaga came under investigation regarding suspected money laundering in a veritable orgy of local construction. Investigators suspected that the industry’s economic infusion was coming primarily from money laundering.

Half of the new construction sites in Spain are on its Mediterranean shore. During an operation codenamed “White Whale,” the police for the first time established a direct link between organized crime and the dramatic explosion of the Spanish construction industry.

Operation “White Whale”, the height of the eighteen-month investigation that included police forces from seven countries, caught 41 suspects and seized 251 pieces of real estate. The combined value of these was estimated at 250 million euros. The seized properties included luxurious villas, weekend flats and shopping centres. Bank deposits of 30 million euros were frozen, and contents of several bank safes were seized by inspectors.

Spanish police believe that through this operation they stopped the biggest chain of money laundering in Europe, one which has branches in the USA and Canada. Candido Conde-Pumpido, the attorney general, described the investigation as being just “the tip of the iceberg.” According to the Financial Times, he said “we are witnessing the silent invasion of mafias on our coast,” adding, “and the big fish have yet to be caught.”

Following the tracks of narco-cartels, the article continues, police raided the offices of Fernanto del Valle, director of the lawyer’s firm in Marbella. The police stated that he established hundreds of companies for foreign criminals so that they could invest their illegal profits and real estate in Spain. The police estimate that more than 600 million euros could have been laundered through del Valle’s firm, and they doubt that many other lawyer’s firms along the shore are not involved in money laundering.

Most sensationally, documents confiscated in Del Valle’s firm point to the fact that large amounts of money were transferred from Yukos, the famous Russian oil group, to a Dutch company and were then invested in Spain.

However, Yukos denied having businesses in Spain and asked for detailed information from the public prosecutor. There are no reliable estimates regarding to what extent organized crime is involved in the Spanish construction industry, but Per Stangeland, head of criminology at the University of Malaga, said that the presence of criminal networks in the construction industry and real estate field cannot be denied. “It is a driving force, perhaps the most important driving force, behind the construction industry,” he said for the FT. “How else is there to explain that [Malaga], with one of the highest unemployment rates and lowest incomes in Spain, can sustain a 1,600% growth in the construction of private housing in five years?”

Budva’s Hotel Splendid and a Russian Magnate

In June 2005, at the construction site of the Hotel Splendid in Budva, Montenegro, three explosive devices were set off within a few days of one another. According to the media, photographs showing the perpetrators exist. So far, the police have arrested several persons suspected of being involved in the explosions. The motives have not been discovered yet. There are several versions regarding who was behind the explosions. According to one, it is a war of local construction lobbies. According to the other, it involves racketeering and money of suspicious origins.

Hotel Splendid was sold to the Russian-Montenegro Company “Montenegro Stars Hotels Group” for 2.4 million euros in 2004. The same Russian-Montenegrin company bought hotels “Blue Star” and “Montenegro.” “We are originally a Montenegrin firm and we remain Montenegrin”, said Darko RaduloviˆšÃ‘‡ at the press conference.

An interlocutor involved in the privatization of several Montenegrin hotels told the Montenegrin weekly The Monitor that the majority owner of the “Splendid” is one Viktor Ivanenko. “The Montenegrin shareholder in the “Montenegro Stars’ has a minority package” states the article, which adds that Ivanenko entered the Montenegrin hotel business through the firm Radan Investors, registered in Switzerland.

Ivanenko, Russia’s 84th wealthiest main according to Forbes’ 2004 report, has an impressive biography. He went a long way from the village of Koltsovka, where he was born in 1947, through the secret Russian police, to the top of the Moscow business and politics. He entered the Russian secret service immediately upon graduation in 1970, during the depressed Communist years. He also stayed on after the disintegration of the USSR, until 1993. Then he went to Yukos and became the First Vice-President of this oil giant. In the 1990’s, private empires appeared in Russia after state property came into the hands of oligarchs through suspicious privatization processes. Ivanenko became one of Yukos’ shareholders.

Russian oligarchs were then recruited from the circles in and around the government, especially from the KBG secret services.

When Russian President Vladimir Putin entered into war against Yukos and its main owner, Mikhail Khodorkovsky, due to unpaid taxed and other alleged suspicious activities, the empire worth billions was destroyed overnight. But Viktor Ivanenko survived.

Khodorkovsky was sentenced to nine years’ imprisonment. Cohort Platon Lebedev is also in prison. Other shareholders of Yukos are under surveillance and many have left Russia and are hiding abroad. Only Ivanenko, along with three other shareholders of Yukos, has stayed in Russia.

At the time when Khodorkovsky was on trial in Russia, at the other end of Europe – Spain – an affair involving the destroyed Russian oil company was unfolding. As we discussed above, several people were arrested last spring in Spain due to the suspicion that they laundered Yukos’ money through construction and tourist businesses in Marbella.

An interesting coincidence: the large board in front of the construction site of “Splendid” has a notice reading that the construction company, the contractor, Unik Trade, in addition to Becici, has jobs in Moscow, Belgrade and Marbella.

A text published in the weekly Nedeljni Telegraf last year on the subject of Russian investments in Montenegro claimed that the Montenegrin shareholder of the “Montenegro Stars,” Zarko Radulovic, said that his Russian partner in the oil business made millions in annual profit. However, Radulovic then protested for The Monitor that, “it is not true that I said that. The whole text was made up.”

At the same time, Radulovic denied claims that his partner is one of the former directors of Yukos. He did not want to reply to the specific question of whether Viktor Ivanenko was the majority co-owner of “Splendid.”

……………………………..

The author is a native Montenegrin and Executive Director of the NGO MANS. She has worked in the non-governmental sector since 1999 on issues related to poverty and corruption. Ms Calovic is also a member of the Expert Task Force for monitoring implementation of the Plan for Combating Corruption and Organized Crime established by the Ministry of Interior of Montenegro.

2004-2009 Back Archives