INTERVIEW: President says Montenegro values ties with Russia but Nato, EU membership strategic

INTERVIEW: President says Montenegro values ties with Russia but Nato, EU membership strategic
Vujanovic shakes hands with Commander US Naval Forces Europe Adm. Harry Ulrich III.
By bne IntelliNews March 31, 2016

This article has been updated to reflect comments by the head of the Azerbaijani state energy company Socar, in which he stresses that contrary to Montenegrin President Vujanovic's remarks, Socar was not a direct investor in the Portonovi resort project, but a facilitator for other Azerbaijani investors.

Montenegro is not pursuing Nato membership to spite Russia, President Filip Vujanovic tells bne IntelliNews in an interview.

The small Balkan nation with a population of just 621,000 and an army of 2,000 was invited to join the security organisation in December. But the invitation did not go down well with Russia, Montenegro’s largest investor. After the December announcement, Russian foreign ministry spokeswoman Maria Zakharova promptly urged Podgorica to hold a referendum on Nato membership, warning of “deep splits” amongst Montenegrins over Nato accession.

But speaking in Baku in March, Vujanovic sings a completely different tune to Zakharova’s, leaving out some instances of domestic opposition to the country’s accession to the military alliance. “Joining Nato is our strategic interest, and we see it as a precursor to a possible EU membership later on. Our membership in the organisation is also important to the stability of the Balkans, and could be an impetus for other candidate countries in the region, like Macedonia and Bosnia & Herzegovina, to join,” he says. 

Besides, Montenegro is the only country on Europe’s Mediterranean coast that is not a Nato member yet, Vujanovic sniffs. While Montenegro values its “close relations with Russia”, it expects Moscow to understand Podgorica’s position, just like it did when Slovenia and Greece joined the organisation, “because it is our sovereign right to choose our strategic goals”.

Montenegro is expected to join Nato in early 2017, marking a dramatic turn of direction for the country. Only 16 years ago, in 1999, Nato warplanes were bombing Serbia and Montenegro to halt the killing and expulsion of ethnic Albanians from Kosovo. Less than two decades later, Montenegro is about to become a Nato member, an event that Vujanovic hopes will pave the way for better international cooperation and more trade and investment for the country, in addition to increased security.

Russia invested some $1.1bn in the country between 2000 and 2013, but one of the largest Russian investments in Montenegro, the acquisition of Kombinat Aluminijuma Podgorica (KAP) by Oleg Deripaska’s Central European Aluminum Company Holding (CEAC), ended disastrously. KAP has since been taken under state control and re-sold to a local firm, while CEAC is seeking to recover its investment through international arbitration.

Relations between Moscow and Podgorica have been tense since December. More recent reports that Russian Deputy Prime Minister Dmitriy Rogozin is banned from entering the country and an incident that led to the expulsion of some 55 Russian citizens from Montenegro in March only add insult to injury. But politics should not affect commercial ties as long as Russian investment is still welcome in the country, which Vujanovic says it is.

Open to investment

“We have succeeded in attracting investment in many sectors since 1999; Montenegro has privatised most of the state-owned enterprises through foreign investment from companies like Turkey’s Tosyali and Global Ports holdings, but also through domestic investment,” Vujanovic says, referring to the companies that purchased shares in an important steel plant and in the port of Bar on the Adriatic Sea.

Montenegro’s tourism sector has been particularly popular with investors in recent years, the president notes, expressing his pride in plans for an upscale beach resort in the Boka Bay area called Portonovi, which is being funded by Azerbaijani investors.

Set to open in 2017, the €500mn project – a 60-acre mixed-use luxury resort and mega yacht marina – is expected to significantly boost Montenegro’s tourism sector and overall economy. The Boka Bay area “is one of the nicest places on Montenegro’s coast – it used to be a military base before 1989,” says Vujanovic.

The president goes on to say that: “[Azeri state oil and gas firm] Socar respects all obligations, has invested according to the planned timeline and we expect the deadline [for completing the project] to be 2017.”

However, exactly which investors are behind the project remains a matter of some confusion. In the interview (which you can hear here) with bne IntelliNews, President Vujanovic repeatedly mentions Socar as the Azerbaijani investor in the project, as do articles by the Financial Times and Reuters. “Through communication with Azerbaijan, we discovered Socar's readiness to invest in a tourist resort in Montenegro... We announced public procurement and Socar was the winner... I am sure it will be one of the nicest resorts, without financial problems from Socar," Vujanovic says.

But on April 4, Socar’s president, Rovnag Abdullayev, denied that his company was financing the resort, telling Trend news agency that “Socar didn’t invest a single Azerbaijani manat into this project”. He stressed that Socar had merely operated as an intermediary between Montenegro and an Azerbaijani company called Azmont Investments, which is owned by Azerbaijan Global Investments (AGI), which in turn is owned by a consortium of three leading Azerbaijani Investment Holding companies: Pasha Construction, a member of Pasha HoldingAta Holding; and Synergy Group. 

Regardless, Vujanovic emphasises the strong investment ties that his government has with Baku, which spans many sectors, not just tourism. “I am very happy with our relations with Azerbaijan. My friend [Azerbaijani President] Ilham Aliyev has understood Montenegro’s willingness to establish close relations.”

Three gas pipelines, of which two are already under construction – the Trans-Anatolian Pipeline (TANAP), Trans Adriatic Pipeline (TAP) and Ionian Adriatic Pipeline (IAP) – “prove Azerbaijan’s commitment to the development of our region. Gas imports will fuel industrial development in Montenegro, and further cement our ties,” the president says.

Together the three pipelines constitute a gas transport route that will deliver some 16bn cubic metres (cm) of Azerbaijani gas to Turkey and Europe starting in 2018. The first two are definitive – TANAP is more than halfway completed, while work on TAP should start before the summer – but IAP remains wishful thinking for now. The pipeline would connect the Albanian town of Fier, which is crossed by TAP, to Montenegro, Bosnia & Herzegovina, and Croatia. However, building this conduit would require that Azerbaijan further increase its gas exports, which it will be unable to do before the middle of the next decade due to technical limitations at its offshore fields.

Vujanovic remains upbeat about Montenegro’s appeal to investors, to which the country’s track record of strong growth is testament. “Montenegro has averaged a GDP growth of 3.3% in recent years, 2 percentage points above the European average. Past privatisations have proven that we can overhaul these [public] companies and make them more productive and profitable. We have demonstrated our commitment to promote growth in industry and services,” he says.

Looking West

Russia might be the largest investor in Montenegro, but the country’s hopes and dreams are tied to the EU. Montenegrins are very supportive of the idea of joining the EU, with a recent poll showing that 70% are in favour of EU accession, Vujanovic tells bne IntelliNews. According to him, the Montenegrin government’s “main goal at the moment is to make sure that we meet the requirements to become a candidate country as soon as possible. We have opened 22 [EU accession] chapters and have closed two important chapters on education, research and culture. By early 2017, we expect to open all 35 chapters and to close as many of them as possible.”

In less than a decade as an independent country, Montenegro has undoubtedly made significant strides to comply with EU economic and political criteria. A recent European Commission progress report finds that the country is “broadly” compliant even with requirements that used to be problematic in the past, such as combating corruption, reforming the judiciary and upholding freedom of expression.

Meanwhile, Montenegro’s progress on reforms and the country’s adoption of the euro as its currency should bring in more investment from EU countries, which continue to lag behind Russian, Serbian, Ukrainian and Chinese capital.