President of Bosnia’s Republika Srpska hit by loan scandal

President of Bosnia’s Republika Srpska hit by loan scandal
By Denitsa Koseva February 18, 2016

Milorad Dodik, the president of Bosnia & Herzegovina’s smaller entity, the Republika Srpska, appears to be fighting for his political life as he faces accusations of taking out a fake loan for the purchase of a luxury villa in Belgrade. Dodik has also lost political credibility after putting off a planned referendum challenging the authority of Bosnia’s central institutions.

The rising pressure on Dodik, who has many times stated that Republika Srpska belongs to Serbia and should have friendly relations with Russia, comes as Sarajevo moves closer to the EU. Bosnia’s official application to join the bloc was submitted on February 15. The Republika Srpska’s government, led by Zeljka Cvijanovic of Dodik’s Alliance of Independent Social Democrats (SNSD), voiced strong objections to the move.

The entity refused to accept the two key conditions that would make Bosnia’s EU application credible – the coordination mechanism and the adjustment of the Stabilisation and Association Agreement following Croatia’s entry to the EU.

However, while Dodik opposes the central government’s actions, he is increasingly bogged down in the scandal concerning his loan agreement with local Pavlovic Banka. On February 16, at a press conference in Banja Luka, the president denied alleged accusations from state prosecutors that he had taken out a fake loan worth €750,000 from Pavlovic Banka, daily Nezavisne Novine reported.

In December, local media quoted sources as saying that Bosnia’s prosecution was investigating Dodik’s purchase of a €1.26mn villa in Serbia’s capital Belgrade in 2007.

Dodik says he purchased the villa according to the law, using the bank loan. However, local media claim that he paid in full for the villa, and the loan was only extended in 2008, raising questions about the origin of the money.

“I have found in my personal archives a contract dated May 14, 2007, signed between me and Pavlovic Banka, which has been certified as required and which proves that such contract exists,” Dodik told local media in Banja Luka, showing them the contract.

Earlier this month, the prosecution arrested the owner of Pavlovic Banka, Slobodan Pavlovic, along with three other bank employees. According to their lawyer, all four were accused of money laundering, abuse of power and forgery of official documents. Local press speculated that the arrests might be connected to the Dodik loan.

Dodik said in his February 16 statement to media that he hopes that the prosecution will release Pavlovic.

“Obviously someone either misled the prosecution or it is some sort of revenge. I want to believe the prosecution was misled when it initiated this [arrest],” Dodik said.

Dodik also said he was surprised that the prosecution had initiated the investigation later than the legal deadline of five years after which commercial banks are allowed to destroy documentation. Dodik added that the prosecution had not contacted him to ask whether he had documents relating to the transaction.

Tensions between Republika Srpska and the state-level judicial authorities have risen since July 2015, when Dodik proposed holding the referendum. The proposal provoked a strong negative reaction from western diplomats and international institutions since it would breach the 1995 Dayton agreement that ended the Bosnian war. This would have had potentially serious consequences for stability in the country. It was also seen as one of the main hurdles on Bosnia’s path towards the European Union.

Earlier this month, however, Dodik decided to put the referendum on hold, explaining that consensus between all political parties in Republika Srpska was needed. This move was seen by local analysts and politicians as a climbdown by Dodik following heavy international pressure.

Meanwhile, the opposition Savez za Promjene has called on Dodik to resign over threatening comments directed at Bosnia’s foreign affairs minister Igor Crnadak. Dodik claimed that Crnadak had initiated the loan investigation with the aim of forcing him to quit politics.

“This is not political demand. I consider it personal and I will not forgive [him],” Dodik was quoted by the TV channel N1 as saying at the February 16 press conference.

Following this statement, Branislav Borenovic, leader of the opposition Party of Democratic Progress (PDP), said that action could be taken against Dodik.

“I have contacted the minister of internal affairs of Republika Srpska, Mr. Dragan Lukas, and the director of the police, Mr. Vasic, because this is a serious threat for the security of Igor Crnadak and his family. We seek from the respective authorities to act according to the law and to react on this threat,” Brenovic told He added that he has also informed the entity’s chief prosecutor.