MONTENEGRO MARKS ONE YEAR OF INDEPENDENCE (C-RE7-00522)

UNCLAS SECTION 01 OF 04 PODGORICA 000182

SIPDIS

SENSITIVE
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E.O. 12958: N/A
TAGS: PGOV PREL ECON MARR MW
SUBJECT: MONTENEGRO MARKS ONE YEAR OF INDEPENDENCE (C-RE7-00522)

REF: A. A) 06 BELGRADE 1475


B. B) 06 BELGRADE 1646

C. C) 06 BELGRADE 1858

D. D) 06 BELGRADE 0865

E. E) 07 PODGORICA 032

F. F) 07 PODGORICA 064

G. G) 07 PODGORICA 100

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SENSITIVE BUT UNCLASSIFIED - PLEASE HANDLE ACCORDINGLY.




1. (SBU) SUMMARY: ON MAY 21 MONTENEGRO MARKED THE FIRST
ANNIVERSARY OF INDEPENDENCE. MANY HAVE DESCRIBED MONTENEGRO AS A
SOUTH EUROPEAN SUCCESS STORY, REFERRING TO THE PEACEFUL
RESOLUTION OF THE INDEPENDENCE QUESTION AND THE VISIBLE PROGRESS
THE COUNTRY HAS ACHIEVED ON ECONOMIC DEVELOPMENT AND
EURO-ATLANTIC INTEGRATION. HOWEVER, MANY PROBLEMS FROM THE PAST
REMAIN. MONTENEGRO CONTINUES TO BE A LARGELY DIVIDED SOCIETY --
THE GAPS BETWEEN RICH AND POOR, AS WELL AS BETWEEN THE NORTHERN,
AND SOUTHERN PARTS OF THE COUNTRY HAVE GROWN. SHOULD MONTENEGRO
REALLY WISH TO SEIZE ITS EURO-ATLANTIC FUTURE IT WILL NEED TO
ACCELERATE PROGRESS TOWARD THE FULL DEMOCRATIZATION OF SOCIETY,
AND IMPLEMENTATION OF RULE OF LAW THROUGH MORE PROFESSIONAL AND
EFFICIENT INSTITUTIONS. END SUMMARY



MODEST CELEBRATION OF INDEPENDENCE

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2. (U) MONTENEGRO PROCLAIMED INDEPENDENCE ON JUNE 3, 2006,
FOLLOWING A REFERENDUM HELD ON MAY 21, IN WHICH 55.5% SUPPORTED
INDEPENDENCE AND 44.5% VOTED AGAINST, WITH AN 86% TURNOUT. ON
MAY 21, 2007, MONTENEGRO MARKED THE FIRST ANNIVERSARY OF THE
REFERENDUM, BUT CELEBRATIONS WERE MINIMAL AND SUBDUED. AT THE
CENTRAL CELEBRATION ON MAY 20 IN CETINJE, PRESIDENT FILIP
VUJANOVIC SAID THE STRATEGIC AIM OF MONTENEGRO WAS FASTER
INCLUSION INTO EURO-ATLANTIC INSTITUTIONS - FULL MEMBERSHIP IN
NATO AND EU. PARLIAMENT SPEAKER RANKO KRIVOKAPIC LAID A WREATH
AT THE MAUSOLEUM ON MOUNT LOVCEN, THE GRAVE OF THE FAMOUS
MONTENEGRIN WRITER PRINCE PETAR II PETROVIC-NJEGOS (1813-51),A
SYMBOL OF MONTENEGRIN INDEPENDENCE. MOST OPPOSITION FIGURES
STAYED AWAY FROM THE TWO EVENTS. THERE WERE NO
GOVERNMENT-ORGANIZED EVENTS IN THE CAPITAL, PODGORICA, ALTHOUGH
THERE WAS A WELL-ATTENDED CONCERT THAT EVENING.



MEMBERSHIP IN MAJOR INTERGOVERNMENTAL ORGANIZATIONS

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4. (U) INDEPENDENCE HAS BROUGHT VISIBLE RESULTS. MONTENEGRO HAS
JOINED SEVERAL RELEVANT INTERNATIONAL ORGANIZATIONS: THE UN
(JUNE 28, 2006),THE OSCE (JUNE 26, 2006),THE COUNCIL OF EUROPE
(MAY 11, 2007),NATO'S PFP (NOVEMBER 28, 2006),THE WORLD BANK
AND THE IMF (JANUARY 18, 2007, AND JANUARY 28, 2007,
RESPECTFULLY). ON MARCH 15, 2007 A STABILIZATION AND ASSOCIATION
AGREEMENT (SAA) BETWEEN MONTENEGRO AND THE EU WAS INITIALED. THE
SAA WILL PROBABLY BE FORMALLY SIGNED IN OCTOBER. MONTENEGRO HAS
ALSO INITIALED AGREEMENTS ON VISA FACILITATION AND READMISSION
WITH THE EU, AND HAS SIGNED THE CENTRAL EUROPE FREE TRADE ZONE
AGREEMENT (CEFTA),WHICH SHOULD ENTER INTO FORCE IN JULY 2007.



EMBASSIES OPEN IN THE COUNTRY; MONTENEGRO OPENS EMBASSIES

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5. (U) BESIDES THE U.S., THE FOLLOWING COUNTRIES HAVE OPENED
EMBASSIES IN MONTENEGRO: AUSTRIA, BULGARIA, CHINA, FRANCE,
GERMANY, GREECE, CROATIA, HUNGARY, ITALY, MACEDONIA, ROMANIA,
RUSSIA, SLOVENIA, THE UK AND ALBANIA. MONTENEGRO TO DATE HAS
BEEN FORMALLY RECOGNIZED BY 103 COUNTRIES AND HAS FORMALLY
ESTABLISHED DIPLOMATIC RELATIONS WITH 80 COUNTRIES.




6. (U) MONTENEGRO'S AMBASSADOR TO THE U.S. IS IN PLACE AND
MONTENEGRIN EMBASSIES HAVE OPENED IN SERBIA, CROATIA, MACEDONIA,
FRANCE, THE UK, ITALY, THE VATICAN, BOSNIA AND HERZEGOVINA, AND
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SLOVENIA. IT HAS ALSO OPENED PERMANENT MISSIONS TO THE UN, EU
AND OSCE. MONTENEGRO'S AMBASSADOR TO NATO (BRUSSELS) IS TO
ASSUME HIS POSITION SOON, AND A MILITARY LIAISON TO NATO-SHAPE
(MONS) HAS BEEN ANNOUNCED. IN ITS JUNE 3, 2006, DECLARATION OF
INDEPENDENCE, MONTENEGRO STATED THAT IT ACCEPTED ALL RELEVANT
INTERNATIONAL OBLIGATIONS OF THE FORMER STATE UNION.



POLITICS AS USUAL

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7. (U) AS REQUIRED, A PARLIAMENTARY ELECTION WAS HELD SEPTEMBER
10, 2006, AT THE END OF THE 2002 PARLIAMENTS MANDATE. THE
ELECTION WAS GENERALLY IN ACCORDANCE WITH INTERNATIONAL
STANDARDS AND SAW NO SHIFT IN POWER, WITH THE DEMOCRATIC PARTY
OF SOCIALISTS (DPS) AND SOCIAL DEMOCRATIC PARTY (SDP) HOLDING ON
TO POWER WITH 41 OF 81 SEATS. EVEN WITH NO PARTY BOYCOTTING THE
VOTE, TURNOUT WAS "ONLY" 70 PERCENT, BELOW PAST ELECTIONS. THE
REAL SURPRISE CAME A MONTH AFTER THE VOTE, WHEN MILO DJUKANOVIC
STEPPED BACK FROM OFFICE AFTER 17 YEARS AS EITHER PRIME MINISTER
OR PRESIDENT. (REF A, B) THE NEW GOM, LED BY FORMER JUSTICE
MINISTER STURANOVIC, HAS GENERALLY HEWED CLOSE TO THE LINE SET
BY DJUKANOVIC, WHO WAS REELECTED AS PARTY LEADER OF THE DPS ON
MAY 19, 2007.



ECONOMIC PARAMETERS LOOK PROMISING

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8. (SBU) THE FIRST YEAR OF INDEPENDENCE SAW BOOMS IN BOTH STOCK
AND REAL ESTATE (PRICES DOUBLED AND TRIPLED IN BOTH MARKETS IN
THE PAST TWELVE MONTHS),AN INCREASE OF FOREIGN INVESTMENTS TO
EUROS 506 MILLION IN 2006 (COMPARED TO XXX IN 2005),AND A MORE
PRONOUNCED AND NOTICEABLE DIVISION BETWEEN THE RICHER SOUTH
(WHICH CONTINUES TO ATTRACT THE BULK OF FOREIGN INVESTMENT,
PARTICULARLY REAL ESTATE SALES, AND TOURISM) AND THE POORER
NORTH.




9. (U) ACCORDING TO OFFICIAL DATA, INFLATION HAS BEEN KEPT AT
THE LEVEL OF EUROPEAN UNION COUNTRIES, THE UNEMPLOYMENT RATE HAS
BEEN REDUCED FROM 18 TO 13.87 PER CENT, AND THE AVERAGE MONTHLY
SALARY ROSE 16 PERCENT IN THE LAST YEAR TO EUROS 326. REAL GDP
GROWTH IN 2006 WAS 4.5 PERCENT.




10. (U) IN THE TOURISM SECTOR, THE MILITARY SHIPYARD "ARSENAL"
IN TIVAT WAS SOLD TO CANADIAN BUSINESSMAN PETER MONK; HE PLANS
TO DEVELOP A FULL-SERVICE HARBOR FOR YACHTS AND MEGA-YACHTS.
FURTHER DOWN THE COAST, THE ELITE HOLIDAY RESORTS SVETI STEFAN,
MILOCER AND QUEEN'S BEACH WERE LEASED TO SINGAPORE'S AMAN
RESORTS GROUP.



REFORM OF MILITARY AND DEFENSE SYSTEM BEGINS FROM SCRATCH

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11. (U) FOLLOWING THE INVITATION TO JOIN THE PARTNERSHIP FOR
PEACE, WHICH WAS EXTENDED IN NOVEMBER 2006 AT NATO'S RIGA
SUMMIT, MONTENEGRO HAS STARTED AN OVERALL REFORM OF ITS DEFENSE
SYSTEM. THE SO-CALLED "BRUSSELS" GOVERNMENT (I.E., THE PRIMARY
INTERNATIONAL GOAL OF THE GOM IS EU AND NATO) OF PM ZELJKO
STURANOVIC HAS FOR THE FIRST TIME IN MONTENEGRO'S HISTORY
ESTABLISHED A DEFENSE MINISTRY. IN OCTOBER 2006 U.S. DEFENSE
SECRETARY RUMSFELD VISITED MONTENEGRO. THE STATE PARTNERSHIP

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PROGRAM BETWEEN MONTENEGRO AND THE STATE OF MAINE HAS BEEN
ESTABLISHED. THE WARSHIPS USS ANZIO AND USS EMORY S. LAND
VISITED MONTENEGRO IN OCTOBER 2006 AND MAY 2007; A FOUR-NATION
NATO SQUADRON (INCLUDING THE USS ROOSEVELT) VISITED IN APRIL

2007.




12. (SBU) THE GOM SEES MILITARY COOPERATION WITH THE USG AS ITS
STRATEGIC GOAL, AND LOOKS FOR AMERICAN SUPPORT IN EQUIPPING AND

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TRAINING MONTENEGRO'S MILITARY STAFF. THE DEFENSE MINISTRY HAS
ANNOUNCED THAT IT WILL SOON FORWARD BILLS ON THE MILITARY, ON
DEFENSE, AND ON DEFENSE DOCTRINE TO THE PARLIAMENT FOR APPROVAL.
THE GOVERNMENT HAS ALSO ANNOUNCED IT WILL START A NATO
MEMBERSHIP AWARENESS CAMPAIGN.



VARIOUS PERCEPTIONS OF THE RESULTS ACHIEVED

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13. (U) AFTER CONCLUDING A SOFA AND AN ARTICLE 98 AGREEMENT WITH
THE USG AND A TRANSIT AGREEMENT WITH EUFOR, THE MONTENEGRIN
LEADERSHIP WAS SUBJECT TO UNEXPECTEDLY HARSH CRITICISM FROM THE
OPPOSITION. HOWEVER, NO NEGATIVE COMMENT WAS MADE ON
MONTENEGRO'S JOINING THE GLOBAL INITIATIVE FOR COMBATING NUCLEAR
TERRORISM, JOINING THE PROLIFERATION SECURITY INITIATIVE, OR
SIGNING A "SECTION 505" DEFENSE ARTICLE END-USE AGREEMENT -- ALL
CONCLUDED AFTER THE SOFA/ARTICLE 98 AGREEMENTS.




14. (U) THE RULING COALITION OF THE DEMOCRATIC PARTY OF
SOCIALISTS (DPS) AND THE SOCIAL DEMOCRAT PARTY (SDP) HAS
PROMISED THAT CITIZENS WILL SOON START TO FEEL CONCRETE BENEFITS
FROM INDEPENDENCE, THROUGH THE COMPLETION OF PRIVATIZATION,
INCREASED FOREIGN INVESTMENTS, AND FURTHER DEVELOPMENT OF
TOURISM. HOWEVER, THE OPPOSITION HAS REMAINED SHARPLY CRITICAL
OF THE GOVERNMENTS ACHIEVEMENTS. PRO-SERBIAN PARTIES (15 SEATS
IN THE 81-MEMBER PARLIAMENT) ASSERT THAT THE DISSOLUTION OF THE
STATE UNION WITH SERBIA HAS LED TO A CONTINUATION OF SMUGGLING
AND CORRUPTION, AN INCREASE OF CRIME, AND FOREIGN DOMINATION OF
THE COUNTRY. THE MOVEMENT FOR CHANGE (PZP, ELEVEN PARLIAMENTARY
SEATS) HAS CRITICIZED ALLEGED GOVERNMENT CORRUPTION AND THE
PRIVATIZATION PROCESS, STATING THAT "MONTENEGRO HAS BEEN TURNED
INTO A PRIVATE STATE."




15. (SBU) THE ENERGY SECTOR HAS BECOME AN ISSUE WITHIN THE
RULING COALITION. THE PRIVATIZATION OF THE THERMO POWER PLANT
AND THE COAL MINE OF PLJEVLJA HAS NOT BEEN COMPLETED. WHILE THE
DPS REMAINS FIRMLY DETERMINED TO COMPLETE THE PRIVATIZATION OF
THE TWO COMPANIES, A FACTION IN THE JUNIOR PARTNER SDP IS
STRONGLY AGAINST THE PRIVATIZATION, PARTICULARLY IF THE SALE IS
TO THE LEADING BIDDER, THE EN+ GROUP OWNED BY THE RUSSIAN TYCOON
OLEG DERIPASKA (WHO BOUGHT KAP IN DECEMBER 2004 - KAP CONSUMES
ABOUT 40% OF MONTENEGRO'S ELECTRICITY).



PENDING ISSUES

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16. (SBU) ONE YEAR AFTER INDEPENDENCE THE NEW CONSTITUTION HAS
NOT YET BEEN ADOPTED. ABOUT 90 PERCENT OF THE TEXT HAS BEEN
AGREED, AND LEGISLATION SPECIFYING PROCEDURES FOR ADOPTION OF
THE NEW CONSTITUTION WAS APPROVED. CONTENTIOUS POINTS SUCH AS
THE OFFICIAL LANGUAGE, RELIGION, AND THE SELECTION OF THE
JUDICIARY ARE STILL UNRESOLVED. IF THE NEW CONSTITUTION IS NOT
APPROVED BY A TWO-THIRDS MAJORITY IN PARLIAMENT (54 OF 81 SEATS;
THE RULING COALITION HAS 41),A PUBLIC REFERENDUM MUST BE HELD.
THE DESIGNATED PERIOD OF PUBLIC DEBATE ON THE NEW CONSTITUTION
HAS JUST BEEN COMPLETED, BUT IT IS NOT CLEAR THAT THE "DEBATE,"
WHICH WAS LACKADAISICAL AT BEST, RESOLVED ANY OF THE OUTSTANDING
QUESTIONS. POST DOES NOT EXPECT A PARLIAMENTARY VOTE BEFORE THE
EARLY FALL.



COMMENT

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17. (SBU) UNTIL THE QUESTION WAS RESOLVED A YEAR AGO, THE ISSUE
OF MONTENEGROS STATE STATUS OVERSHADOWED ALL OTHER TOPICS.
CURRENTLY, INDEPENDENCE IS ACCEPTED BY ALMOST ALL, INCLUDING
THOSE WHO HAD CAMPAIGNED AGAINST IT. IT IS NOW LITERALLY LAST
YEAR'S ISSUE. THE STRUGGLE FOR A BETTER ORGANIZED AND MORE
PROSPEROUS MONTENEGRO IS FINALLY STARTING. THE GENERAL PUBLIC'S
PERCEPTION IS THAT THINGS HAVE NOT CHANGED MUCH SINCE
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INDEPENDENCE; THEY ARE NEITHER BETTER NOR WORSE. MONTENEGRO HAS
GAINED ITS INTERNATIONAL POLITICAL IDENTITY, BUT PEOPLE HAVE YET
TO PERCEIVE AN IMPROVEMENT IN THEIR PERSONAL LIVING STANDARDS.
THE CHALLENGE FOR MONTENEGRO'S LEADERSHIP IS TO TRANSFORM A
STRONG MACROECONOMIC BASE AND THE RIGHT TO MAKE ITS OWN
DECISIONS INTO BALANCED MICROECONOMIC GROWTH, PUTTING MONTENEGRO
INTO THE MAINSTREAM AND LEAVING ITS BACKWATER STATUS BEHIND.
END COMMENT.
FERRILL
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