RIFT IN MONTENEGRO'S RULING COALITION (C-RE7-00522)

UNCLAS PODGORICA 000195

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PGOV ENRG MW
SUBJECT: RIFT IN MONTENEGRO'S RULING COALITION (C-RE7-00522)

REF: PODGORICA 94

SENSITIVE BUT UNCLASSIFIED - PLEASE HANDLE ACCORDINGLY




1. (SBU) A "principled" disagreement over privatization of the
large thermo-electric plant in Pljevlja (TE Pljevlja) has led to
a rift in Montenegro's ruling coalition. The larger Democratic
Party of Socialists (DPS) is seeking to finalize the sale of TE
Pljevlja to En+ Group, owned by Russian tycoon Oleg Deripaska.
Deripaska is seeking a steady power supply for Kombinat Alumina
Podgorica (KAP),which he bought in December 2004. The smaller
Socialist Democratic Party (SDP) opposes privatization of TE
Pljevlja, stating that monopoly public utilities should remain
in state hands.




2. (SBU) PM Zeljko Sturanovic (DPS),and Parliamentary Speaker
Ranko Krivokapic (SDP) are trying to patch the split between the
parties. The difference of views, apparent for months (ref),
grew pronounced in the past week after the opposition Socialist
People's Party (SNP) proposed a parliamentary motion to advise
the GoM that Parliament opposes privatizing TE Pljevlja. While
the motion would not be binding on the GoM, the SDP was disposed
to vote for it, against the wishes of its senior partner in
government. Such a vote would further widen the GoM split, and
affect its stability. Krivokapic told Charge June 7 that the SDP
would withdraw from government, even at the cost of new
elections, rather than support privatization of TE Pljevlja, but
added that a coalition collapse before the new Constitution is
agreed, probably in September or October, would be a
catastrophe. He therefore plans to ask DPS to postpone the vote
on the government's energy (and energy privatization) policy,
now delayed until June 12, until after the Constitution is
adopted. Note: Krivokapic is looking to strengthen his hold on
the leadership of the SDP, in advance of the party's July 28
Conference, and may be trying to refute claims that he has
become too close to the DPS and Djukanovic. End note.




3. (SBU) Comment: If the vote is postponed the opposition will
rail against the maneuver, which does bend if not break
parliamentary rules. But without an SDP vote against its
governing partner (the DPS) on the books, the opposition would
be unable to realistically seek a vote of no confidence in the
GoM. However, winning support from centrist elements of the
opposition is required if the constitution is to be adopted by a
2/3 vote in parliament. It is those same centrist elements that
have introduced and most strongly support the motion objecting
to the sale of TE Pljevlja.




4. (SBU) A central question is whether the DPS, particularly
elements of its leadership (including former PM Milo
Djukanovic),is willing to forego or postpone the sale of TE
Pljevlja. New elections are unlikely to strengthen either
party. New independent polling data is not expected for another
ten days or so, but DPS and SDP are both assumed to have lost
support since last September's election, when their coalition
just managed to gain 41 of 81 parliamentary seats. It also
assumed by many observers that if the SDP left the coalition, it
would not clear the 3 percent vote threshold needed to stay in
parliament. End comment.

FERRILL