SUMMER OF SQUABBLES FOR MONTENEGRO'S RULING COALITION

UNCLAS SECTION 01 OF 03 PODGORICA 000210

SENSITIVE

SIPDIS

E.O. 12958: N/A
TAGS: PGOV PREL MW
SUBJECT: SUMMER OF SQUABBLES FOR MONTENEGRO'S RULING COALITION

REF: PODGORICA 208

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1. (SBU) SUMMARY: Relations between coalition partners the
Democratic Party of Socialists (DPS) and the Social Democratic
Party (SDP) have hit a rough patch of late, fueling rumors that
the DPS might consider early elections. While highly unlikely
-- the partners' decade-long coalition has survived bigger bumps
and is advantageous to both -- the parties may run separately in
the next election (scheduled for fall 2009). Even if this
occurs, however, their shared commitment to Montenegrin
statehood and Euro-Atlantic integration could well reunite them
after the vote. END SUMMARY.



A Stormy Summer For DPS-SDP Relations...

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2. (U) As reported reftel, coalition partners Democratic Party
of Socialists (DPS) and Social Democratic Party (SDP) failed to
agree on July 31 on a new Law on Concessions. The dispute --
over the length and mechanism for approval of government
concessions -- marred the coalition's otherwise assembly-line
efficiency, with opposition MPs boycotting over a TV coverage
dispute, in passing several dozen bills before the summer
recess. (Note: the DPS and SDP have run together in every
national election since 1998. Following the September 2006
election, by agreement the DPS has 33 MPs and the SDP seven.)




3. (U) The quarrel over concessions capped a summer of small but
highly publicized disagreements between the partners:



-- In June, the SDP ousted DPS operative Dragan Kujovic from the
managing board of the state-owned Budvanska Rivijera company
(which controls four hotels and valuable land on the Montenegrin
coast). The SDP replaced him with Rasko Konjevic, Chief of
Staff to SDP leader and Parliament Speaker Ranko Krivokapic.

-- Also in June, Djordje Suhih, the SDP head of the Podgorica
Municipal Council, attempted to block DPS Podgorica Mayor
Mugosa's sale of a city-owned children's holiday resort (which
the Mayor plans to turn into a parking lot). Suhih demanded the
resignation of a Mugosa protigi and blasted the Mayor for making
decisions without consulting the Council.

-- In late July, the DPS-controlled Finance Ministry rescinded a
decision by the SDP-run Real Estate Directorate to tighten
regulations concerning the sale of land to foreigners.

-- Also in late July, the DPS rejected an SDP amendment to the
Law on the Historic Capital of Cetinje which would have moved
Parliament from Podgorica to Cetinje (DPS MPs publicly accused
the SDP of seeking to score cheap political points).



...And Differing Economic Visions...

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4. (SBU) DPS-SDP squabbles are nothing new. In June 2007, the
partners famously fell out over a DPS plan to sell the majority
stake in Montenegro's only thermo-electric plant and an
accompanying coal mine, both in Pljevlja, to Russian oligarch
Oleg Deripaska. (Note: The SDP voted with opposition parties
to block the sale, and the DPS backed down at the time, although
DPS leaders assure us that a new tender for the plant will be
released in the next year or so.) The partners also have
clashed on several occasions over privatization.




5. (SBU) These flaps reflect a larger ideological rift between
the parties over the state's role in the economy. In a
nutshell, the SDP does not oppose privatization but would like
the government to retain a controlling stake in strategic
industries and assets, and has been critical of what it sees as
the DPS's "neo-liberal" rush to sell state properties (the SDP
also has sought to restrict the ability of foreigners to buy
land). SDP deputy head Ivan Brajovic recently told us that the
parties still were at loggerheads over energy privatization and
property relations.


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...Fuel Divorce Rumors

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6. (SBU) The latest disagreements have fueled rumors that the
coalition is in jeopardy; these have gained additional traction
because some believe the DPS would benefit from early
parliamentary elections (which would be called should the
coalition split). The latest polls give the DPS close to 50
percent support at a time when opposition forces are divided and
weak (SDP had four percent in a June poll, uncomfortably close
to the three percent hurdle to enter Parliament). Early
elections therefore could give the DPS a shot at forming the
parliamentary majority -- and consequently the government -- on
its own. (Note: We also have heard rumors that some DPS
members -- most notably DPS Vice President Svetozar Marovic, who
has been criticized by Krivokapic for pursuing personal business
interests in his hometown of Budva -- are pushing for an
alliance with the moderate opposition Socialist People's Party
(SNP),which is headed by Budva-resident Srdjan Milic.)




7. (SBU) As for the SDP, independent analyst Svetozar Jovicevic
recently opined to us that it was increasingly difficult for
that party to justify its coalition with the DPS. Montenegrin
statehood was the glue that held the partners together, he said,
and with this issue settled, the SDP needed to take a principled
stand on what the new state should like or risk losing what
small electorate it had.



Ranko's New Car, Or The Ties That Bind

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8. (SBU) Officials of both parties quickly denied the divorce
speculation. Following the concession law spat, President
Vujanovic told the press that the partners had their
disagreements, but were willing to overcome them. PM Djukanovic
also declared that the coalition was encountering "normal
differences" and was not in crisis; the SDP's Brajovic seconded
this assessment.




9. (SBU) Indeed, few interlocutors see a split as likely at this
point. The parties agree on most big issues (adherence to
statehood, Euro-Atlantic priorities) and have usually
compromised on legislative and privatization disagreements. SDP
MPs frequently tell us they recognize that their small party is
better able to influence policy within the coalition than from
without. As Brajovic told us recently, "for all our problems,
we are still one of the most stable coalitions in the Balkans."




10. (SBU) Many also note the considerable benefits the SDP
accrues in terms of positions and perks. The party has the
Speaker and a deputy speaker position and three ministers in the
government, including one of the two Deputy Prime Ministers.
According to the parties' post-September 2006 election
agreement, the SDP also gets 20 percent of positions in state
managing boards and structures. DPS MP Miodrag Vukovic claimed
to us that SDP-run agencies control 40 percent of all budget
assets (including pension and health funds, forestries, and
other state companies). And more than one interlocutor has
pointed to Krivokapic's expensive new Audi as an example of what
the SDP would lose should it bolt the coalition.



Comment

--------------




11. (SBU) The odds are heavily stacked against a split -- the
coalition has survived bigger bumps in the past and is highly
convenient for both sides -- but the DPS does not appear to have
conclusively ruled out early elections (PM Djukanovic said in TV
interview that "everything is possible, but let's hope it is not
necessary.") The implied threat gives the DPS considerable

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leverage over the SDP at a time when several big privatization
decisions are pending (for example, the privatization of
Montenegro's airports, the Plantaze winery, the port of Bar, and
several coastal tourist sites were put off until at least 2009,
and the DPS wants to push again for the privatization of the
thermo-electric plant and coal mine, although the parties have
an apparent agreement that the state will retain a 55 percent
stake). The rumors, likely encouraged by the DPS, of the DPS's
flirtation with the SNP also can be seen in this light, although
the DPS also likely wants to keep its options open.




12. (SBU) What does appear possible is that the DPS and SDP will
run separately in the next election. They ran alone in April
local elections in Herceg Novi and Tivat and may do so again in
October elections in Kotor. SDP sources tell us it is too early
to make a decision about the parliamentary election, but that
their party "approaches every election with the intent to run on
our own." In the DPS, there clearly is strong sentiment for
separate slates. A senior DPS official predicted as much during
a recent conversation. After describing the recent
disagreements (the official was particularly bitter about the
SDP's activities in the Budvanska Rivijera company),and
confiding that the DPS was considering introducing a law that
would prohibit parties from forming coalitions for elections, he
told us, "after ten years together, we simply have grown tired
of each other."




13. (SBU) The implications of a split ticket are unclear at this
point, but are unlikely to affect Montenegro's foreign policy
orientation. The DPS would hope to win an outright majority,
which would allow it to form the government on its own (in this
scenario, the SDP -- if it makes it into Parliament -- would
still vote with the DPS on issues supporting Euro-Atlantic
integration). If the DPS falls short of a majority, given DPS's
and SDP's strong adherence to statehood and Euro-Atlantic goals,
a revival of the present coalition is a distinct possibility.
The wildcard would be a third scenario -- in which the DPS would
opt for another coalition partner, such as the SNP. This should
not slow Montenegro's drive toward EU integration, but --
depending on how strong the SNP's representation was in the
Parliament and GoM -- could slow its NATO integration pace (in
that the SNP, while not opposed, is less enthusiastic about
membership than the SDP.)
MOORE