SCENESETTER FOR ADMIRAL FITZGERALD VISIT TO MONTENEGRO

UNCLAS SECTION 01 OF 03 PODGORICA 000232

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SUBJECT: SCENESETTER FOR ADMIRAL FITZGERALD VISIT TO MONTENEGRO

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1. (SBU) SUMMARY: Welcome to Montenegro. Your visit comes as
the Montenegrin leadership continues its pro-West, pro-NATO,
pro-American stance, while simultaneously looking to maintain
good relations with Belgrade. Its effort to maintain this
balance is currently being put to the test over the issue of
whether or not to recognize neighboring Kosovo. The GoM remains
a receptive interlocutor, eager to develop strong ties with
Washington and to prove itself a reliable partner. The GoM also
continues preparing for its goal of eventual NATO membership by
beginning Intensified Dialogue with NATO in 2008, working to
increase low public support for NATO membership, and lobbying
for a Membership Action Plan (MAP) invitation at the 2009 NATO
summit. The GoM is making continued contributions to the GWOT,
including plans to deploy peacekeepers abroad. The growing
economy is being fueled heavily by FDI in the tourism sector
along the Adriatic coast. END SUMMARY





NATO Membership a Top GoM Priority

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2. (U) The GoM has stated NATO Membership as a strategic goal.
Montenegro was invited to Intensified Political Dialogue at the
NATO Bucharest Summit in April 2008 and began a government-wide
NATO Communications Strategy to increase support for membership
among the population (presently only about 30% favors
membership, 30% oppose it, and the remainder appear undecided).
Montenegrin officials are hopeful an invitation to the
Membership Action Plan (MAP) will be forthcoming at the next
summit in spring 2009.




3. (U) Montenegro continues to make slow, but mostly forward
progress in establishing its nascent defense institutions and
future military force. The Montenegrin Armed Forces are led by
Admiral Dragan Samardzic. Montenegro inherited an outdated,
ill-equipped military that is still working to organize itself
as a modern, NATO-interoperable force capable of contributing to
peacekeeping operations. Present plans call for a 2400-person
force structure under a combined service of naval, ground, and
air assets. This plan is currently under revision as part of a
larger Strategic Defense Review expected to be concluded later
this year.




4. (U) Following independence, and unlike most other ministries
in the GoM, the MoD -- led by Minister of Defense Boro Vucinic
-- has had to build its organization from the ground up.
Developing its human resource capacity is proving to be perhaps
its biggest challenge. Other challenges include prioritizing
requirements, building the legal and regulatory framework for
its volunteer force, and establishing a functioning procurement
system.




5. (U) In June 2008, Montenegro completed the destruction of
1500 Strela Man Portable Air Defense Systems (MANPADs) under a
two million dollar USG demilitarization program. This was an
important contribution in support of the GWOT, and we are
continuing the program to encompass the destruction of more than
2,000 Sea Mines, rockets, and other outdated arms and
ammunition. Additionally, Montenegro officially donated more
than 1500 small arms weapons and 200,000 rounds of ammunition to
the Government of Afghanistan in September 2007. In December
2007, the GoM signed a Transit Agreement with NATO to facilitate
the use of its territory to reinforce KFOR in the event reserves
are needed in Kosovo. Montenegro has signed an Article 98
Agreement with the U.S. and plans on sending peacekeeping
contingents to the Near East following adoption of necessary
legislation in late September.





GoM Delaying on Kosovo

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6. (SBU) The GoM has postponed making a decision on recognizing
Kosovo's independence, but there are indications that a decision
to recognize may be on the horizon. The GoM has been cautious on
Kosovo, wishing neither to offend the USG, Albania, and its own
ethnic Albanian minority (5% of the population) on the one hand,
nor Serbia and its own ethnic Serbian population (32% of the
population) on the other. (This balancing act has also
influenced the GoM's effort to keep its head down on the
Georgia-Russia issue.) The central concern of the GoM is that
stability, regionally but also particularly within Montenegro,
be maintained. Kosovo recognition also will be politically risky
for the GoM. A large majority here opposes recognition of
Kosovo. Montenegro's largest pro-Serb opposition forces have
promised mass protests if the government recognizes. Montenegro
has been consulting with Macedonia about the possibility of a
joint recognition before the UNGA this September.




7. (SBU) There was some concern that potential disturbances in
Kosovo following its declaration of independence in February
2008 could prompt refugees to enter Montenegro, but there have
been no reports of new refugees entering the country. In 1999,
over 100,000 IDPs from Kosovo (primarily ethnic Albanians but
also including Serbs and Roma) entered Montenegro - equal to 1/6
of the local population. Most have returned home.





Stable, but Somewhat Lackluster Political Situation

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8. (SBU) More than two years after independence, no major
political parties are actively questioning Montenegro's
independence. The May 2006 referendum and subsequent September
2006 parliamentary and April 2008 Presidential contests all met
international standards for free and fair elections. In October
2007, Montenegro adopted a new Constitution through democratic
debate. It has moved toward the EU, signing a Stabilization and
Association Agreement (SAA) in October 2007, and is currently
considering seeking formal candidate status before the end of
this year. Montenegro is a member of the United Nations (UN),
Organization for Security and Coordination in Europe (OSCE),and
the Council of Europe. It has been a constructive regional
player, building good relations with neighbors and participating
in numerous regional initiatives (such as CEFTA, SECI, and the
Stability Pact).




9. (SBU) President of the ruling Democratic Party of Socialists
(DPS) Milo Djukanovic, who led Montenegro from the
reintroduction of multi-party democracy in 1991 to independence
in 2006, declined to seek reappointment as Prime Minister after
his party won the September 2006 parliamentary election.
Djukanovic returned to office as PM in February 2008, when
previous PM Sturanovic resigned for health reasons. Prime
Minister Djukanovic's primary foreign policy goals are EU and
NATO membership and he speaks candidly about the U.S. as
Montenegro's "strategic partner."




10. (SBU) Domestically, the GoM's track record on fully
implementing needed democratic and economic reforms is generally
positive, with room for improvement (particularly in
strengthening the rule of law). Privatization of remaining
infrastructure (airports, railroad, and the port of Bar) and the
energy sector is on hold, after the smaller coalition partner,
the Social Democratic Party (SDP),sided with the opposition in
June 2007 to halt the sale of a large thermoelectric plant and
associated coal mine to firm owned by notorious Russian tycoon
Oleg Deripaska. The DPS and SDP -- which differ over the state's
control of strategic industries -- have sparred throughout the
summer over control of various councils and laws regulating
state assets.




11. (SBU) The opposition is fractious and to date has been
ineffective in presenting a serious challenge to the DPS. Most
also remain somewhat on the fence about NATO membership for
Montenegro, for many just as much because of the low public
support for membership and because it provides a handy issue
over which to disagree with the GoM than because of any
principled disagreement with NATO.


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12. (SBU) The two largest opposition blocks are the Movement for
Change (PzP),headed by the charismatic and populist Nebojsa
Medojevic, and Andrija Mandic's Serbian People's Party (SNS) and
Serbian List (SL - a coalition of the SNS and small Serb
parties). Mandic, who typically plays to a Serb nationalist
voter base, claims to be personally disposed to pursue good
relations with the U.S., but this summer he has elevated his
nationalist rhetoric to attack NATO and U.S. foreign policy over
the Russia-Georgia conflict. Unlike the other opposition
groupings, the SL opposes NATO (but not EU) membership for
Montenegro. PzP is pro-independence, pro-EU, but lukewarm on
NATO.



Fighting Corruption

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13. (U) As in other transition countries in this region,
corruption is present at all levels, and many Montenegrins list
corruption as the country's biggest problem (along with low
living standards). In this process, implementation of existing
legislation will be key and the GoM has issued semiannual
reports its progress. Post's new Resident Legal Advisor made a
brief visit to Montenegro in August and will return in October
to focus on rule of law issues.



Attracting Investment

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14. (U) Montenegro has been successful in attracting significant
foreign direct investment (FDI),though so far little of that
has been American. The economy continues to expand, fueled by a
boom in coastal tourism and investment. In the last two years,
the GoM has tamed inflation, moved closer to WTO membership,
privatized almost 90% of the economy, and successfully created a
generally business-friendly environment which has produced the
highest per capita rate of FDI in the region. The country
established the lowest corporate tax rate in the region (9%) and
dramatically improved its tax policy. Tourism and
tourism-related investments, particularly along the Adriatic
coast, are booming, and the independent World Travel and Tourism
Council has ranked Montenegro as the top-growing tourism
destination in the world.




15. (U) Montenegro currently is entering the largest investment
cycle in its history as the GoM plans tenders totaling between
15 and 20 billion euros in infrastructure, tourism, energy, and
the privatization of the remaining state-owned companies over
the next two years. Eager to change the impression that only
Russians are investing in Montenegro, the GOM is carrying out an
aggressive "invest in Montenegro" campaign around the world,
including in the United States.




16. (U) The GoM also is moving Montenegro full steam ahead into
the WTO. Having reached agreement with the EU on terms of its
WTO accession, the U.S. is now the main remaining bilateral
partner with whom the GoM must reach an accord prior to joining
the WTO. They hope to wrap up all negotiations by the end of
2008 and formally join the organization in early 2009.
MOORE