Identifier
Created
Classification
Origin
08PODGORICA90
2008-03-17 10:35:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Podgorica
Cable title:
KOSOVO'S INDEPENDENCE HAS MINIMAL ECONOMIC IMPACT IN
how-toVZCZCXRO6681 RR RUEHBW RUEHPOD DE RUEHPOD #0090/01 0771035 ZNR UUUUU ZZH R 171035Z MAR 08 FM AMEMBASSY PODGORICA TO RUEHC/SECSTATE WASHDC 0699 INFO RUEHBW/AMEMBASSY BELGRADE 0312 RUEHTI/AMEMBASSY TIRANA 0087 RUEHSQ/AMEMBASSY SKOPJE 0026 RUEHVJ/AMEMBASSY SARAJEVO 0066 RUEHPOD/AMEMBASSY PODGORICA 0773 RUEHPS/USOFFICE PRISTINA 0079
UNCLAS SECTION 01 OF 02 PODGORICA 000090
SIPDIS
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: ETRD ECON PREL MW
SUBJECT: KOSOVO'S INDEPENDENCE HAS MINIMAL ECONOMIC IMPACT IN
MONTENEGRO, SO FAR
UNCLAS SECTION 01 OF 02 PODGORICA 000090
SIPDIS
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: ETRD ECON PREL MW
SUBJECT: KOSOVO'S INDEPENDENCE HAS MINIMAL ECONOMIC IMPACT IN
MONTENEGRO, SO FAR
1. (SBU) SUMMARY: To date Kosovo's independence declaration and
Serbia's angry reaction have not resulted in any significant
economic consequences for Montenegro, and Montenegrin
interlocutors are downplaying the likelihood of Serbian economic
sanctions. However, continued regional political instability
could harm Montenegro's tourism industry, a critical element of
the Montenegrin economy. Montenegro's dependence on imported
energy from Serbia also leaves it vulnerable should Belgrade
ever decide to punish the GoM for future recognition of Kosovo.
END SUMMARY.
--------------
No Economic Impact So Far
--------------
2. (SBU) In the weeks leading up to and following Kosovo's
declaration of independence, EconOff and Econ FSN raised the
issue of the potential economic impact on Montenegro --
including the likelihood of a punitive Serbian response should
the GoM recognize Kosovo -- with numerous interlocutors.
Repeatedly we were told that economic ties are stronger than
"nationalist political games" and that there is nothing to be
concerned about. Economic think tanks, Government officials, and
private sector contacts all concurred, telling us that
Montenegro and Serbia are too economically linked for the Kosovo
issue to disrupt these ties.
3. (SBU) Darko Konjevic of the Montenegro Business Alliance told
us that Serbia is one of the most significant markets for
Montenegrin products and the same is true for Serbian goods in
Montenegro. Regardless of the political decisions Belgrade was
making, Konjevic said that he doubts Serbia would ever take
measures which would endanger its economic cooperation with
other countries. Finance Minister Luksic also predicted that
there would be no adverse economic consequences for Montenegro.
He even put a positive spin on the regional developments,
speculating that with Serbia falling out of favor with the EU,
Montenegro's chances at a rapid EU integration process improved,
as did its chances for speedy visa liberalization.
-------------- --------------
But Problems May Loom in Tourism and Energy Sectors
-------------- --------------
4. (SBU) Luksic did note, however, that the GoM hoped the
political atmosphere in the region would improve before the
start of the tourist season. His comment highlights the fact
that, despite the current optimism in Podgorica, regional
instability has the potential to adversely impact tourism
revenues, which accounted for nearly 20 percent of Montenegro's
GDP last year.
5. (SBU) Tourism and tourism investments have been booming in
the last few years, and the independent World Travel and Tourism
Council ranked Montenegro as the top-growing tourism destination
in the world in 2007. A shaky political environment in the
region could lead Western European and American tourists to
associate Montenegro with its troubled neighbours and rethink
their travel plans. Further, a significant number of tourists
visiting the Montenegro coast each summer are from Serbia --
roughly 41 percent of the total 6.4 million tourist overnights
in 2007. Montenegro risks losing this revenue if its relations
with its northern neighbour cool.
6. (SBU) In addition to tourism, Montenegro's reliance on
imported energy, the bulk of which comes from Serbia, is a
potential concern. Montenegro imported 44 percent of its energy
PODGORICA 00000090 002 OF 002
needs in 2007, and the Ministry for Economic Development told us
that they expect to import at least 35 percent in 2008. Of that,
approximately a quarter comes from Serbia. Although we have no
indications that anyone in the energy sector believes Serbia
would cut them off, it remains a vulnerability.
--------------
Comment
--------------
7. (SBU) Over a quarter of all Montenegrin exports, worth
roughly 170 million euros, are sold in the Serbian market and
nearly thirty percent (638 million euros) of all imports to
Montenegro came from Serbia in 2007. These are significant
numbers on both sides, indicating that Konjevic may be right
that Serbia would be unwilling to risk a freeze in economic
relations. But beyond Montenegro's delicate ethnic balance and
domestic political scene, the close economic ties and
Montenegro's energy reliance on Serbia make the recognition of
Kosovo for the GoM particularly sensitive. The situation is calm
now, and our interlocutors are generally optimistic, but when
pressed, some did express concern that political developments in
their backyard could have some impact here.
MOORE
SIPDIS
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: ETRD ECON PREL MW
SUBJECT: KOSOVO'S INDEPENDENCE HAS MINIMAL ECONOMIC IMPACT IN
MONTENEGRO, SO FAR
1. (SBU) SUMMARY: To date Kosovo's independence declaration and
Serbia's angry reaction have not resulted in any significant
economic consequences for Montenegro, and Montenegrin
interlocutors are downplaying the likelihood of Serbian economic
sanctions. However, continued regional political instability
could harm Montenegro's tourism industry, a critical element of
the Montenegrin economy. Montenegro's dependence on imported
energy from Serbia also leaves it vulnerable should Belgrade
ever decide to punish the GoM for future recognition of Kosovo.
END SUMMARY.
--------------
No Economic Impact So Far
--------------
2. (SBU) In the weeks leading up to and following Kosovo's
declaration of independence, EconOff and Econ FSN raised the
issue of the potential economic impact on Montenegro --
including the likelihood of a punitive Serbian response should
the GoM recognize Kosovo -- with numerous interlocutors.
Repeatedly we were told that economic ties are stronger than
"nationalist political games" and that there is nothing to be
concerned about. Economic think tanks, Government officials, and
private sector contacts all concurred, telling us that
Montenegro and Serbia are too economically linked for the Kosovo
issue to disrupt these ties.
3. (SBU) Darko Konjevic of the Montenegro Business Alliance told
us that Serbia is one of the most significant markets for
Montenegrin products and the same is true for Serbian goods in
Montenegro. Regardless of the political decisions Belgrade was
making, Konjevic said that he doubts Serbia would ever take
measures which would endanger its economic cooperation with
other countries. Finance Minister Luksic also predicted that
there would be no adverse economic consequences for Montenegro.
He even put a positive spin on the regional developments,
speculating that with Serbia falling out of favor with the EU,
Montenegro's chances at a rapid EU integration process improved,
as did its chances for speedy visa liberalization.
-------------- --------------
But Problems May Loom in Tourism and Energy Sectors
-------------- --------------
4. (SBU) Luksic did note, however, that the GoM hoped the
political atmosphere in the region would improve before the
start of the tourist season. His comment highlights the fact
that, despite the current optimism in Podgorica, regional
instability has the potential to adversely impact tourism
revenues, which accounted for nearly 20 percent of Montenegro's
GDP last year.
5. (SBU) Tourism and tourism investments have been booming in
the last few years, and the independent World Travel and Tourism
Council ranked Montenegro as the top-growing tourism destination
in the world in 2007. A shaky political environment in the
region could lead Western European and American tourists to
associate Montenegro with its troubled neighbours and rethink
their travel plans. Further, a significant number of tourists
visiting the Montenegro coast each summer are from Serbia --
roughly 41 percent of the total 6.4 million tourist overnights
in 2007. Montenegro risks losing this revenue if its relations
with its northern neighbour cool.
6. (SBU) In addition to tourism, Montenegro's reliance on
imported energy, the bulk of which comes from Serbia, is a
potential concern. Montenegro imported 44 percent of its energy
PODGORICA 00000090 002 OF 002
needs in 2007, and the Ministry for Economic Development told us
that they expect to import at least 35 percent in 2008. Of that,
approximately a quarter comes from Serbia. Although we have no
indications that anyone in the energy sector believes Serbia
would cut them off, it remains a vulnerability.
--------------
Comment
--------------
7. (SBU) Over a quarter of all Montenegrin exports, worth
roughly 170 million euros, are sold in the Serbian market and
nearly thirty percent (638 million euros) of all imports to
Montenegro came from Serbia in 2007. These are significant
numbers on both sides, indicating that Konjevic may be right
that Serbia would be unwilling to risk a freeze in economic
relations. But beyond Montenegro's delicate ethnic balance and
domestic political scene, the close economic ties and
Montenegro's energy reliance on Serbia make the recognition of
Kosovo for the GoM particularly sensitive. The situation is calm
now, and our interlocutors are generally optimistic, but when
pressed, some did express concern that political developments in
their backyard could have some impact here.
MOORE