SCENESETTER FOR THE VISIT OF THE DEPUTY SECRETARY TO

UNCLAS SECTION 01 OF 04 PODGORICA 000119

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PREL PGOV ECON MW
SUBJECT: SCENESETTER FOR THE VISIT OF THE DEPUTY SECRETARY TO
MONTENEGRO

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1. (SBU) SUMMARY: You are the highest-level State Department
official to visit Montenegro since its independence in 2006, and
your arrival represents a major milestone in our bilateral
relationship and a great opportunity for us to advance our
broader goals in this region. I recommend that two themes
dominate the visit: a) building on our close bilateral
partnership, and b) promoting Montenegro as a positive model
that can help bring lasting stability throughout the Balkans.




2. (SBU) We have a significant interest in helping Montenegro
become the next Balkan success story, an achievable goal that
would generate positive reverberations in Serbia, Bosnia, and
elsewhere. Alone among the non-NATO ex-Yugoslav states,
Montenegro faces no daunting obstacles to NATO and the EU, and
the country's stable, pro-U.S. leadership is intent on bringing
Montenegro into those organizations as soon as possible.
Moreover, Montenegro is unique in the Balkans in having built
positive relationships with all other countries in the region
(including Kosovo) and can potentially play a moderating role.




3. (SBU) Your visit can help accelerate Montenegro's timeline
for success by building on the encouraging signals from the
April NATO Summit. Montenegro hopes to be invited into NATO's
Membership Action Plan (MAP) in 2009 and will appreciate your
views as to its prospects. Given Montenegro's strong ties with
all the other Balkan countries, you could also encourage the
President and Prime Minister to help us move our agenda forward
elsewhere. END SUMMARY.



Stable, Pro-Western Democracy

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4. (SBU) Montenegro has come a long way in the three years since
independence from the state union with Serbia. The country has
held democratic elections, built state institutions, privatized
and grown its economy, adeptly managed relations among its
ethnic groups (Montenegrins, Serbs, Muslims, Bosniaks,
Albanians, Croats, Roma, and others),and launched an ambitious
drive for full Euro-Atlantic integration. There is a general
societal consensus for EU membership (although not yet for
NATO),and the Government is wholeheartedly gunning for early
accession to NATO and the EU. Moreover, none of the complex
obstacles tripping up other non-NATO Balkan states
(constitutional issues, name disputes, recognition, ICTY,
Kosovo, etc.) stands between Montenegro and achievement of this
goal. In short, Montenegro has all the ingredients to be a
success story -- a market-based democracy anchored in the key
Euro-Atlantic institutions. Such success would reverberate
positively throughout the region, especially in Serbia and
Bosnia.




5. (SBU) A few possible bumps lie in the road. One is
Montenegro's small size - despite its progress, it has had
difficulty getting the attention of its Western partners.
Secondly, some European states continue to lean in the direction
of instinctively lumping Montenegro in with other countries in
the region, rather than fostering Montenegro as a positive model
that can have a "pulling effect" on other Balkan states lagging
behind. Finally, Montenegro has a major challenge in overcoming
an at least partly-deserved reputation for problems in the rule
of law area (more below).




6. (SBU) Pre-term parliamentary elections in late March resulted
in a landslide victory for Prime Minister (PM) Djukanovic's
ruling Democratic Party of Socialists (DPS) - Social Democratic
Party (SDP) coalition - now including Bosniak and Croat parties
- over a fragmented and fractious opposition. As was the case
with the 2006 independence referendum and subsequent polls, the
OSCE assessed this election as generally meeting international
standards. PM-designee Djukanovic, who will head the GoM for
the sixth time, has pledged to intensify Montenegro's drive for
EU and NATO membership.



Strong Bilateral Relationship

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7. (SBU) Montenegro's pro-American leadership views us as a
strategic ally and is genuinely grateful for critical U.S.
assistance which helped keep the country afloat after Montenegro
broke with Milosevic in the late 90s. The GoM generally
supports U.S. priorities, sometimes at considerable political
risk. For example, the GoM is enthusiastically pursuing NATO
membership despite limited public support, and it recognized
Kosovo in October 2008 over virulent domestic opposition and
dire warnings from neighboring Serbia.




8. (SBU) In addition, since independence, Montenegro has signed
Article 98 and Status of Forces agreements and destroyed almost
90 percent of its Man Portable Air Defense Systems (MANPADs)
under a USG program. In September 2007, at the USG's behest,
Montenegro donated more than 1,500 small arms weapons and
200,000 rounds of ammunition to Afghanistan. In December 2007,
it signed a transit agreement allowing NATO to supply KFOR.
None of these actions was domestically popular.




9. (SBU) In October 2007, at the USG's request, the GoM
committed to send troops from its fledgling military to Iraq.
Before that commitment could be fulfilled, the GoM agreed to a
new USG request to deploy an infantry platoon to the
International Security Assistance Force (ISAF) mission in
Afghanistan. In late April, Montenegro contracted U.S. firm
MPRI to train two platoons, one of which is expected to deploy
with a German outfit by the end of the year (the other will
rotate in after six months). Montenegro also will send a
three-man medical team to the ISAF in August. I suggest that
you ask the Prime Minister to provide a firmer timeline as to
when the first Montenegrin platoon will arrive in Afghanistan.




10. (SBU) Embassy Podgorica is almost alone among EUR posts in
not issuing visas. This is a major bilateral issue which we
hear about almost daily from a wide range of interlocutors.
While we have made no public announcements, we expect to begin
issuing visas in mid-July. You may wish to inform the President
and Prime Minister of our plans to do so.



Pushing Hard For EU and NATO

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




11. (SBU) EU and NATO membership are the GoM's top strategic
goals. Montenegro applied for candidate status in the EU in
December 2008. In April, the European Commission began its
assessment (the "avis"),which could eventually result in
Montenegro being granted formal candidate status, perhaps in the
latter part of 2010.




12. (SBU) The GoM also is pushing hard to integrate with NATO -
and has made notable progress. Montenegro was invited to
Intensified Political Dialogue at the 2008 Bucharest Summit, and
it received a very positive PARP assessment earlier this year.
The April 2009 Summit communiqui was a major success for
Montenegro, as the Alliance sent strong signals that Montenegro
is on the fast track to MAP.




13. (SBU) The GoM hopes to receive a MAP invitation at or before
the December NATO ministerial, and initial soundings suggest
that Allies believe this is achievable. The GOM would welcome
your views as to whether the USG will support Montenegro joining
MAP in 2009.




14. (SBU) Public support for NATO is still somewhat tepid, in
significant measure due to memories of the 1999 NATO
intervention. According to recent polls, public support stands
slightly above 30 percent, with another 40 percent opposed and
the remainder undecided. The GOM, assisted by NGOs, has
initiated an aggressive communications strategy to increase
public support for membership.


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Positive Regional Role

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15. (SBU) Montenegro has been a constructive regional player,
building good relations with all its neighbors. It actively
participates in numerous regional initiatives (such as CEFTA,
which it currently chairs, SECI, the Stability Pact, etc.).
Montenegro and Croatia recently agreed to refer a dispute over
their maritime border (at the entrance to Kotor Bay) to the ICJ,
offering a potential model for resolution of similar disputes
elsewhere in the region.




16. (SBU) The GoM recognized Kosovo in October over widespread
opposition, including large demonstrations. Ethnic Serbs, a
third of the population, were particularly incensed. The GoM
put off establishing diplomatic relations with Pristina until
after the March elections, and continues to treat the issue
gingerly. Nevertheless, the governments of Montenegro and
Kosovo continue to interact regularly at senior levels, and
there has been substantial cooperation among police, border, and
customs officials. Moreover, the GoM joined us in supporting
Kosovo's membership in the IMF and World Bank.




17. (SBU) President Vujanovic has announced that he wants the
GoK to officially recognize Kosovo's Montenegrin minority and to
establish conditions for the return of some of the 16,000
refugees from Kosovo (many of whom are Roma) who now live in
Montenegro. However, the President has assured us that these
are not conditions, and FM Rocen told us recently that the GoM
still intends to establish diplomatic relations soon (he said
the GoM is still waiting for a diplomatic note from Pristina to
initiate the process of establishing relations). I recommend
that you ask the Prime Minister as to when he expects diplomatic
relations to be formalized.




18. (SBU) Kosovo recognition strained official relations with
Serbia, which promptly expelled Montenegro's ambassador last
October. However, bilateral trade and working level cooperation
in other areas have continued. Moreover, President Vujanovic
will meet with President Tadic on May 18 in Belgrade in a bid to
place relations on a stronger footing. You may wish to discuss
with President Vujanovic and the PM ways in which the GOM can
urge other leaders in the region to play more helpful roles.



Achilles Heel: Rule of Law?

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19. (SBU) Montenegro has made significant progress in overcoming
its 1990s reputation as an organized crime hub. According to
Transparency International and Freedom House rankings, it is
about even with or ahead of most of its neighbors in corruption
perceptions (as well as in most other democracy measures).
However, as in other transition countries, it still faces
significant rule of law challenges.




20. (SBU) Montenegro is located at an historic smuggling
crossroads, and law enforcement officials and the judiciary are
underfunded and underequipped. Many Montenegrins list
corruption among the country's biggest problems, and some worry
that the ruling coalition's dominance will dampen the GoM's
desire to vigorously identify and prosecute graft. The Embassy
has made strengthening Montenegro's ability to fight crime and
corruption a top priority, and we recently established a
Resident Legal Advisor office headed by a veteran U.S. federal
prosecutor. GoM leaders understand that rule of law issues must
be addressed for Montenegro to enter the EU and NATO. Still, I
would recommend that you remind them that continued progress in
this area will be critical to sustained momentum toward full
membership in NATO and the EU.



Global Crisis Meets Booming Economy

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21. (SBU) Montenegro's economy, fueled by a boom in coastal
tourism and investment, expanded rapidly over the past few
years. During this period the GoM also tamed inflation, moved
closer to WTO membership, privatized almost 90 percent of the
economy, and created a generally business-friendly environment.
The result has been the highest per capita rate of FDI in the
region.




22. (SBU) Although we recently helped establish an AmCham and a
U.S.-Montenegro Business Council, U.S. trade and investment
remain at disappointingly low levels. However, the GoM plans
billions of euros worth of tenders over the next two years in
infrastructure, tourism, and energy, and is eagerly courting
U.S. investors, in part to balance against heavy Russian
investment, most of which occurred earlier in the decade. (In
2008, Russia ranked number one in terms of aggregate FDI to
date). We have not seen indications that the Russian economic
presence has translated into political or diplomatic influence.




23. (SBU) Montenegro's narrow economic base makes it vulnerable
to the global economic crisis, which is expected to bring growth
(eight percent in 2008) to a virtual standstill this year.
Montenegro's largest employer, a Russian-owned aluminum plant,
is near bankruptcy, tourist numbers are down (tourism accounts
for about 20 percent of GDP),the country's largest domestic
bank (majority-owned by the PM's family) required a bailout in
December, and the rest of the banking sector remains vulnerable.





24. (SBU) The economic crisis could exacerbate economic
conditions in northern Montenegro, which trails the more
prosperous south and center of the country in virtually every
developmental index. This region is potentially vulnerable, as
it is home to the majority of Montenegro's anti-independence
Serbs, as well as significant numbers of Muslims and Albanians.
To mitigate risks, the Embassy has launched a $10 million USAID
program to stimulate private sector growth in this region.
MOORE