SCENESETTER FOR THE VISIT OF PDASD MCMILLAN TO MONTENEGRO

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SENSITIVE
SIPDIS

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

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1. (SBU) SUMMARY: Welcome to Montenegro. Your visit comes as
the newly re-elected Montenegrin leadership continues a
pro-NATO, pro-western stance. The GoM welcomed the positive
language about Montenegro in the April NATO Summit Communiqui
and now has its sights set on an invitation into MAP by December

2009. In the meantime, the GOM is working to increase public
support for NATO membership and is continuing preparations to
deploy a peacekeeping unit to ISAF. The GOM formally applied
for EU membership in December 2008 and expects to receive a
lengthy questionnaire - the next step toward candidate status -
this summer. The economy has been fueled heavily by Foreign
Direct Investment (FDI) in the tourism sector, but growth is
expected to stagnate in 2009 due to the global economic crisis.
The GoM remains a receptive interlocutor, eager to develop
strong ties with Washington and to prove itself a reliable
partner (e.g., it recognized neighboring Kosovo in October
2008). Montenegro still has work to do in improving its record
on rule of law issues. END SUMMARY





Stable, Pro-Western Democracy

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




2. (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.




3. (SBU) A few possible bumps lie in the road, however. One is
Montenegro's small size. Despite its progress, it has had
difficulty getting the attention of some 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.




4. (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. In addition to addressing domestic consequences of
the global financial crisis, PM Djukanovic -- now heading the
GoM for the sixth time -- has pledged to intensify Montenegro's
drive for EU and NATO membership.





Strong Bilateral Relationship

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




5. (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.


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6. (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.




7. (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 Hungarian unit based in Pol-i-Khomri under the command of
German-led Regional Command (North) (RC(N)) by the end of the
year (the other will rotate in after four months ). An MPRI
training team is currently in Montenegro. Montenegro also has a
three-man medical team ready to deploy (with parliamentary
approval) now. Montenegro's MoD is in active negotiations with
Norway, Hungary and Germany to deploy its medical team.
Additionally, Montenegro plans to deploy two liaison officers
(LNO) to the RC (N) headquarters in Mazar-e-Sharif by September

2009.





Focused on NATO and EU Integration

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




8. (SBU) EU and NATO membership are the GoM's top strategic
goals. 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. Montenegro continues to
make forward progress in establishing its nascent defense
institutions and future military structure, which was reflected
in the positive PARP assessment earlier this year. Montenegrin
officials were further encouraged by the positive statements on
Montenegro in the NATO communiqui in April. The GoM now hopes
to receive a MAP invitation at or before the December NATO
ministerial, and initial soundings suggest that Allies believe
this is achievable.




9. (U) Following independence, and unlike most other ministries
in the GoM, the Ministry of Defense (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.




10. (U) The Montenegrin Armed Forces are led by Chief of Defense
Admiral Dragan Samardzic, who has staked out a decidedly
pro-NATO orientation. Montenegro inherited an outdated,
ill-equipped military that is still working to organize itself
as a modern, NATO-interoperable force capable of contributing to
force projection and peacekeeping operations. The latest
Montenegrin Strategic Defense Review (SDR) calls for a
2400-person force (plus 300 reservists) structure under a
combined service of naval, ground, and air assets. The current
force structure is significantly below even this modest level.
Their goal is a combat capable, fully professional force which
serves their nation not only in operations outside its borders,
but also is capable of homeland defense, assisting the Ministry
of Interior in crisis management.




11. (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 a variety of
local NGOs, has initiated an aggressive communications strategy

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to increase public support for membership.




12. (U) Public support for EU membership, however, is
widespread. Montenegro applied for candidate status in the EU
in December 2008. In April, the European Commission initiated
steps for an assessment (the "avis") of Montenegro's
suitability, which could eventually result in Montenegro being
granted formal candidate status, perhaps in the latter part of

2010.





Aiming to Play a Positive Regional Role

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13. (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.




14. (SBU) The GoM recognized Kosovo in October 2008 over
widespread opposition, including demonstrations in Podgorica and
towns across Montenegro. 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. Foreign Minister Rocen
repeatedly has assured us that Podgorica will establish official
diplomatic relations by the end of the year.




15. (SBU) Kosovo recognition has 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 met with Serbian President Tadic in May, the first
presidential visit since Montenegro's independence in 2006.
Since then the two Presidents have seen each other on at least
two additional occasions. The Presidency tells us that the GoM
will appoint a new Ambassador to Serbia soon.



Achilles Heel: Rule of Law?

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16. (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
roughly even with many 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.




17. (SBU) Montenegro is located at an historic smuggling
crossroads, and law enforcement officials and the judiciary are
underfunded and underequipped. The small size of the country
and the lengthy tenure of the ruling parties have generated many
allegations of cronyism and nepotism. 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. In this
process, implementation of existing legislation will be key and
the GoM is issuing semiannual reports on its progress.





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Global Crisis Meets Booming Economy

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18. (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.




19. (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.




20. (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.
MOORE