VZCZCXYZ0012
RR RUEHWEB

DE RUEHBW #0155 0391627
ZNR UUUUU ZZH
R 081627Z FEB 08
FM AMEMBASSY BELGRADE
TO RUEHC/SECSTATE WASHDC 2171
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC 0036
RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS BELGRADE 000155 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
USDOC FOR 4232/ITA/MAC/EUR/OEERIS/SSAVICH 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV SR
SUBJECT: SERBIA: DESPITE GOVERNMENT CRISIS SERBIA FINALIZES MINING 
FIRM SALE 
 
Ref 07 Belgrade 1700 
 
SUMMARY 
------- 
 
¶1.  (U) While the Serbian Government spent the week largely 
paralyzed due to Prime Minister Kostunica's (DSS) refusal to call a 
government session, on February 7 a conference call among ministers 
approved the privatization sale of mining firm RTB Bor to Austrian 
A-Tec.  The government needed to approve the sale agreement before a 
February 8 deadline.  If the sale had fallen through, it would have 
been the second failure to sell RTB Bor, and could have opened the 
door to the sale of the firm to the second ranked Russian bidder. 
End Summary. 
 
Government by Conference Call 
----------------------------- 
 
¶2. (U) Despite the Serbian Government's gridlock, the government 
ministers held a conference call on February 7, to approve the 
privatization contract for copper mining and smelting complex 
Rudarsko Topionicarski Basen (RTB) Bor with the Austrian consortium 
A-Tec Minerals and Montanwerke Brixlegg AG.  February 8 was the last 
day to sign the contract for RTB Bor, and if the government had not 
met the already extended deadline the sale would have fallen 
through. 
 
¶3. (SBU) Following the conference call, Economy Minister Dinkic 
signed the sales contract with representatives from A-Tec.  An 
Embassy contact from the Energy and Mining Ministry confirmed that 
Energy and Mining Minister Popovic (DSS) participated in the 
conference call.  In addition, Jasna Matic, State Secretary in 
Dinkic's Economy Ministry told Econoff that Popovic had been 
instrumental in getting the DSS leadership to agree to the cabinet 
conference call.  At the signing ceremony, Dinkic said that the 
Government decision on the contract was reached by consensus. 
 
Austrian Firm Commits to Keep Workers and Make Investments 
--------------------------------------------- - 
 
¶4. (U) A-Tec agreed to pay $466 million for the assets of RTB Bor 
and exploitation rights plus an additional commitment of $230 
million in investment.  A-Tec increased its pledged investment from 
its initial offer of $180 million.  A-Tec will be required to build 
a new smelter and to bring Bor into compliance with Serbian 
environmental standards in four years.  It is also obliged to 
continue employing all 4,700 workers for the next three years. 
 
¶5. (U) This deal was the second tender for RTB Bor, following the 
failure of Romanian firm Cuprom to pay the bid price of $400 
million.  In the second tender only A-Tec and the Russian firm 
Strikeforce Mining and Resources (SMR) submitted bids.  If the sale 
had not been completed by the February 8 deadline, the Privatization 
Agency might have been able to open negotiations with the second 
ranked bidder. 
 
Comment 
------- 
 
¶6. (SBU) The conference call to approve the Bor sale was the first 
government "meeting" since President Tadic's reelection on February 
¶3.  Insiders in two of the key ministries involved have told us that 
there was significant behind the scenes pressure to bring the 
ministers together (on the phone) to approve this deal.  As noted in 
the past (reftel), individuals seeking a greater Russian commercial 
presence in Serbia could have maneuvered to put a Russian firm in 
position to purchase Bor.  Ultimately, the government chose to 
complete the sale with the Austrian firm, but only following 
significant efforts by Western-oriented leaders within the 
government.  End Comment 
 
MUNTER