VZCZCXRO0395
PP RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHPOD #0210/01 2271216
ZNR UUUUU ZZH
P 141216Z AUG 08
FM AMEMBASSY PODGORICA
TO RUEHC/SECSTATE WASHDC PRIORITY 0900
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHPOD/AMEMBASSY PODGORICA 0985

UNCLAS SECTION 01 OF 03 PODGORICA 000210 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV PREL MW
SUBJECT: SUMMER OF SQUABBLES FOR MONTENEGRO'S RULING COALITION 
 
REF: PODGORICA 208 
 
PODGORICA 00000210  001.2 OF 003 
 
 
¶1. (SBU) SUMMARY: Relations between coalition partners the 
Democratic Party of Socialists (DPS) and the Social Democratic 
Party (SDP) have hit a rough patch of late, fueling rumors that 
the DPS might consider early elections.  While highly unlikely 
-- the partners' decade-long coalition has survived bigger bumps 
and is advantageous to both -- the parties may run separately in 
the next election (scheduled for fall 2009).  Even if this 
occurs, however, their shared commitment to Montenegrin 
statehood and Euro-Atlantic integration could well reunite them 
after the vote.  END SUMMARY. 
 
 
 
A Stormy Summer For DPS-SDP Relations... 
 
---------------------------------------- 
 
 
 
¶2. (U) As reported reftel, coalition partners Democratic Party 
of Socialists (DPS) and Social Democratic Party (SDP) failed to 
agree on July 31 on a new Law on Concessions.  The dispute -- 
over the length and mechanism for approval of government 
concessions -- marred the coalition's otherwise assembly-line 
efficiency, with opposition MPs boycotting over a TV coverage 
dispute, in passing several dozen bills before the summer 
recess. (Note:  the DPS and SDP have run together in every 
national election since 1998.  Following the September 2006 
election, by agreement the DPS has 33 MPs and the SDP seven.) 
 
 
 
¶3. (U) The quarrel over concessions capped a summer of small but 
highly publicized disagreements between the partners: 
 
 
 
-- In June, the SDP ousted DPS operative Dragan Kujovic from the 
managing board of the state-owned Budvanska Rivijera company 
(which controls four hotels and valuable land on the Montenegrin 
coast).  The SDP replaced him with Rasko Konjevic, Chief of 
Staff to SDP leader and Parliament Speaker Ranko Krivokapic. 
 
-- Also in June, Djordje Suhih, the SDP head of the Podgorica 
Municipal Council, attempted to block DPS Podgorica Mayor 
Mugosa's sale of a city-owned children's holiday resort (which 
the Mayor plans to turn into a parking lot).  Suhih demanded the 
resignation of a Mugosa protigi and blasted the Mayor for making 
decisions without consulting the Council. 
 
-- In late July, the DPS-controlled Finance Ministry rescinded a 
decision by the SDP-run Real Estate Directorate to tighten 
regulations concerning the sale of land to foreigners. 
 
-- Also in late July, the DPS rejected an SDP amendment to the 
Law on the Historic Capital of Cetinje which would have moved 
Parliament from Podgorica to Cetinje (DPS MPs publicly accused 
the SDP of seeking to score cheap political points). 
 
 
 
...And Differing Economic Visions... 
 
------------------------------------ 
 
 
 
¶4. (SBU) DPS-SDP squabbles are nothing new.  In June 2007, the 
partners famously fell out over a DPS plan to sell the majority 
stake in Montenegro's only thermo-electric plant and an 
accompanying coal mine, both in Pljevlja, to Russian oligarch 
Oleg Deripaska.  (Note:  The SDP voted with opposition parties 
to block the sale, and the DPS backed down at the time, although 
DPS leaders assure us that a new tender for the plant will be 
released in the next year or so.)  The partners also have 
clashed on several occasions over privatization. 
 
 
 
¶5. (SBU) These flaps reflect a larger ideological rift between 
the parties over the state's role in the economy.  In a 
nutshell, the SDP does not oppose privatization but would like 
the government to retain a controlling stake in strategic 
industries and assets, and has been critical of what it sees as 
the DPS's "neo-liberal" rush to sell state properties (the SDP 
also has sought to restrict the ability of foreigners to buy 
land).  SDP deputy head Ivan Brajovic recently told us that the 
parties still were at loggerheads over energy privatization and 
property relations. 
 
 
PODGORICA 00000210  002.2 OF 003 
 
 
 
 
...Fuel Divorce Rumors 
 
---------------------- 
 
 
 
¶6. (SBU) The latest disagreements have fueled rumors that the 
coalition is in jeopardy; these have gained additional traction 
because some believe the DPS would benefit from early 
parliamentary elections (which would be called should the 
coalition split).  The latest polls give the DPS close to 50 
percent support at a time when opposition forces are divided and 
weak (SDP had four percent in a June poll, uncomfortably close 
to the three percent hurdle to enter Parliament).  Early 
elections therefore could give the DPS a shot at forming the 
parliamentary majority -- and consequently the government -- on 
its own.  (Note:  We also have heard rumors that some DPS 
members -- most notably DPS Vice President Svetozar Marovic, who 
has been criticized by Krivokapic for pursuing personal business 
interests in his hometown of Budva -- are pushing for an 
alliance with the moderate opposition Socialist People's Party 
(SNP), which is headed by Budva-resident Srdjan Milic.) 
 
 
 
¶7. (SBU) As for the SDP, independent analyst Svetozar Jovicevic 
recently opined to us that it was increasingly difficult for 
that party to justify its coalition with the DPS.  Montenegrin 
statehood was the glue that held the partners together, he said, 
and with this issue settled, the SDP needed to take a principled 
stand on what the new state should like or risk losing what 
small electorate it had. 
 
 
 
Ranko's New Car, Or The Ties That Bind 
 
-------------------------------------- 
 
 
 
¶8. (SBU) Officials of both parties quickly denied the divorce 
speculation.  Following the concession law spat, President 
Vujanovic told the press that the partners had their 
disagreements, but were willing to overcome them.  PM Djukanovic 
also declared that the coalition was encountering "normal 
differences" and was not in crisis; the SDP's Brajovic seconded 
this assessment. 
 
 
 
¶9. (SBU) Indeed, few interlocutors see a split as likely at this 
point.  The parties agree on most big issues (adherence to 
statehood, Euro-Atlantic priorities) and have usually 
compromised on legislative and privatization disagreements.  SDP 
MPs frequently tell us they recognize that their small party is 
better able to influence policy within the coalition than from 
without.  As Brajovic told us recently, "for all our problems, 
we are still one of the most stable coalitions in the Balkans." 
 
 
 
¶10. (SBU) Many also note the considerable benefits the SDP 
accrues in terms of positions and perks.  The party has the 
Speaker and a deputy speaker position and three ministers in the 
government, including one of the two Deputy Prime Ministers. 
According to the parties' post-September 2006 election 
agreement, the SDP also gets 20 percent of positions in state 
managing boards and structures.  DPS MP Miodrag Vukovic claimed 
to us that SDP-run agencies control 40 percent of all budget 
assets (including pension and health funds, forestries, and 
other state companies).  And more than one interlocutor has 
pointed to Krivokapic's expensive new Audi as an example of what 
the SDP would lose should it bolt the coalition. 
 
 
 
Comment 
 
------- 
 
 
 
¶11. (SBU) The odds are heavily stacked against a split -- the 
coalition has survived bigger bumps in the past and is highly 
convenient for both sides -- but the DPS does not appear to have 
conclusively ruled out early elections (PM Djukanovic said in TV 
interview that "everything is possible, but let's hope it is not 
necessary.")  The implied threat gives the DPS considerable 
 
PODGORICA 00000210  003.2 OF 003 
 
 
leverage over the SDP at a time when several big privatization 
decisions are pending (for example, the privatization of 
Montenegro's airports, the Plantaze winery, the port of Bar, and 
several coastal tourist sites were put off until at least 2009, 
and the DPS wants to push again for the privatization of the 
thermo-electric plant and coal mine, although the parties have 
an apparent agreement that the state will retain a 55 percent 
stake).  The rumors, likely encouraged by the DPS, of the DPS's 
flirtation with the SNP also can be seen in this light, although 
the DPS also likely wants to keep its options open. 
 
 
 
¶12. (SBU) What does appear possible is that the DPS and SDP will 
run separately in the next election.  They ran alone in April 
local elections in Herceg Novi and Tivat and may do so again in 
October elections in Kotor.  SDP sources tell us it is too early 
to make a decision about the parliamentary election, but that 
their party "approaches every election with the intent to run on 
our own."  In the DPS, there clearly is strong sentiment for 
separate slates.  A senior DPS official predicted as much during 
a recent conversation.  After describing the recent 
disagreements (the official was particularly bitter about the 
SDP's activities in the Budvanska Rivijera company), and 
confiding that the DPS was considering introducing a law that 
would prohibit parties from forming coalitions for elections, he 
told us, "after ten years together, we simply have grown tired 
of each other." 
 
 
 
¶13. (SBU) The implications of a split ticket are unclear at this 
point, but are unlikely to affect Montenegro's foreign policy 
orientation.  The DPS would hope to win an outright majority, 
which would allow it to form the government on its own (in this 
scenario, the SDP -- if it makes it into Parliament -- would 
still vote with the DPS on issues supporting Euro-Atlantic 
integration).  If the DPS falls short of a majority, given DPS's 
and SDP's strong adherence to statehood and Euro-Atlantic goals, 
a revival of the present coalition is a distinct possibility. 
The wildcard would be a third scenario -- in which the DPS would 
opt for another coalition partner, such as the SNP.  This should 
not slow Montenegro's drive toward EU integration, but -- 
depending on how strong the SNP's representation was in the 
Parliament and GoM -- could slow its NATO integration pace (in 
that the SNP, while not opposed, is less enthusiastic about 
membership than the SDP.) 
MOORE