VZCZCXRO0434
PP RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHNP RUEHROV RUEHSK RUEHSL RUEHSR RUEHVK RUEHYG
DE RUEHPOD #0166/01 1891537
ZNR UUUUU ZZH
P 081537Z JUL 09
FM AMEMBASSY PODGORICA
INFO RUEHC/SECSTATE WASHDC PRIORITY 1395
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEKJCS/SECDEF WASHDC
RUEHPOD/AMEMBASSY PODGORICA 1484

UNCLAS SECTION 01 OF 04 PODGORICA 000166 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL PGOV ECON MW
SUBJECT: SCENESETTER FOR THE VISIT OF PDASD MCMILLAN TO MONTENEGRO 
 
PODGORICA 00000166  001.2 OF 004 
 
 
¶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. 
 
 
PODGORICA 00000166  002.2 OF 004 
 
 
 
 
¶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 
 
PODGORICA 00000166  003.2 OF 004 
 
 
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 
 
--------------------------------------- 
 
 
 
¶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? 
 
---------------------------- 
 
 
 
¶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. 
 
 
 
 
 
PODGORICA 00000166  004.2 OF 004 
 
 
 
Global Crisis Meets Booming Economy 
 
----------------------------------- 
 
 
 
¶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