Serbia and Montenegro - A Balkan imbroglio
LATE last year, in an operation dubbed “Balkan Warrior”, police in South America seized 2.7 tonnes of cocaine, most of it from a yacht moored in Uruguay. Almost six months on, the reverberations are being felt on the other side of the world.
Serbia has indicted Darko Saric and 19 associates, accusing them of smuggling drugs from South America to Europe. Mr Saric hails from Pljevlja, in Montenegro, but is a Serbian citizen. The Serbs have confiscated more than 25 properties which they claim belong to him or to his associates. The Serbian government is trumpeting this as a crackdown on organised crime. But the Balkan Warrior story is now damaging relations between Serbia and Montenegro, which became independent only in 2006.
In February the Serbs asked the Montenegrins to arrest and extradite three alleged gang members. But when Serbia did not provide any evidence against them, they were released. Montenegrin officials say they are the victims of a Serbian smear campaign. Montenegro is way ahead of Serbia in progress towards joining the European Union. It may even win formal candidate status by the end of 2010. The Montenegrins suggest that Serbia is now using the Saric affair to blacken Montenegro’s name in Brussels. 
In a statement, Hypo Alpe Adria says that these transactions have been reported to Montenegro’s anti-money-laundering agency. The bank claims it is not laundering money, but the agency’s director, Predrag Mitrovic, says the transactions look suspicious. Igor Luksic, Montenegro’s finance minister, says the authorities are investigating them.
Mr Saric has vanished. Nebojsa Medojevic, a Montenegrin opposition leader, who has often accused Milo Djukanovic, the prime minister, of tolerating organised crime (he in turn has accused critics of being criminals and drug addicts) believes Mr Saric is still in the country but has been kidnapped by bigger crime bosses to stop him talking. NowMonitor, a Montenegrin magazine, claims to have seen leaked documents showing unusual financial activities in companies linked to Mr Saric. According to the documents, millions of euros have been paid by companies registered in the Marshall Islands and in Delaware via the Bank of Cyprus into accounts at an Austrian bank, Hypo Alpe Adria, in Montenegro. The companies are all owned by people with links to Mr Saric. The magazine claims the money is being used as collateral for bank loans to other companies with connections to Mr Saric.
The Saric affair has hit the reputation of Montenegro at a bad moment for the economy. GDP grew by 10.7% in 2007 and 7.5% in 2008. But Mr Luksic says it shrank by 5.3% in 2009 and will barely grow this year. Mr Djukanovic’s ruling Democratic Party of Socialists may suffer politically. In local elections later this month, the main opposition parties will stand together for the first time since independence. 
If the opposition parties do well, they will demand a general election. Mr Luksic, who is widely seen as a possible successor if Mr Djukanovic steps down (as he has repeatedly promised), perhaps next year, is against that. He suggests one bright way to lift the gloom: to persuade Thaksin Shinawatra, a billionaire former Thai prime minister who has now become a citizen of Montenegro, to invest. We are rich in opportunities, Mr Luksic insists. But before most foreign investors will be prepared to take any of them up, his country needs to do more to improve its reputation.
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