September 2007

Corruption and organised crime

Montenegro has an unsavoury reputation as a haven for smuggling and organised crime, and for the corruption of its public officials. Much of this relates to the troubled decade of the 1990s, when the Federal Republic of Yugoslavia (the rump of the old Yugoslavia consisting of Serbia and Montenegro) was under international sanctions. The collapse of Yugoslavia had brought federal subsidies to a sudden end, leaving Montenegro with a cash crisis. The smuggling of fuel and other goods from Albania became part of its survival strategy, bringing with it a range of social ills that have taken many years to bring under control.

To gain hard-currency earnings, Montenegro engaged in a complex, multinational tax-evasion scheme politely termed the "cigarette transit business". International smugglers would bring huge shipments of cigarettes bought in Switzerland, Belgium or other Western countries to Montenegro, often by plane to Podgorica airport. The cigarettes were then shipped to the port of Bar and loaded on speedboats for shipment to Italy, where they could be sold on.

The Montenegrin authorities did not deny the existence of the cigarette transit business, but insisted that the whole process was legal until the point when the cigarettes left Montenegrin territory. The fact that they then entered Italy illegally was, according to the Montenegrin government, not its concern. The smugglers paid their transit duties to the Montenegrin government, providing an important source of revenues for the republican budget. As Milo Djukanovic put it in July 2003: "There is no question of smuggling, just transit business which was done in line with the law. The cigarettes that came into Montenegro's port at Bar had in fact come from the EU, and were re-exported with all the right paperwork." (IWPR, Balkan Crisis Report, Dukanovic Smuggling Claims Perist)

Italian prosecutors have taken a rather different view. Montenegrin officials have been repeatedly mentioned in Italian police reports. In 1999, Branko Perovic, at the time Montenegro's Foreign Minister, was forced to resign after being indicted by an Italian court. In October 2002, Naples prosecutor Giovanni Russo requested an arrest warrant for Milo Djukanovic on smuggling charges. The responsible investigative judge, Anna Di Mauro, however, declined to issue a warrant, citing Djukanovic's sovereign immunity as head of state.

Most recently, in June 2006, two prosecutors from Bari accused Milo Djukanovic and another dozen individuals, of cigarette smuggling and money laundering. They allege that Djukanovic and his associates were much more deeply involved in the smuggling enterprise. Nedjelko Rudovic wrote:

"The prosecutors named Djukanovic as the boss of an enterprise from 1994 to 2002, consisting firstly of mafia members from Puglia, southern Italy, and two Swiss businessmen. A separate investigation has been launched against these two.

The ring allegedly used speedboats to transport cigarettes across the Adriatic from the Montenegrin ports of Bar and Zelenika to Italy. The prosecutors claim the profits were deposited in Swiss bank accounts, and transferred to Montenegro and then Cyprus and Lichtenstein. About 500 million euros allegedly belonging to the group were found in a Cypriot bank account, numbered 03854109703948, ANSA reported. This money was allegedly being laundered through investments in Montenegro."

One of the accused, former Minister of Finance Miroslav Ivanisevic, maintained that:

"There was a cigarette transit through Montenegro and this business, including the collection of revenues from it for the state of Montenegro, was transacted in keeping with the laws and decisions in effect at the time. Everything was registered and all the legally due payments were collected."

The cigarette business declined rapidly after the end of the 1990s. A 2006 Situation Report on Organised and Economic Crime in South-eastern Europe by the Council of Europe states in its Montenegro chapter:

"Smuggling of legal goods (cigarettes, oil and oil derivates) has been significantly diminished since the abolition of sanctions and law enforcement efforts since 2000. The smuggling practices have been changed to adjust to new conditions and still manage to resist law enforcement efforts while integrating into European and global smuggling flows and distributions of illegally and legally produced cigarettes. Smuggling channels from Montenegro were mainly intercepted but new routes have been formed going via Bulgaria, Croatia, Kosovo, Romania and the ‘former Yugoslav Republic of Macedonia'." (p. 96)

The questions of how involved the Montenegrin senior leadership was in the actual smuggling operations remains to be resolved. Another disputed question is how much of the "transit fees" went into private pockets, rather than the republican budget.

Today, the Montenegrin government faces a different set of allegations. Nebojsa Medojevic, along with many other opposition politicians, has repeatedly accused high-ranking government figures of corruption and nepotism. Criticism relates in particular to privatisation deals, the business of Milo Djukanovic's brother Aco Djukanovic, and the origin of the capital that Milo Djukanovic has invested in Prva Crnogorska Banka.

Most recently, on 6 September 2007, Medojevic told the news agency MINA that the Montenegrin state and its society is taken captive "by private connections of the highest government circles and organised criminals". He maintains that

"they should reform the police and clean it of criminal members who possess property worth millions without documentation; to clean the judiciary of judges who make decisions under instruction from the centres of organised crime and protect them from prosecution."

There is little hard evidence available on corruption in Montenegro. Transparency International has not yet included Montenegro in its "Corruption Perception Index". A Council of Europe report maintains that:

"Based on this small and basic data, a comprehensive analysis on characteristics, turnover – particularly affected sectors, impact on society, economy, rule of law, democracy, etc. – could not be provided. In any case, corruption is seen most dangerously in the process of privatisation, urban planning, civil engineering, and public procurement." (p. 97)

Media, most notably the independent weekly Monitor, the independent daily Vijesti and the opposition-leaning Dan, have repeatedly questioned privatisation deals and raised questions of the origins of wealth of government politicians. The watchdog organisation MANS has published a series of critical reports and case studies on privatisation, corruption in spatial planning and the (lack of) freedom of access to information. To this day, there has not been a single court case involving a senior Montenegrin politician.

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We thank the Montenegrin daily Vijesti for access to their photo archive.