Montenegro has an unsavoury reputation as a haven for smuggling and organised crime, and for the corruption of its public officials. Much of it is a product of 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 resold.
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, as far as the Montenegrin government saw it, 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 Persist)
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.
More recently, in June 2006, two prosecutors from Bari accused Milo Djukanovic and another dozen individuals, of cigarette smuggling and money laundering.
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."
Questioned on the issue in 2007, Milo Djukanovic (at that time not holding elected office) addressed the allegations in the following way:
I fully respect the autonomy of the Italian judicial system. I said that I was a responsible man and I wish to give a full contribution to an objective enquiry about the nature of work that was carried out in Montenegro.
Truly, I have no fear for my own position. Were I to have fear I would have taken recourse in the immunity which I am entitled to after my victory in the parliamentary elections at the end of last year. But I didn't want to let this immunity protect me. I didn't want to hold any function in the state because I know that I have acted according to Montenegrin law and that I have acted in accordance with the responsibilities borne by the government of Montenegro and by me as its president.
Djukanovic also maintains that the allegations were originally raised by Mirjana Markovic, the wife of Slobodan Milosevic, and spread by Srdjan Milic's predecessor as Socialist Peoples Party leader, Predrag Bulatovic.
"Bulatovic then started to make use of other forms of manipulation, namely by suggesting that a Montenegro represented and epitomized by the Democratic Party of Socialists and Milo Djukanovic would be a state in which organized crime would prosper. So then Mrs. Markovic and her confederates in Serbia put forward the theory that yes, Montenegro might be able to sustain itself, but through some form of illegal activity and the black market.
Of course, they first wanted to compromise the transit work that was going on in Montenegro at the time. The Montenegrin government saw this as an opportunity to raise some additional income and as a way of compensating for the reduced budgetary revenue that resulted from economic paralysis under the sanctions. This allowed us to finance salaries and pensions as well as to maintain the education, culture and health systems, if at a minimum level. Concerning this work there were absolutely no contentious issues relating to the Montenegrin regulations.
On March 29th 2008, Milo Djukanovic appeared voluntarily before the Italian legal authorities in Bari. The Beta news agency reported: "the prosecution in Bari is due to submit the application for archiving because Djukanovic, who occupies the post of prime minister, enjoys complete diplomatic immunity and cannot be subject to an investigation."
Actually, 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 degree of involvement of the government’s senior leadership in the actual smuggling operations remains to be resolved.
Montenegro’s governmental elite is also haunted by widespread corruption allegations. But there is little hard evidence. Transparency International in its "Corruption Perception Index" still ranks Montenegro together with Serbia. 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)
The press, most notably the independent weekly Monitor, the independent daily Vijesti, and the opposition-leaning Dan, has repeatedly raised questions about privatisation deals and the origins of government politicians’ wealth. MANS, a watchdog organisation, 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. Not a single court case involving a senior Montenegrin politician has taken place to date.
"Management of public assets raises serious concerns," the European Commission wrote in its progress report of November 2007. "There is considerable room for corruption, especially in the cases of construction and land-use planning, privatisation, concessions and public procurement. Procedures for reporting conflicts of interest in privatisation have yet to be established. Police resources within the economic crime division are limited, as are experience and results in dealing with corruption."