Lawsuit Puts Italy-Montenegro Power Deals Under Spotlight

Embroiled in sex scandals at home and embarrassed by his ties to Libya’s dictator, Muammar Gaddafi, the lawsuit filed recently from Montenegro is unlikely to be Silvio Berlusconi’s chief concern.

But opposition leaders in Montenegro are determined to see the Italian Prime Minister and their own former premier, Milo Djukanovic, face fraud charges in court over a series of allegedly damaging energy deals.

On the other side of the Adriatic, some opposition leaders also welcome the scrutiny in Montenegro, describing some of the energy deals as “strange”.

Lorenzo Valloreja, a member of Gianfranco Fini's Futuro e libertà party, FLI, in Pescara, said they were relieved to hear that the power deals were coming under the spotlight in Montenegro.

"We are satisfied that there is attention to this topic in Montenegro as well,” he told Balkan Insight. “From the start, we said these deals were rather strange.”

Nebojsa Medojevic and Branko Radulovic, president and vice-president of the Montenegrin opposition Movement for Changes, say Berlusconi, Djukanovic, and seven other officials damaged Montenegro to the tune of hundreds of millions of euros.

In their suit filed before the Supreme State Prosecutor on February 15, they say huge sums were lost in the part-privatisation of the state electrical company and electrical transmission system.

They assert that serious procedural violations occurred during the part-sake of the companies, which Medojevic says indicate “potential for corruption” at the least.

“Milo Djukanovic, as the former prime minister, president of the [ruling] Democratic Party of Socialists (DPS), and as the figure making all decisions on… processes in Montenegro, and defendant Silvio Berlusconi, as Italian Prime Minister, illegally abused their official positions, authority and influence,” the lawsuit says.

They “committed several criminal acts, generating profits for two Italian companies A2A and Terna [Terna Rete Elettrica Nazionale], while damaging the Montenegrin Electric Enterprise, the Montenegrin Electrical Transmission System, the state of Montenegro and its citizens,” the lawsuit adds.

To date, neither Berlusconi’s office, nor Djukanovic’s office, nor A2A headquarters have responded to the charges, when asked to do so by Balkan Insight.

Italy’s growing economic interest in Montenegro became clear after Berlusconi visited the country on March 16, 2009.

At the press conference that followed, Djukanovic, then prime minister, said Italian investors were chiefly interested in three strategic projects: a share capital increase in and partial privatization of the Montenegrin State Energy Company, EPCG, laying a submarine power cable between Montenegro and Italy and the construction of a series of hydro-electric power dams on the river Moraca.

No time was wasted in executing these three objectives. After the Milan-based A2A won a tender in 2009, it took over more than 40 per cent of EPCG.

In 2010, Montenegro signed a deal with Italy by which Terna, in addition to obtaining a stake in the Montenegrin Electrical Transmission System - together with Montenegrin partners - was to build a submarine power cable connecting Pescara in Italy to Tivat in Montenegro.

The cable, to be completed in 2015, will export electricity to Italy from Montenegro and the broader Balkan region.

In explaining the contract, the Montenegrin government described Terna as a strategic partner as a result of which no tender had been required.

A2A is also seen as the most likely winner of the tender to build new hydroelectric power plants on the Moraca.

The government says the new power plants will resolve all Montenegro’s current power shortages.

The Movement for Changes says the project will only benefit the concessioners and the additional energy will not go to Montenegro but mostly to Italy, via the new cable.

Italy has a deficit in so-called “green” energy and the European Union has obliged it to resolve this deficit over the next few years. Any energy obtained from Montenegro’s hydroelectric power plants will be considered “green”.

The government last year organised the tender for the construction of the power plants despite protests from the opposition and civil society groups, including the World Wildlife Fund, WWF.

“Construction of the plants on the Moraca could endanger Montenegro’s economic stability and self-sustainability in energy over the long term,” Branko Radulovic said.

“The current high price of electricity and the announced imminent prices increases are the results of the secret deals, illegal decisions, and damaging agreements,” Radulovic added.

The Movement for Changes leader told a press conference on filing the lawsuit that if the state prosecutor did not launch a pre-trial procedure, he would call for street protests, warning of an “Egyptian scenario”.

Medojevic referred to the street unrest in Cairo that recently drove Egypt’s long-time leader, Hosni Mubarak, from power.

In the meantime, he urged Montenegrins, now paying the highest prices for electricity in the region, to support the lawsuit by signing a petition.

Some officials named in the opposition lawsuit have adamantly rejected the charges.

“All the procedures [in the sales of the companies] were public and transparent,” one of the accused, Branko Vujovic said, dismissing claims that he belonged to an organised crime group run by Djukanovic and Berlusconi.

Djukanovic has on several occasions dismissed opposition and non-government claims that the privatisation of power companies has damaged Montenegro, though he has not spoken publicly on the recent lawsuit.

The Movement for Changes claims that the power agreements between Montenegro and Italy are part of a larger deal aimed at compensating Italy for damages accrued in the 1990s.

During that decade, tobacco-smuggling rackets conducted through Montenegro robbed Italian customs of several billion euros in uncollected duties, according to prosecutors in the Italian port of Bari.

Radulovic described the Italian takeovers as a “third attempt” to occupy Montenegro on the part of its neighbour on the other side of the Adriatic Sea. Italian forces under Mussolini briefly occupied Montenegro in the Second World War.

“This is Italy’s third attempt to occupy Montenegro,” he said. “We managed to repel the first two in 1918 and 1941 and I hope we will succeed in deflecting this third, most dangerous one as well,” he added.

Lorenzo Valloreja, who also opposes Terna’s submarine cable, said the project would help neither country.

“We are talking about benefits only for a few people,” he said, referring to the company owners. “In our [Italian] eyes, this project is useless both for us and for you [Montenegrins],” he told Balkan Insight.

Valloreja's campaign against the cable in Pescara helped result in the town council withdrawing its approval for Terna’s project in December. The company is now lobbying for the town to restore approval for the project.

Last November, the Italian newspaper La Repubblica reported that the Office for Public Procurement in Pescara had opened an investigation into alleged corruption related to the power cable.

A source in Pescara told Balkan Insight that this investigation was ongoing. The same source said the Procurement Office did not want the matter publicised in case it compromised the outcome.

In Montenegro, Medojevic describes the lawsuit as a major test for the State Prosecutor’s office.

Following requests from the European Union - which late last year awarded Montenegro candidate member status - it recently declared its determination to toughen the fight against corruption and organised crime.