An interesting piece from The New York Times last month touches upon a theme explored a few months ago. Namely, Montenegro, and specifically its Adriatic coastal towns (e.g., Tivat, Budva), is becoming the next Monaco. Montenegro receives more foreign investment per capita than any other country on the Continent, and it’s mostly thanks to wealthy Russians. Needless to say, the country’s tax base and development is also improving. The price of land in Budva, for example, where Russians are building a $310 million hotel and condominium complex on a rocky peninsula, is already more expensive than in the French-speaking tax haven. And huge investments have also been made in the country’s industrial sector.

Moreover, the Russian Bear also has its paws extended nearby:

In neighboring Serbia, Gazprom, the Russian state energy monopoly, recently bought a majority stake in the national energy company, Petroleum Industry of Serbia, for $520 million and agreed to invest another $650 million by 2012. The deal will give Gazprom a dominant position in Serbia’s energy market while transforming Serbia into a gateway for the transportation of Russian gas into western Europe.

Some pundits scoff at Russian presence as little more than cynical, geopolitical motivated maneuvering.  What better way to temper the two nations’ EU and NATO desires?  That said, aiding their economic development may only accelerate their readiness to join. Still, if the name of the game is energy dependence, then the Kremlin may already have the upper hand, at least in Serbia:

In a recently announced energy deal, Gazprom agreed to make Serbia a transit country for its South Stream pipeline, a $14 billion project that will stretch 560 miles undersea from Russia to Europe. The project — which Gazprom insists will forge ahead despite the global financial crisis — is a direct challenge to Nabucco, a pipeline championed by the United States and the European Union to bring natural gas to Europe via Central Asia, offsetting energy dependence on Russia.

That said, all is not so rosy. The Montenegro Times reported last month that Oleg Deripaska, “the politically connected Russian metals tycoon” and the country’s “richest man on paper” who bought majority control of the debt-ridden Kombinat Aluminijuma Podgorica (KAP) and its associated bauxite mines for €48.5m in late 2005, was frantically looking to secure more than $2b in financing to repay part of a $4.5b loan to western banks before the end of the month, or risk losing to creditors a 25% stake in the world’s biggest nickel miner. It is speculated that the income of almost one in 10 of Montenegro’s estimated 680,000 population is tied to the company and its subsidiaries. Alas, Deripaska found his honey pot at the last minute in the form of a $4.5b loan from Russia’s central bank funds. KAP describes itself as is the “industrial powerhouse of Montenegro, representing 51% of the country’s exports.” Owned by Deripaska’s CEAC (it has a has a 58.73% stake in the company), it says it has no plans to cease all aluminium production at the plant. However, in response to current metal prices and cost pressures, it is reported that CEAC will gradually reduce output by up to 10%. Moreover, most mining stocks have incredibly low P/E ratios and very high yields. However, if metal prices continue trending downwards, earnings will decline sharply and companies like KAP will be forced to slash its dividend payments. So far at least, and as The Guardian reported, [Deripaska’s] alumnium plant is “turning out to be a money pit.”

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