Montenegro faces a future without Russian money

Yacht in the Tivat Bay from Porto Montenegro, March 16, 2022 (SAVO PRELEVIC/AFP)

Montenegro has long been a magnet for superyachts, tourists and real estate speculators from Russia. But the Adriatic coast country has pledged to join sanctions against Moscow, and the future looks uncertain without a guarantee of Russian money.

Since Vladimir Putin’s invasion of Ukraine last month, the tiny Balkan EU candidate country that joined NATO just five years ago has faced a big challenge.

The application of Brussels-imposed sanctions on Moscow could jeopardize the economic balance of a country of 620,000 people, a quarter of whose GDP comes from tourism, to which Russians have made a significant contribution over the past decade.

“We love Russians. And we depend on them,” Danica Kazanegra Gregovich, director of the travel agency Gulliver Montenegro in Budva on the Adriatic coast, told AFP.

On the main embankment of the city, Russian is heard more often than Montenegrin. At the seaside resort, a whole series of shops and schools are dedicated to thousands of Russian expatriates.

Like many others, Ms. Gregovich fears the impact on Montenegro of a series of sanctions targeting Russian financial institutions, as well as bans on flights to Europe.

Tourists walk along the embankment in Budva on March 16, 2022 in Montenegro.
Tourists walk along the embankment of Budva on March 16, 2022 in Montenegro (SAVO PRELEVIC / AFP)

The timing couldn’t be worse. Tourism professionals have been counting on the high season to attract people yearning for a holiday after the pandemic has taken it away.

“We’ve already been through two terrible tourist seasons. We’re going to take more hits than we’d like,” admits Ms Gregovich.

“Preferred Destination”-

To make matters worse, the investment that helped develop coastal real estate appears to be drying up as it becomes increasingly difficult for Russians to get money out of the country.

Port of Budva, March 16, 2022 in Montenegro.
Port of Budva, March 16, 2022 in Montenegro (SAVO PRELEVIC / AFP)

For years, weak investment laws, the fact that Russians don’t need a visa to travel to Montenegro, have encouraged an influx of Russian money, fueling a frenzy of building villas on once-pristine areas.

“Most of the money invested in the coast came from Russia,” says Dejan Milovac, deputy director of the Le Mans anti-corruption group. “Montenegro has been a favorite destination for wealthy Russians looking to buy property or hide their assets.”

The Russians have also greatly benefited from the Golden Passports, a citizenship program for foreigners who have invested up to 450,000 euros in the country. More than 60% of these passports have been issued to Russians in the last 14 months.

But nothing has been sold in Budva since the invasion, two different real estate agents confirmed to AFP.

“Everything has stopped. Construction has stopped, people are having a hard time working,” said Jovan, a 44-year-old bar owner from Budva. “There are only a few months left before the season, and all this creates problems for our business.”

Authorities are trying to allay fears by promising to impose sanctions on Moscow in line with European measures.

Tourists sit at tables near a restaurant in Budva on March 16, 2022, Montenegro.
Tourists sit at tables outside a restaurant in Budva on March 16, 2022, Montenegro (SAVO PRELEVIC/AFP)

These sanctions have not yet been applied due to disagreements between political factions, but the government has promised to take steps to mitigate the economic impact of the conflict, including rising fuel and food prices.

“Unfortunately, the war has come and we have to look for other markets,” Foreign Minister Dorde Radulovic told AFP, believing we should take advantage of this to innovate.

– “Losing a lot”

“Maybe it’s time for us to try to diversify our economy. Maybe it’s time for us not to depend on just one sector, which is tourism.”

Tivat Bay and port of Porto Montenegro, March 16, 2022
Tivat Bay and port of Porto Montenegro, March 16, 2022 (SAVO PRELEVIC/AFP)

Montenegro and Russia have maintained a fairly harmonious relationship for centuries based on their Slavic and Orthodox heritage and their alliances during the wars of the 20th century.

In 2006, Montenegro divorced Serbia and turned to the West, but relations with Russia have remained relatively stable, apart from a cold snap in 2016.

Montenegrin authorities then accused Moscow of fomenting an alleged coup plot to prevent the country from joining NATO, which the Kremlin has always denied.

Despite everything, Montenegro remained a favorite destination for Russians looking to go on vacation, emigrate or invest.

For Russian emigrants, life is difficult. Many are cut off from Russia, no longer have access to their Russian accounts, their credit cards are blocked.

“Maybe it’s our fault because we didn’t explain how dangerous (Putin) is,” sighs Marat Guelman, a Russian art collector hostile to the Russian president.

“Anyone who has ties to Russia in one way or another is going to lose a lot.”

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