"If
the Balkans find that too many obstacles are strewn about the road to
Brussels, they may well be tempted to set out on the shorter road to
Istanbul"
(Misha Glenny, Balkan political analyst)
Practically
the Eastern EU enlargement for the moment is stopped. Croatia's
membership is a bit delayed, Turkey’s EU bid is dead as continent simply
has no intention of ever incorporating 70 million Muslims and the rest –
such as Serbia - are still more or less in association process. Tens of
thousands demonstrators demanded early elections in Serbia at a protest
rally 16th April 2011, blaming Serbia’s pro-Western
government for a deepening economic crisis and alleged corruption. The
government has rejected the demand for early elections, saying they will
be held after Serbia wins candidacy for EU membership in the autumn.
European Commission (EC) unanimously agrees that early parliamentary
elections in Serbia should not be called which position in my opinion
gives a strange picture about EU's view towards democracy - really a
view that democratic elections would harm stability and EU-accession.

From
day one of membership at the latest, candidates are expected to be able
to implement and enforce the "acquis communautaire", i.e. the detailed
laws and rules adopted on the basis of the EU's founding treaties and
make EU law part of their own national legislation. The most positive
part of the European Commission progress report states that Serbia is
well advanced in the sector of industry, small and medium enterprises,
agriculture and food safety and that good progress has been made in the
fight against drugs and organised crime.
The
European Parliament ratified the Stabilisation and Association
Agreement (SAA) between the EU and Serbia in Strasbourg on 19. January
2011. The Questionnaire, which covers all elements of Serbia’s future
negotiations with the EU, was delivered to Serbia by the EC on 24
November 2010 and answers were delivered on 31. January 2011. Responses
to 2,483 questions, divided in six annexes and 33 chapters, were
completed within the record 45 days and are divided in more than 37
volumes and weigh ten kilograms. Third expert mission of the European
Commission (EC) analysing responses to the EC Questionnaire in order to
prepare an opinion on Serbia’s EU membership, finalized its work on 18
March.
Serbia
has implemented significant structural reforms in many parts of its
economy over the past decade but more is needed. The main components of
further reforms are: judicial reforms, the continuous fight against
organised crime and corruption, the improvement of our political system,
property right issues and reforming Serbia's regulatory agencies and
removing bureaucratic bottlenecks. It remains to see if there is enough
political will for these reforms or even for membership – especially
after Serbia's next elections, due by spring 2012. Most sectors of the
economy are open to foreign investment. Reforms have improved the
investment environment is improved by reforms, but e.g. corruption
discourage foreign investments (Serbia ranks 83rd out of 180 countries
in Transparency International’s Corruption Perceptions Index for 2009).
More about Serbia's EU integration can be found from The EU Integration Office of Serbian Government.
Serbia's
road towards EU membership has two obstacles – status of Kosovo and
cooperation with Hague tribunal (ICTY). Probably the later problem will
be solved with Serbia's own efforts before association process is in its
final stage. Serbia's vice-PM Djelic said in his interview (Euractiv) on March 10. 2011, that
today
in Serbia all major criminal figures are either under arrest or on the
run. In the fight against corruption we have had high-level arrests of
people who used to run our railway system, our road system, teachers,
professors, surgeons, public officials. It is still not very pleasant
but it is a demonstration that there has been a critical mass within the
administration and the people to fight these phenomena.
The
question of Kosovo is politically harder as there is a need to find a
common compromise with Kosovo Albanians and this question can end or at
least freeze Serbia's EU association for long time, maybe so long that
when solved there may not be EU at all or it is completely different
than today.
New elements in new Kosovo talks
Talks
between Serbia and its separatist province Kosovo started finally in
Brussels on March 2011. The agenda concentrated to technical questions
however everything is about politics i.e about solving Kosovo's status.
The status question would solve problems regarding north Kosovo, which
is currently under “dual sovereignty" (officially part of Kosovo, which
officially is UN protectorate and under sovereignty of Serbia and
practically totally integrated to Serbia).
The new situation has forced also International Crisis Group (ICG)
to admit the defeat of its Kosovo policy recommendations during last
decade. ICG has informally as informal extension of U.S. State
Department however pretending to be neutral mediator and think tank.
During earlier “status” negotiations 2005 it endorsed preconditions
before talks and afterwards supported sc Ahtisaari plan. Now in their
new analysis Kosovo and Serbia after the ICJ Opinion ICG
sees Kosovo's partitition with land swap one of possible solutions
during coming talks between Belgrad and Pristina. The (dead) Ahtisaari
plan and expanded autonomy for North Kosovo are the other two
conceivable solutions according ICG.
Last
decades have showed how it is possible to draw new borders in Europe,
the issue is only the method; e.g. while the Czechs and the Slovaks
negotiated by themselves the terms of separation nobody objected to the
splitting of Czechoslovakia. In Kosovo there has been implemented only
forced temporary solutions outsiders and therefore the outcome is a
frozen conflict. The International Crisis Group (ICG) advised the Kosovo
Albanian authorities to consider granting autonomy for the northern
Kosovo. In exchange they would get "Serbia’s recognition of Kosovo
statehood". ICG concludes that Serbia and Kosovo have equal sovereignty
in north Kosovo and should work to resolve what the ICG calls "the
Balkans’ most serious territorial dispute.". Many other even more
sustainable solutions are available such as splitting of Kosovo to
independent Albanian part and to Serbia integrated Northern part, with
or without land swaps. Also a sc Hong Kong model is possible; such a
compromise – with the principle of 'one country, two systems' - would
guarantee Kosovo economic and political autonomy without endangering
Serbia's territorial integrity. It is as well possible to create
national union between Albanian part of Kosovo and Albania. In my
opinion all these alternatives could be better for local parties than to
continue the situation as today. Economically, Serbia is probably
better off without Kosovo.
Belgrade's
chief negotiator, Borko Stefanovic, said in an interview published
April 23, 2011 in the daily newspaper "Blic" that "Serbia's negotiating
team is not resisting the possibility of talking about the division of
Kosovo." Belgrade has hinted in the past that it could support a
division, with Kosovo's Serbian-majority north being attached to Serbia.
(Source: RFERL )
The
trial against two former leaders of the Kosovo Liberation Army, KLA,
who are charged with war crimes committed against civilians in Albania
during the conflict in Kosovo, has gotten underway in Pristina. The
victims of the crimes included in the indictment are Albanians whom the
KLA commanders accused of collaborating with Serbian authorities, and
individuals whose political views differed from those of KLA. The trial
against the two men begins several months after Dick Marty, Special
Rapporteur of the Council of Europe, released a report in December
alleging that human organs were harvested from detainees during and
after the conflict in Kosovo, with the harvesting run by the KLA and
allegedly taking place in Albania. Politically the key importance in
Marty report is an allegation that a criminal network is linked to
Kosovo’s Prime Minister Hashim Thaci and that western intelligence
services knew this link but were silent to stabilize the region. More in
Balkaninsight and in my article Captured Pseudo-State Kosovo .
Serbia's Foreign trade
The value of export amounted
to EUR 7.4 billion, which was a 24.0% increase when compared to the
same period in 2009, while the value of imports amounted to EUR 12.6
billion, which was a 9.7% increase relative to the same period in 2009.
The deficit amounted to EUR 5.2 billion, which was a decrease of 5.7% in
relation to the same period in 2009.
EXPORTS AND IMPORTS OF GOODS BY ECONOMIC ZONE, 2010.
| Zone | Exports, in mlln. EUR
| Imports, in mlln. EUR
| Share (%) in the total
|
I-XII 2009
| I-XII 2010
| I-XII 2009
| I-XII 2010
| Exports
| Imports
|
| Total | 5961,3
| 7393,4
| 11504,7
| 12621,9
| 100.0
| 100.0
|
| EFTA | 66,0
| 52,3
| 189,0
| 171,9
| 0.7
| 1.4
|
| EU | 3195,9
| 4235,3
| 6532,7
| 7068,7
| 57.3
| 56.0
|
| CEEC | 306,4
| 359,8
| 164,6
| 205,8
| 4.9
| 1.6
|
| CIS | 408,2
| 599,3
| 1665,6
| 1959,1
| 8.1
| 15.5
|
| MEDA | 1642,7
| 1880,0
| 1026,9
| 1174,2
| 25.4
| 9.3
|
(Source: SURVEY RS 4/2010)
For economical development sc Foreign Direct Investments (FDI) are important factor.According
last statistics in terms of the country structure, investors from the
European Union top the list, accounting for about 70% of the total FDI
influx. The leading spot on the country list is held by Austria,
followed by Greece, Norway, Germany, the Netherlands and Italy, while
major investor countries also include Slovenia, France, Hungary, the
Russian Federation and Luxembourg. The actual amount of investments from
U.S. and Israel is significantly higher than the official figure due to
their companies investing primarily through European affiliates. (
Source and more info from SIEPA )
Other directions – Turkey and Russia
"For
many years, the perception has been that Turkey needs Europe more than
Europe needs Turkey. If Europe does not look hard at the dynamism of
Turkish economic and foreign policy, it may miss the boat."
(Misha Glenny, Balkans political analyst)
Serbia
was under Ottoman empire hundreds of years and according Gallup polls
only less than 20 % Serbs consider Turkey a friendly power. At the state
level, the historic vision in Serbia of Turkey as an abusive occupier
has little influence. Turkey has also been very active in Balkans during
recent years; its trade with the Balkan countries increased to $17.7
billion in 2008 from about $3 billion in 2000. Turkey's banks provided
85 percent of loans for building a highway through Serbia for Turkish
transit of goods to the EU. In 2008, Turkish Airlines bought a 49
percent stake of Bosnia's national carrier, BH Airlines, and has also
expressed its interest in Jat Airways – the Serb national carrier – and
other Turkish companies are keen to invest in shops, supermarket chains
and hotels. Since January last year, Serbian exporters have been selling
their products in Turkey free of customs duties. (Source: Turkey uses economic clout to gain Balkan foothold by Dusan Stojanovic)
On 16 October 2009 Turkish Foreign Minister Ahmet Davutoglu gave a presentation in Sarajevo, speech concludes with the promise that the golden age of the Balkans can be recaptured:
Like
in the 16th century, which saw the rise of the Ottoman Balkans as the
center of world politics, we will make the Balkans, the Caucasus and the
Middle East, together with Turkey ,the center of world politics in the
future. This is the objective of Turkish foreign policy, and we will
achieve this. We will reintegrate the Balkan region, the Middle East and
the Caucasus, based on the principle of regional and global peace ,for
the future, not only for all of us but for all of humanity.
Increase
trade relations, remove (visa) barriers to freedom of movement between
people, privilege soft power, emphasize a common history … such have
been the core principles of Turkish foreign policy, not only towards
Syria and Iraq but also towards Georgia, Russia or Greece. Turkey and
Serbia’s free trade agreement came into force on September 1 this year.
The deal opens Serbia’s to Turkish investors and paves the way for
visa-free travel for nationals of both countries.
However,
many commentators in Serbia see this change of Turkish foreign policy
as an alternative to EU membership because both Turkey and Serbia know
they are still far from formally joining the union. (More Multikulti and the future of Turkish Balkan Policy by Gerald Knaus/ESI)
Suha
Umar, who left his post as Turkish ambassador to Belgrade on September
10, 2010, concluded his period in Serbia as follows:
When
I arrived in this country… relations between Serbia and Turkey were at
their lowest level because of [Turkish support for] Kosovo’s
independence but also because of the lack of common interests, some
prejudice and a lot of manipulation from outside. We managed to overcome
the obstacles. If we are after peace and stability, without Serbia
truly seeking peace and stability, it won’t happen. If we are looking
for trouble, without Serbia it is very difficult to create trouble. This
is why Serbia is the key country and Turkey has realised this fact.
(Source: BalkanInsight )
Russian
Prime Minister Vladimir Putin visited in Balkans end of March 2011
emphasizing the bonds linking the two Orthodox Christian nations. The
two countries’ ties go back to when Russia supported Serbia’s drive for
independence from the Ottoman Empire in the 19th
century. Putin's visit took place on the eve of the 12th anniversary of
the NATO bombing over Belgrade's policy toward Kosovo reminding Serbia
of its past differences with the West. A
survey of 42 countries conducted in the summer of 2009 showed that
Serbs had the fifth-most favorable opinion of Russia: Some 53 percent of
respondents had a positive opinion of the country, while 61 percent
expressed negative feelings toward the USA.
Putin
delivered a message that Europe needs South Stream as part of its
energy security because it can no longer rely on North Africa as a safe
alternative. Serbia is a very critical part of the whole South Stream
project. Beside energy policy there are 15 new agreements between Serbia
and Russia being drafted at the moment including cooperation in
science, technology and tourism. Politically Putin promised continued
Russian support for Serbia over Kosovo. He pledged Russian investment
and further cooperation in energy sector – e.g. development of ‘Lukoil’
petrol pumps net, new investments in energy system and electric power
plants - in the power system, railway, infrastructure and agriculture.
The two countries signed agreements on inter-governmental tourism,
scientific and technical cooperation, and an international road service.
A package for Serbian economy brought to Belgrade by Putin is estimated
to be worth USD 10 billions. At the moment it is known that 3 billions
are for the Army of Serbia. Also debts by the NIS to Serbian budget
shall be settled (about EUR 1 billion). And finally, the enterprise
‘Southern Stream’ is going to be founded. In addition, Putin revealed
that the Russian government is considering issuing an $800 million loan
to Serbia for railway projects.
Recently
after Putin's visit the first military consultations between the
Ministries of Defense of Serbia and Russia in Moscow, a bilateral
military cooperation plan for 2011 was signed, while Serbian and Russian
foreign ministers confirmed that the relations between the two
countries are friendly, close and improving. They also said this would
be confirmed by a strategic partnership agreement to be signed in the
near future.
Serbia's
possible NATO membership may have big influence to Serbia-Russian
relationship. The ruling coalition in Belgrade has designed to leave the
door to NATO membership open without quite saying so. While the ruling
coalition is supporting Montenegro’s intention to become a NATO member
it officially to back a Resolution on Military Neutrality made by
National Assembly on December 2007. According to a WikiLeaked February
2010 cable from the U.S. Embassy in Belgrade, “Tadic believes that
Serbia cannot remain outside of NATO forever, but doesn’t say this often
because of the political sensitivity of the issue.” (Source: Serbianna )
The
opposition - Democratic Party of Serbia (DSS) – is advocating a
non-aligned policy (opposing Serbia’s NATO accession), similar to
Ukraine, Finland, Sweden, Ireland, Switzerland, and other democratic
states, promotes strong economic ties with Russia. From tactical point
of view by moving closer to Russia, Serbia strengthens its negotiating position with both the EU and the US.

Energy Aspect - South Stream nullifying Nabucco
Energy
aspect is now more important in geopolitics and for Balkans as well
than decades before. First of all, due to the turbulence in the
Arabic-Muslim world and the ongoing rapid increase in industrial
production in countries such as China, India, Brazil, Vietnam and South
Africa, the price of oil and gas has increased significantly. Because of
the Arab turmoil, LNG imports are at risk, as well as, the whole
spectrum of hydrocarbon imports from the Arab world for years to come.
Russia, as well as, Kazakhstan and Turkmenistan are starting to lay down
long-term plans for the exportation of tremendous amounts of gas to
China for the next decades. That means in simple terms that the EU
states will have to act fast in order to secure sufficient amounts of
energy, otherwise they may end up relying in the spot market by instable
regions such as North Africa, Nigeria and others. The continuous
instability in Iraq in combination with the isolation of Iran due to its
nuclear program makes the European energy market anxious to secure
reliable and steady flow of natural gas and oil.
As
a result Russia gains more than a 1.2 billion Dollars daily only from
its oil exports, thus being able to continue its investment program and
in parallel being able to attract significant foreign direct investment
and fund placements. Between January and March, 2011, around 3.5 billion
Dollars were placed in Russian-based funds for investments purposes and
the Moscow stock exchange has seen an almost 30% growth. A 7.5% GDP
increase for the Russian economy is projected -ceteris paribus- for
2011. (Source: Russian energy moves indicate a shift in priorities by Ioannis Michaletos )
The international gas pipeline South Stream
shall be finished until December of 2015 while its construction shall
begin in 2013. The $21.5 billion South Stream pipeline would transport
up to 63 billion cubic meters of gas from Russia to Central and Southern
Europe. The stretch running through Serbia shall cost from EUR 1.3 to
1.5 billions. Serbian construction on a leg of a natural gas pipeline
that could boost plans for the South Stream pipeline for Europe started
in September 2010. The project would be completed this year.
The New York Times reported on 22nd March 2011 that the German oil-and-gas company Wintershall AG (a unit of German chemicals giant BASF),
is set to join Russia's South Stream natural-gas pipeline, a move that
the partners hope will increase the pipeline's chances of gaining
European Union backing. BASF said joining the South Stream consortium
would give it access to markets in southeastern Europe. South Stream is
owned 50-50 by Italy's ENI and Gazprom . Electricite de France is to take a 10% stake later this year as well Wintershall AG its 15 % stake.

Serbia
and Slovakia have signed an agreement on cooperation in the
construction of gas pipeline Aleksandrovac-Novi Pazar-Tutin. The
agreement is worth €45 million and the project will be implemented
jointly by a Serbian gas company Srbijagas and a Slovak consortium led
by company Euroframe. The construction of the pipeline with the capacity
of 100,000 cubic meters per hour could be completed in two years.
Serbia has also started a €14 billion investment cycle in the energy
sector and its main components are investments of about 2 billion euros
in the gas sector, about 1 billion euros should be invested in the oil
sector, while the potentials of renewable energy sources would enable
investments worth between 2 and 6 billion euros over the next five to
seven years. A Canadian company REV has informed that the company will
invest about €140 million in the construction of two hydroelectric power
plants - Brodarevo 1 and Brodarevo 2 on the River Lim. The Electric
Power Company of Serbia (EPS) and the Italian company Seci Energia have
signed the Preliminary agreement which concerns implementation of
construction of a system of hydroelectric power plants on the middle
reaches of the Drina river. Several agreements on cooperation in use of
hydro potentials of the Drina river have already been signed between the
governments of Serbia, Italy and the Republic of Srpska (RS). The
capacity of these hydroelectric power plants will be 300 megawatts,
while the value of the investment is estimated at about €819 million.
From EU*s side it has its own favorite energy project called Nabucco, however there
is broad recognition that the €7.9bn ($10.5bn), 3,900km project is
desperate for momentum as it enters what even its backers concede is a
make-or-break year. Among them is the commission itself, which has
contributed €200m in start-up funding. The existential question hanging
over Nabucco is whether there will be enough gas to make it commercially
viable. The biggest difference between the two projects is that while
Gazprom will fill the South Stream pipeline with Russian gas, the
consortium behind Nabucco has yet to sign up any gas suppliers or, for
that matter, investors.
The competition over gas is coming harder. In my article New Player in Caspian Sea Power Corridor
I described how China has came to game to take big share of
Turkmenistan gas. This gas was one of the last hopes for Nabucco to fill
its planned pipeline. For contest between EU’s Nabucco and Russia’s
South Stream China’s actions favor later. Today’s arrangements are
securing gas for South Stream while Nabucco still is searching supply.
It is more clear that Nabucco should be filled with Iraqi and/or Iranian
gas and political aspects related to this may delay finding(private)
investors and the implementation of project as whole. In bottom line
while Russia is taking its part from old gas fields and China from old
and new gas fields the Nabucco pipe still is more than half empty.
Turkey
has been using its recent diplomatic rapprochement with Moscow to lobby
for making the Balkans a major strategic hub for a Russian gas pipeline
planned to stretch from Central Asia to Western Europe, via Turkey.
Reshaping new cooperation framework
Inside
EU there is already increasing amount of EU sceptics. Some of them be
regarded as right wing and/or populist politicians, however in my
opinion their criticism should not be ignored only because of their
political position. Especially in UK has been discussions about being
inside or outside of EU. (Director of the Trade Policy Research
CentreDirector of the Trade Policy Research Centre) Ronald Stewart-Brown
gives one possible position related to the content of EU membership in
his article “The Vacuity of UKIP’s Flagship Policy” as follows:
One
possible solution is to negotiate to stay in customs union with the EU
outside the framework of the EU treaties and institutions on the basis
of a simple new “plain vanilla” bilateral customs union agreement.
Staying within the EU tariff band could reasonably be seen as a fair
price to pay for continuing free movement of goods. Such an approach
combined with other agreements to cover areas such as services,
intellectual property, public procurement, competition and technical
barriers to trade could attract the happy label of “Staying in Europe
for Trade”. It would also approximate to the Common Market most people
thought they were voting for in 1975, which was after all a customs
union rather than a free-trade area.
In my article “Turkey’s EU hopes -is there any?” I was covering a German idea about a
“privileged partnership” for Turkey instead of full membership in order
to allow Turkey into the EU economically but not politically. From my
point of view “privileged partnership” could pre indicate a possible
search of “third way” between EU member- and non-membership. The model –
when first created – could be copied also with some other countries
which now are in enlargement process or included in Eastern Partnership
program which include free trade agreements, visa waivers, financial aid
and economic integration with the EU. This “privileged partnership“
could be a pragmatic alternative model in EU enlargement and it could
even be better alternative for all stakeholders than full EU membership.

The
EU’s main political aim in the region, at least in the short term, is
to avoid trouble. And the bloc’s most effective stabilisation tool is
money. The European Investment Bank has increased its lending in the
Balkans in the past two years and will soon open regional headquarters
in Belgrade. There is no concern about “enlargement fatigue”. The bloc’s
financial institution aims to “help member states and future member
states achieve their objectives”.
My Perspective
"There is no enlargement fatigue, what I see is enlargement apathy on the part of governments in the Western Balkans" (Stefan Füle, European Commissioner for Enlargement)
EU
does not have a fixed timeframe for Serbia's EU integration, and that
it will make the decisions only once it estimates that Serbia is ready.
The late reaction to the democratic revolts in the Arab world only
further underlined that Brussels lacks a vision of how to steer a common
EU policy agenda. Democratic deficit, enlargement fatigue and ever more
rescue funds. Is there still a future for a common Europe? Is the EU
the real sick man of Europe?
The
European Union seems to be ready to welcome Serbia as a candidate
member in spite of enlargement fatigue and economic crisis. In the
meantime people in Serbia show signs of scepticism about EU membership.
Support for EU accession has dropped to a meagre 57%, the lowest level
of support since 2002 (when the Serbia EU Integration Office started
these surveys), while a third of the respondents fears that the EU will
stop the enlargement process altogether in the near future or may even
fall apart.
The
Balkans still aspire to EU membership, but Turkey allows them
privileged access to a huge and rapidly growing domestic market of 74
million people, compared to about 55 million in the entire Balkan
region. A Free Trade Agreement between Turkey and Serbia entered into
force 1st of September 2010 and will give Serbian exporters opportunity
to sell their products duty free to the large Turkish market, in
addition to the already existing free trade agreements with the EU,
CEFTA, Russia, Belarus and Ukraine.
All
Balkan countries have their own development paths – some countries are
going to join fast to EU (Croatia), some are going to do it later
(Macedonia, Albania), some are maybe looking alliances from other
directions (Serbia), Kosovo will be international protectorate – a
quasi-state captured by organized crime tribes - also next decade;
Bosnia will totter between breakup, federation/confederation, state,
protectorate depending inner politics and exterior influences.
Serbia
has strategic partnership agreements with China, Italy and France, and
one such agreement is expected to be signed with Russia soon. Serbia can
be seen a gravitational center of the region. In
my previous articles, still and now even more than before I have a view
that Serbia should think if joining to EU is worth of time, money and
bureaucracy it demands, could the main benefits of EU membership be
achieved via “third way”. Despite this I think that at this moment it is
good idea to continue EU process but not only to fulfil EU needs but
especially the needs of the beneficiaries aka Serbs not EU elite in
Brussels. Most of the some 32 chapters negotiated in association process
can help economical and other cooperation between Serbia and EU. Also
Serbia should same time develop its economical cooperation with Russia,
other BRIC countries, Turkey and regional neighbours.

Related articles:
“Serbia on the road to EU”
“Turkey’s EU hopes -is there any?”
“Captured Pseudo-State Kosovo”
“Is it time to bury Nabucco?”
"New Player in Caspian Sea Power Corridor"
“EU’s big choice – Nabucco or South Stream?”