Serbia and Montenegro Union: Prospects and Policy Implications

CRS Report for Congress
Serbia and Montenegro Union:
Background and Pending Dissolution
Julie Kim
Specialist in International Relations
Foreign Affairs, Defense, and Trade Division
On May 21, 2006, Montenegro held a long-awaited referendum on independence;
55.5% of the electorate voted in favor of independence, slightly over the 55% threshold
established by the European Union (EU), and turnout exceeded 86%. Serbia and
Montenegro were the last remnants of the former Yugoslavia to exist in a common state.
They formed a new, highly decentralized state union under an agreement brokered by
the EU in 2002-2003, which allowed for either republic to hold a referendum after three
years. Serbia’s political leaders supported continuation of the union but recognized the
referendum outcome. The impending dissolution of the Serbia and Montenegro union
comes at the same time as the international community is conducting talks on the future
status of Kosovo, a disputed province in Serbia. This report may be updated as events
warrant. For additional information, see CRS Report RL30371, Serbia and
Montenegro: Current Situation and U.S. Policy, by Steven Woehrel.
On February 4, 2003, a new common state of Serbia and Montenegro replaced the
bi-republic Federal Republic of Yugoslavia (FRY). The event quietly marked the
culmination of intensive European Union-led efforts to negotiate the continuation of a
common state, as well as the start of a process to implement and develop the blueprint for
the new, highly decentralized state. The agreement to keep Serbia and Montenegro a
single international entity was initially viewed as a foreign policy success for Javier
Solana, the EU’s common foreign policy representative. The EU brokered the union
(dubbed by some as “Solania”) in support of its goal eventually to integrate all of the
states of the western Balkans into the EU and to prevent further instability in the region
that might arise from the creation of new states and new borders.

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Leadership and Key DatesDespite the agreement, thecomplicated union arrangement did not
President of Serbia and Montenegro: Svetozar Marovicresolve significant political and
President of Serbia: Boris Tadicstructural differences between the two
Prime Minister of Serbia: Vojislav Kostunicarepublics that contributed to difficulties
President of Montenegro: Filip Vujanovicin integrating with the EU, a primary
Prime Minister of Montenegro: Milo Djukanovic
incentive for concluding the union
Mar. 14, 2002 —Belgrade Agreement” (Agreement onagreement in the first place. Brussels
Principles of Relations between Serbia and Montenegrodevised special arrangements for Serbia
within the State Union) was signed, and witnessed by EUand Montenegro to overcome these
High Representative Javier Solana
challenges and achieve further progress
Apr. 9, 2002 Both republic parliaments passed thetoward EU association. Nevertheless,
Belgrade AgreementMontenegro’s leaders continued to
June 18, 2002 — Inaugural meeting of the Constitutionalpursue independence for the small
Commission created by Agreement was heldrepublic. Meanwhile, the international
July 2002 — Agreement made on an Economic Action Plancommunity opened talks on Kosovo’s
to harmonize economic policies between two republicsfuture status in early 2006. While the
Dec. 6, 2002 — Constitutional Commission adoptedKosovo issue more directly involves
Constitutional CharterSerbia than Montenegro, the status of
Feb. 4, 2003 — Constitutional Charter came into effectKosovo and the status of the union maybear some mutual impact.
Mar. 3, 2003 — New Serbia and Montenegro parliament
convened, elected Svetozar Marovic (of Montenegro)Shape of the Union
President of Serbia and Montenegro on March 7
Sept. 4, 2004 The EU adopted atwin-track approachThe Belgrade Agreement and
with Serbia and Montenegro to reflect their disparateConstitutional Charter envisaged Serbia
economies, but endorsed continuation of the state union
and Montenegro to be a loose
Apr. 7, 2005 — EU, Serbian and Montenegrin officialsconfederation of two member states
signed amendments to the Charter to keep union parliament
in office and postpone direct elections until next republic-with joint state powers remaining
level parliamentary elections limited and split roughly equally
Oct. 10, 2005 — The EU opened Stabilization andbetween the two republics. Federal
Association Agreement negotiations with Serbia andinstitutions included a president,
Montenegroparliament, council of ministers, and
Dec. 16, 2005 — The Council of Europes Veniceconstitutional court. The agreement
Commission issued an opinion on Montenegros plannedcalled for the 126 seats in the union
referendum on independenceparliament to be nominated first by the
Mar. 2, 2006 — The Montenegrin parliament passed arepublic parliaments, and then openly
referendum law that incorporated EU recommendations oncontested in direct elections by early
procedures2005 (a missed deadline addressed by
May 21, 2006 The referendum on independence passedamendments to the Constitutional
by a vote of 55.5% in favor to 44.6% againstCharter in April 2005). The union
council of ministers included five
departments: foreign affairs,1 defense,
international economic relations (including relations with the EU), internal economic
relations, and protection of minority and human rights. Federal court institutions, which
have only slowly become established, were supposed to oversee harmonization of the

1 Montenegro retains its own minister for foreign affairs.

republics’ judicial practices. The army is controlled by a supreme defense council
comprised of the federal president and presidents of the two member republics.
The founding documents called for the creation of a common market and the free
movement of persons, goods, services, and capital but give the federal government only
a coordinating and harmonizing role in these matters with the member states. Most
economic and monetary powers remained with the republics. Serbia and Montenegro
retained separate currencies, central banks, and monetary and fiscal policies, for example.2
The Belgrade Agreement and Constitutional Charter provide for the withdrawal of either
state (or both) from the union following the expiration of a three-year period and a
Interim Developments
Since the union’s founding, different policy priorities and concerns in each republic
caused development of the union to languish. Although economic revitalization and
reforms have been dominant concerns for both Serbia and Montenegro, their respective
governments sought different policy approaches that reflected substantial differences in
economic structure and scale between the two republics. This in turn presented
insurmountable hurdles in the effort to harmonize the republics’ economic policies. Some
observers believe that the structural differences and divergent priorities between the two
republics were simply too great to allow the union to function as a single state in the long
The pull of moving closer to European integration played a large role in keeping the
union in force. However, Montenegro’s leadership never relinquished its ultimate goal
of independence.
EU integration. Since playing a key international role in brokering the Belgrade
Agreement, the European Union remained the primary external force promoting
continuation of a joint Serbia and Montenegro state. As both republics share the goal of
attaining EU membership, EU officials attempted to leverage this influence by insisting
that Serbia and Montenegro’s surest and quickest path toward closer integration with the
EU lies together rather than apart. At the June 2003 Thessaloniki summit, EU and
western Balkan leaders agreed to move the region toward European integration through3
a Stabilization and Association process (SAp). Later that year, the EU agreed to begin
a feasibility study for a Stabilization and Association Agreement (SAA) with Serbia and
Montenegro, the first step in the EU accession process. The EU pressed Serbia and
Montenegro to achieve greater harmonization of their economic, trade, and tariff policies.
However, lack of progress in harmonization, the uncertain political climate in Serbia, and
Serbia’s lack of full cooperation with the International Criminal Tribunal for the former
Yugoslavia (ICTY) delayed further work on the SAA feasibility study with Serbia and
Montenegro in 2003 and early 2004.

2 Montenegro adopted the deutschmark in 2001 (while it was still part of the FRY) and now uses
the euro. Serbia uses the dinar as its currency.
3 See EU-Western Balkans Summit Declaration, June 21, 2003, at [].

In mid-2004, EU members adopted a “twin track” policy that recognized Serbia and
Montenegro’s economic distinctions and differentiated EU approaches to them, including
different trade and customs regimes. Concurrently, the policy called for the preservation
of Serbia and Montenegro’s existence as a single state entity. Officials from both Serbia
and Montenegro welcomed the EU initiative, if for different reasons. Despite the new
approach, progress in finalizing the feasibility study and opening negotiations on an SAA
continued to lag, mainly because of Belgrade’s insufficient cooperation with ICTY. Some
significant progress by Serbia in late 2004-early 2005 on ICTY cooperation helped to
alleviate this hurdle, if only temporarily.4 In April 2005, the EU approved a feasibility
study on opening SAA negotiations with Serbia and Montenegro, which formally opened
in October. However, after several rounds of reportedly positive progress in the SAA
talks, the EU suspended further talks in April, citing Serbia’s still incomplete cooperation
with ICTY.
Position of Montenegro. The Montenegrin government remained the driving
political force promoting dissolution of the union. Prime Minister Djukanovic and his
Democratic Party of Socialists, as well as its coalition partners, have long been identified
with the ultimate goal of independence. While a relatively dormant issue in 2003,
Montenegro’s leaders renewed their commitment to independence as the three-year
moratorium drew to a close. They proposed direct talks with Belgrade on negotiating a
separation in the form of a “union of independent states,” which Belgrade rejected. They
also insisted on holding a referendum in advance of parliamentary elections scheduled for
October 2006. Montenegro’s leaders have stated that progress toward achieving an SAA
with the EU should not hinder prospects for Montenegro’s independence. In fact, they
view independence as a means toward quicker EU integration, and the recent EU decision
to suspend SAA talks over Belgrade’s lack of full cooperation with ICTY appeared to
bolster this view. The government’s domestic critics charged that Djukanovic’s focus on
independence had diverted attention away from other pressing policy problems in
Montenegro. Though never surpassing the pro-independence vote in popularity, the pro-
unionist and anti-government bloc was expected to register a sizeable share of the vote.
Referendum Background and Results
Montenegro’s leadership has consistently insisted that the republic be allowed to
exercise its democratic right to hold a referendum on independence. The April 2005
amendments to the Charter upheld Montenegro’s right to hold a referendum but also
called for Montenegro to cooperate with the EU on respecting democratic standards. The
international community’s approach to the referendum focused on process and
preparations for the vote; key issues of concern included required turnout, necessary
margin of victory, and voter eligibility.
The Venice Commission, a legal advisory body to the Council of Europe, issued an
opinion on Montenegro’s referendum law in mid-December 2005.5 Among other things,
it rejected a Serbian proposal to consider the sizeable Montenegrin population residing
in Serbia as eligible to vote. The Commission recommended that the majority and

4 See also CRS Report RS22097, Balkan Cooperation on War Crimes Issues, by Julie Kim.
5 Text of the opinion can be found at [].

opposition parties negotiate on the conduct and implementation of the referendum,
especially with regard to the specific majority and turnout required for the referendum to
pass. EU leaders also called for the Montenegrin parties to achieve a consensus on
principles and processes and to refrain from unilateral actions. EU foreign policy chief
Solana appointed Slovak diplomat Miroslav Lajcak to be his personal representative to
Montenegro to facilitate dialogue between the government and opposition on the terms
of the referendum.
After several rounds of talks in early 2006, EU envoy Lajcak proposed, among other
things, that a winning majority comprise 55% of those voting, and that turnout exceed
50%. This formula represented a compromise between the opposition’s demands for a
threshold of a majority of the entire electorate and the government’s preference for a
simple majority of those voting. After the government and opposition accepted the EU
terms, the Montenegrin parliament passed a new law on the referendum on March 2 that
set a voting date of May 21, 2006. The text of the referendum question was: “Are you in
favor of Montenegro as an independent state with full international and legal
subjectivity?” Although the share of independence supporters appeared to be growing as
the vote neared, it remained far from certain whether the independence camp would be
able to reach the 55% threshold. Many observers wondered about the possibility of the
vote results falling in a “gray zone” above 50% but below 55% and the implications of
that uncertain outcome.
With a record-high turnout of 86.3%, the May 21 referendum resulted in 55.5% of
registered voters in favor of independence and 44.5% against.6 Some in the pro-unionist
camp disputed the results in certain polling stations, but their demands for a partial
recount were dismissed. International officials promptly praised the successful conduct
of the vote. EU officials stated that the EU could soon open separate SAA talks with
Montenegro. Leaders from Serbia and Montenegro will now have to negotiate specific
terms for the breakup of the joint state. As per the Belgrade Agreement, Serbia will
become the legal successor to the state union after Montenegro gains independence.
Kosovo’s Status
An international process to determine Kosovo’s future status is currently under way.
Since 1999, the province of Kosovo has come under U.N. administration under an
international mandate regulated by U.N. Security Council Resolution 1244. In 2005, the
U.N. Security Council endorsed launching a negotiated process on a Kosovo status
resolution. Talks headed by a U.N. envoy commenced in early 2006, and international
officials seek to conclude them by the end of the year. Although no formal linkage exists
between the issue of Kosovo’s status and the inter-republic relationship between Serbia
and Montenegro,7 many observers believe each situation could affect the other and open
a broader discussion of borders, sovereignty issues, and state relationships. Montenegrin
officials insist that Montenegro’s case for independence has nothing to do with the
Kosovo situation.

6 Montenegro has 466,079 registered voters in a total population of about 670,000.
7 The Belgrade Agreement and Constitutional Charter state that, should Montenegro withdraw
from the union, international agreements including U.N. Resolution 1244 on Kosovo shall apply
to Serbia as successor to the FRY.

U.S. Policy
The United States strongly supports the long-term goal of countries of the western
Balkans to join Europe and Euro-Atlantic structures. The United States supported the
Solana-led negotiations leading up the Belgrade Agreement and welcomed the adoption
of the Constitutional Charter. U.S. Administrations and some Members of Congress
maintained longstanding close relations with the primary architects of the union
agreement, Serbian Prime Minister Djindjic and Montenegrin President Djukanovic, ties
stemming from the staunch anti-Milosevic positions of these leaders during the 1990s.
Especially with regard to Montenegro, Congress took care to exempt that republic from
economic sanctions during the Milosevic years, as well as earmark to it high levels of
bilateral foreign assistance. Montenegro remains exempt from annual legislative
conditions on U.S. aid to Serbia that pertain to Serbia’s cooperation with the international
war crimes tribunal. For example, Montenegro was spared from the temporary U.S.
suspension of some FY2005 assistance to Serbia announced in January 2005.8
The U.S. policy agenda with Serbia and Montenegro has been largely dominated by
the issue of ICTY cooperation and Kosovo. Nevertheless, the joint or separate future of
Serbia and Montenegro is of importance to U.S. policymakers because of its potential
impact on a range of bilateral and multilateral policy issues. These include U.S. support
for the stabilization of the western Balkans region and its integration into western
institutions, including NATO; the normalization and expansion of U.S. bilateral political,
economic, and security relations with Serbia and Montenegro; Serbia and Montenegro’s
relations with the International Criminal Tribunal for the former Yugoslavia; and the
future of Kosovo.
Prior to the referendum held in Montenegro, U.S. officials said that the United States
would remain neutral and would accept any outcome that is achieved through democratic
means and through a process accepted as legitimate by all sides. They emphasized U.S.
support for Serbia and Montenegro’s progress toward Europe, within or outside of the
state union.9 After the vote, U.S. officials praised the peaceful conduct of the vote.

8 For more information, see CRS Report RS21686, Conditions on U.S. Aid to Serbia, by Steve
9 Testimony of Undersecretary of State for Political Affairs Nicholas Burns before the Senate
Foreign Relations Committee, November 8, 2005.