Russian Tourists Love NATO's Next Member, to Moscow's Chagrin

(Bloomberg) -- Marijana Toskovic, a real estate agent in Montenegro, has good reason to be against her country’s entry into NATO next month. She depends on clients from Russia for more than half of her income, and the Russian government is already urging its citizens not to travel there.

Opposition would align her with almost half the citizens of this former republic of Yugoslavia, who polls show are divided on joining the military alliance given the bitter history of conflict in the Balkans.

Even so, Toskovic favors entry.

“It’s probably better to join, just to avoid some trouble in the future -- this is the Balkans after all,” said Toskovic, 31. “I’d settle for stability and peace. That’s what we need most.”

The question is whether accession will bring the stability she seeks. The Kremlin has made no secret of its anger at Montenegro’s efforts to join both the European Union and the euro currency after it secures membership in the North Atlantic Treaty Organization. 

The Balkan state’s prime minister, Dusko Markovic, said in an interview this month that NATO membership will contribute to regional peace and “give crucial impetus for economic growth.” He also has made has made repeated accusations, including in the interview, that Russia organized a coup during last October’s elections. It was foiled, he said. He also accused Russia of trying to assassinate his predecessor, Milo Djukanovic. Moscow denies the charges.

“We don’t expect Russia to give up on the country quite yet,” said Miha Hribernik, senior analyst at global risk consultancy Verisk Maplecroft, in an email. “Continued high levels of pro-Russian sentiment will provide the Kremlin with a mechanism for fomenting instability.”

Read More on Montenegro and NATO: Bloomberg View

Lawmakers in Montenegro, which split from Serbia in 2006, approved NATO membership on April 28 and will formally join on June 5, Markovic told Voice of America radio last week. The country has little to offer in terms of bolstering the alliance’s forces. It has an army of 2,000 troops, about 15 helicopters, two aging frigates and the same number of light jets. But it completes NATO’s Mediterranean dominance by adding the last chunk of territory needed to secure the alliance’s entire northern shoreline, from Gibraltar to Syria.

“Washington’s motive is clearly to prevent the country from falling into the Russian sphere and becoming a security risk to the West,” Timothy Less, the director of the Nova Europa political risk consulting firm, said in an email.

Secretary of State Rex Tillerson spoke favorably about Montenegro’s accession at a March 31 NATO meeting in Brussels, noting it had been overwhelmingly approved by the Senate.

“Montenegro’s inclusion in the alliance will contribute to peace and stability in the strategic Balkan region,” Defense Department spokesman Navy Commander Sarah Higgins said in an email. “Montenegro has successfully pursued vital defense reforms and has been a longstanding partner with NATO in Afghanistan.”

Russia, for its part, wants its people -- who make up about a third of the country’s tourist arrivals -- to stay away. In April, Maria Zakharova, a spokeswoman for the Foreign Ministry in Moscow, urged her countrymen to think twice before heading there, citing “anti-Russian hysteria.”

“We stress that the destructive anti-Russian course of the Montenegrin leadership runs counter to the interests of the Montenegrin people,” she said in February.

Russian Real Estate

The influence of the fellow Slavic and Orthodox Christian state on Montenegro’s economy is visible everywhere. Russian-language billboards advertising real estate dot the road along the coast, where Russian-owned yachts crowd marinas and tourists bask on the white, sandy Adriatic beaches. Russia accounted for 16 percent of the 6.6 billion euros in Montenegro’s foreign investment from 2007 to 2015, according to the government.

The government says NATO entry will bolster investor certainty, and Markovic said the approach of membership helped triple first-quarter foreign direct investment from the same period a year earlier, to 64.6 million euros ($70.6 million). The country’s borrowing costs back up that optimism, with the yield on the country’s bond maturing in March 2020 falling to 3.57 percent last week, from more than 5 percent a year ago.

The debate has left Montenegrins unsure about their future. An opinion poll conducted Dec. 5-14 showed 39.5 percent support for joining NATO and 39.7 percent opposed, according to the Podgorica-based Center for Democracy and Human Rights. The rest weren’t sure. The poll, sponsored by the U.S. Embassy in Montenegro and NATO Public Diplomacy, had a 3.1 percent margin of error.

Andrija Mandic, the head of the opposition Democratic Front and one of 14 people the government has indicted for taking part in the alleged coup, believes that joining NATO would be rejected if a referendum were held. He recalled when six people, including three children, died when NATO missiles hit a bridge they were on in the Montenegrin village of Murino in April 1999 during the Kosovo war.

“People here will never forget that we were bombed,” he said.

Still, after President Donald Trump’s warning that the U.S. would look at whether NATO member states were pulling their weight -- a statement that he later softened -- the country aims to ramp up defense spending. Montenegro will hit the alliance’s target of 2 percent of gross domestic product, from about 1.6 percent now, by 2020, or perhaps even this year if it buys new choppers, Defense Minister Predrag Boskovic said in an April interview.

“Montenegro is aware of its size,’’ Boskovic said. “But what matters more is that we want to contribute to making the traditionally turbulent Balkans a more secure place.’’

--With assistance from Hannah Dormido Adrian Leung and Nafeesa Syeed

To contact the reporter on this story: Misha Savic in Belgrade at msavic2@bloomberg.net.

To contact the editors responsible for this story: James M. Gomez at jagomez@bloomberg.net, Michael Winfrey, Anne Swardson