Order Code RS21568
Updated February 2, 2005
CRS Report for Congress
Received through the CRS Web
Serbia and Montenegro Union: Prospects and
Policy Implications
Julie Kim
Specialist in International Relations
Foreign Affairs, Defense, and Trade Division
Summary
Among the many policy challenges currently or imminently facing Serbia and
Montenegro, such as the issue of cooperation on war crimes and the future status of
Kosovo, remains the question of the future of the state itself, the Serbia and Montenegro
Union. Replacing the “Federal Republic of Yugoslavia” in February 2003, the union
kept Serbia and Montenegro together in a highly decentralized but joint state under a
deal brokered by the European Union (EU). Continued stark differences between the
two republics and their respective governments have held up consolidation of the union
and have contributed to a stalemate in relations with the EU. The long-term future of
the Serbia and Montenegro union remains in doubt and could complicate international
efforts to address unresolved problems in the region. This report may be updated as
events warrant. For additional information, see CRS Report RL30371, Serbia and
Montenegro: Current Situation and U.S. Policy.
Introduction
On February 4, 2003, a new common state of Serbia and Montenegro came into
being, replacing 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.
Two years later, it has become apparent that the complicated union arrangement has
not resolved significant political and structural differences between the two republics.
Moreover, one of the primary incentives for concluding the union agreement, the prospect
Congressional Research Service ˜ The Library of Congress

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of integration with the EU, has also
been held up in part because of
Leadership and Key Dates
problems with the union. Brussels has
President of Serbia and Montenegro: Svetozar Marovic
attem p t e d to devise special
President of Serbia: Boris Tadic
arrangements for Serbia and
Prime Minister of Serbia: Vojislav Kostunica
Montenegro to overcome these
President of Montenegro: Filip Vujanovic
Prime Minister of Montenegro: Milo Djukanovic
challenges, but intra-union disputes
appear far from resolved. Meanwhile,
March 14, 2002 — “Belgrade Agreement” (Agreement on
the EU, the United States, and the rest
Principles of Relations between Serbia and Montenegro
of the international community are
within the State Union) signed, witnessed by EU High
Representative Javier Solana
preparing to begin, by mid-2005, to
address the question of Kosovo’s future
April 9, 2002 — Both republic parliaments passed the
Belgrade Agreement
status. While the Kosovo issue more
directly involves Serbia than
June 18, 2002 — Inaugural meeting of the Constitutional
Montenegro, the status of Kosovo and
Commission created by Agreement
the status of the union will likely bear
July 2002 — Agreement on an Economic Action Plan to
some mutual impact.
harmonize economic policies between two republics
December 6, 2002 — Constitutional Commission adopted
Shape of the Union
Constitutional Charter
February 4, 2003 — Constitutional Charter came into effect
The Belgrade Agreement and
Constitutional Charter envisaged Serbia
March 3, 2003 — New parliament of Serbia and
and Montenegro to be a loose
Montenegro convened, elected Svetozar Marovic (of
Montenegro) President of Serbia and Montenegro on March
confederation of two member states
7
with joint state powers remaining
March 12, 2003 — Serbian Prime Minister Zoran Djindjic
limited and split roughly equally
assassinated
between the two republics. Federal
institutions are comprised of a
December 28, 2003 — Serbia held early parliamentary
elections; the extreme right Serbian Radical Party won the
president, parliament, council of
largest share of the vote
ministers, and constitutional court. The
agreement called for the 126 seats in
March 3, 2004 — A minority coalition government in
Serbia under Prime Minister Vojislav Kostunica came to
the union parliament to be first
office
nominated by the republic parliaments,
and then openly contested in direct
June 13, 27, 2004 — Serbia held direct presidential
elections; Boris Tadic won in the second round
elections by early 2005. The union
council of ministers includes five
Early 2005 — Elections to the union parliament of Serbia
and Montenegro due
departments: foreign affairs,1 defense,
international economic relations
February 2006 — Expiry of 3 year waiting period for a
(including relations with the EU),
referendum on independence
internal economic relations, and
protection of minority and human
rights. Federal court institutions, which have only slowly become established, are
supposed to oversee harmonization of the republics’ judicial practices. The army is
controlled by a supreme defense council comprised of the federal president and presidents
of the two member republics.
1 Montenegro retains its own minister for foreign affairs.

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The founding documents call 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 remain with the republics. Serbia and Montenegro retain
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 referendum.
Factors for Cohesion
Since playing a key international role in brokering the Belgrade Agreement, the
European Union has remained the primary external force promoting continuation of a
joint Serbia and Montenegro state. As both republics share the goal of attaining
membership in the European Union, EU officials have attempted to leverage this
influence by repeatedly insisting that Serbia and Montenegro’s only path toward closer
integration with the EU lies together rather than apart. The Solana-brokered Belgrade
agreement constitutes a pillar of the EU’s integration strategy for the western Balkan
region. At the June 2003 Thessaloniki summit, EU and western Balkan leaders agreed
on a common agenda to move the region toward European integration through the
framework of the EU’s Stabilization and Association process (SAp).3 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. At the
same time, the EU has pressed Serbia and Montenegro to achieve greater harmonization
of their economies, trade, and tariff policies in order to facilitate progress in integrating
with the EU. However, given the lack of progress in tariff and trade harmonization, the
uncertain political climate in Serbia, and Serbia’s lack of full cooperation with the
International Criminal Tribunal for the former Yugoslavia (ICTY), the EU indefinitely
postponed further work on the SAA feasibility study with Serbia and Montenegro in 2003
and early 2004.4
In mid-2004, the EU considered new approaches to Serbia and Montenegro in order
to break the stalemate. EU members adopted a “twin track” policy that would recognize
Serbia and Montenegro’s economic distinctions and differentiate EU approaches to them,
including different trade and customs regimes. Concurrently, the new policy calls for the
preservation of Serbia and Montenegro’s existence as a single state entity. Officials from
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 has not moved forward, albeit mainly due to Belgrade’s insufficient cooperation
with ICTY. In January 2005, Solana postponed a planned visit to Serbia and Montenegro,
citing the ICTY issue as well as limited progress on development of the union.
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 [http://www.eu2003.gr].
4 For details on the EU’s relationship with Serbia and Montenegro, see the European
Commission’s Stabilization and Association Report 2004, released in March 2004.

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Another factor that may encourage the continued existence of the union is Serbia and
Montenegro’s dealings with other international organizations. For example, both
republics seek closer ties with and/or entry into NATO and the WTO. Maintaining the
union may prove the quickest route toward achieving their objectives, as opposed to
establishing new links to these institutions as two independent states.
Political positions and public opinion in both republics may also reinforce
continuation of the union. In Serbia, most parties in the government and in opposition
support the union, which some see in any case as a prerequisite to EU integration. An
exception is Serbia’s small G-17 Plus party, which has advocated “Serbian
independence,” or separation from Montenegro (as well as Kosovo), as a quicker route
to EU integration. While the leadership in Montenegro remains firmly committed to the
goal of independence, the opposition parties support union with Serbia. Public opinion
poll data in Montenegro varies but shows divided sentiments on the issue, with slightly
more favoring independence over the union. Should a referendum eventually be held, it
is estimated that a large share of the republic’s population would likely oppose
independence.5
Factors for Dissolution
Most observers agree that the Belgrade Agreement successfully diffused an emerging
crisis between Serbia and Montenegro in 2002, even while it did not resolve all of the
challenges in the inter-republic relationship. In the intervening period, different policy
priorities and concerns have caused development of the union to languish. Serbia has
been largely preoccupied with internal political developments, including the Djindjic
assassination in 2003, and subsequent parliamentary and presidential elections. In
Montenegro, Prime Minister Djukanovic has remained largely unchallenged politically
(despite mounting charges of government involvement in, or deficient responses to,
organized crime and trafficking), but a parliamentary boycott by opposition parties has
blocked normal legislative functions. In addition, while economic revitalization and
reforms are the dominant concerns for both Serbia and Montenegro, their respective
governments have sought different approaches and strategies to their problems that reflect
substantial differences of economic structure and scale between the two republics. This
in turn has presented recurring hurdles in the process of trying to harmonize the republics’
economic policies beyond the lack of political will. Some observers believe that the
structural differences between the two republics are simply too great to allow the union
to function as a single state.
The Montenegrin government remains the driving political force promoting
dissolution of the union. Prime Minister Djukanovic and his Democratic Party of
Socialists have long been identified with the ultimate goal of independence. Djukanovic’s
smaller coalition parties have been even more insistent on this objective. While a
relatively dormant issue in 2003, Montenegro’s leaders have renewed their commitment
to dissolve the union and to hold a referendum on independence. They have proposed
direct talks with Belgrade on negotiating a separation and insist on holding a referendum
5 Recent census data in Montenegro showed a sharp decline in the number of citizens who
registered as “Montenegrin” and an increase in those who registered as “Serb” from the 1991
census.

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prior to direct elections to the union parliament, called for by early 2005. The exact
timing of such a referendum remains unclear but may come in late 2005 or 2006. The
Montenegrin government has predicted that its supporters would not participate in any
election for a union institution and has argued that state status issues should be resolved
first. In contrast, Belgrade and the EU have insisted on holding parliamentary elections
first, as called for in the Constitutional Charter. Another factor driving Podgorica toward
independence may be Belgrade’s increasing isolation from the international community
over issues that Montenegro has little ability to influence. Notably, Montenegro favors
full cooperation with ICTY but cannot alter policies of the Serbian government in this
area. Montenegro’s leaders therefore see independence as a means toward quicker
European integration.
Outlook Indicators
International opinion appears divided on the staying power of the joint state of Serbia
and Montenegro. Some upcoming developments may suggest future trends:
! Position of the EU. The EU has repeatedly reiterated its preference for
a continuation of the status quo on state unity and border issues.
However, efforts to harmonize Serbia’s and Montenegro’s economic
policies and political positions have proven to be a continual struggle and
a barrier to the conclusion of a Stabilization and Association Agreement.
Reflecting the belief of the need for a more flexible approach to Serbia
and Montenegro, the EU adopted the “twin track” approach in order to
allow for differentiated treatment toward the two disparate economies.
However, progress on the SAA has remained stalled due to the ICTY
problem as well as union issues. The EU is expected to consider next
steps on Serbia and Montenegro’s association agreement in March 2005.
! Montenegro’s preparations for a referendum. Montenegro’s leadership
continues to insist that the republic exercise its democratic right to hold
a referendum on the future of the union and is apparently confident that
the results will endorse independence. Moreover, they insist that a
referendum be held before elections to the union parliament take place.
The preparations for such a vote and its execution will provide further
indications of the future of the union.
! Public views. The Serbian and Montenegrin populations were not
actively engaged in the lengthy deliberations in 2003-2003 over the shape
of the union. Should direct union parliamentary elections eventually be
held, both publics will have the opportunity to register their views on the
union. The Montenegrin public will also likely soon face a referendum
on independence, if the current government carries out its pledge.
! Serbia’s political landscape. Serbia’s political situation has stabilized
somewhat since the 2003-2004 parliamentary and presidential elections.
However, the political landscape remains fluid and the prospect of early
elections still looms. Factors in Serbia that could shape the union include
the current government’s work on a new Serbian constitution and the
possible emergence of a new government, should the current one fall.

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! Kosovo’s status. 2005 is a key year for international engagement on
Kosovo. Since 1999, the province of Kosovo has come under U.N.
administration under an international mandate regulated by U.N. Security
Council Resolution 1244. Current international policy calls for a review
of Kosovo by mid-2005, possibly leading to consideration of Kosovo’s
status. While no formal linkage exists between the issue of Kosovo’s
status and the inter-republic relationship between Serbia and
Montenegro,6 many observers believe each situation will impact the other
and open a broader discussion of borders, sovereignty issues, and state
relationships. At the least, it appears that the EU would prefer to hold off
on major changes to the Serbia and Montenegro union arrangement until
2006, after the Kosovo review process begins in 2005.7
U.S. Policy
The United States strongly supports the long-term goal of countries of the western
Balkans to join Europe and recognizes Europe’s leading role in the stabilization of the
region, in close cooperation with the United States. 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 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 U.S. suspension of FY2005 assistance to
Serbia announced in January 2005.8
The U.S. policy agenda with Serbia and Montenegro has been 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. Should they eventually separate, Serbia and Montenegro may develop divergent
positions on these and other issues affecting U.S. policy.
6 The Belgrade Agreement and Constitutional Charter state that, should Montenegro withdraw
from the union, U.N. Resolution 1244 shall apply to Serbia as successor the FRY.
7 Eric Jansson, “Enthusiasm for union at low ebb,” Financial Times, December 14, 2004.
8 For more information see CRS Report RS21686, Conditions on U.S. aid to Serbia, by Steve
Woehrel.

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