Order Code RS21568
Updated April 19, 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 initially held up consolidation of the
union and closer association with the EU; however, Serbia and Montenegro and the EU
have worked to accommodate these differences in order to move forward with EU
integration. 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.
Congressional Research Service ˜ The Library of Congress

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Moreover, one of the primary
incentives for concluding the union
Leadership and Key Dates
agreement, the prospect of integration
President of Serbia and Montenegro: Svetozar Marovic
with the EU, has also been held up in
President of Serbia: Boris Tadic
part because of problems with the
Prime Minister of Serbia: Vojislav Kostunica
union. Brussels has attempted to devise
President of Montenegro: Filip Vujanovic
Prime Minister of Montenegro: Milo Djukanovic
special arrangements for Serbia and
Montenegro to overcome these
March 14, 2002 — “Belgrade Agreement” (Agreement on
challenges and achieve further progress
Principles of Relations between Serbia and Montenegro
toward EU association. Meanwhile, the
within the State Union) signed, witnessed by EU High
Representative Javier Solana
EU, the United States, and the rest of
the international community are
April 9, 2002 — Both republic parliaments passed the
Belgrade Agreement
preparing to begin to address the
question of Kosovo’s future status later
June 18, 2002 — Inaugural meeting of the Constitutional
in 2005. While the Kosovo issue more
Commission created by Agreement
directly involves Serbia than
July 2002 — Agreement on an Economic Action Plan to
Montenegro, the status of Kosovo and
harmonize economic policies between two republics
the status of the union will likely bear
December 6, 2002 — Constitutional Commission adopted
some mutual impact.
Constitutional Charter
February 4, 2003 — Constitutional Charter came into effect
Shape of the Union
March 3, 2003 — New Serbia and Montenegro parliament
The Belgrade Agreement and
convened, elected Svetozar Marovic (of Montenegro)
President of Serbia and Montenegro on March 7
Constitutional Charter envisaged Serbia
and Montenegro to be a loose
March 12, 2003 — Serbian Prime Minister Zoran Djindjic
assassinated
confederation of two member states
with joint state powers remaining
December 28, 2003 — Serbia held early parliamentary
limited and split roughly equally
elections; the extreme right Serbian Radical Party won the
largest share of the vote
between the two republics. Federal
institutions are comprised of a
March 3, 2004 — A minority coalition government in
president, parliament, council of
Serbia under Prime Minister Vojislav Kostunica came to
office
ministers, and constitutional court. The
agreement called for the 126 seats in
June 13, 27, 2004 — Serbia held direct presidential
the union parliament to be first
elections; Boris Tadic won in the second round
nominated by the republic parliaments,
April 7, 2005 — EU, Serbian and Montenegrin officials
and then openly contested in direct
signed amendments to the Charter to keep union parliament
in office and postpone direct elections until next republic-
elections by early 2005 (a missed
level parliamentary elections
deadline addressed by amendments to
the Constitutional Charter in April
February 2006 — Expiry of 3-year waiting period for a
referendum on independence
2005). The union council of ministers
includes 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, 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. 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 economic, 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 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
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.
Significant recent progress by Serbia on ICTY cooperation helped to overcome, if
not entirely eliminate, this hurdle.5 With regard to the union, a specific recent concern not
addressed by the twin track approach was the status of the union parliament, whose
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.
5 See also CRS Report RS22097, Balkan Cooperation on War Crimes Issues: 2005 Update, by
Julie Kim.

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mandate was set to expire by early 2005. With the two republics unable to agree on
whether and how to carry out direct elections to the union parliament, the EU again had
to intervene. On April 7, EU High Representative Solana, along with Serbian and
Montenegrin officials, signed amendments to the Constitutional Charter that extended the
mandate of the union parliament and postponed direct elections until the next republic-
level parliamentary elections are held. The amendments also called for any possible
referendum on secession to meet “internationally recognized democratic standards.”
These combined developments enabled the European Commission to approve on April
12 a Feasibility Study on opening SAA negotiations with Serbia and Montenegro.
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.
Factors for Dissolution
Since the union’s founding in 2002-2003, different policy priorities and concerns in
each republic have caused development of the union to languish somewhat. 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 in the long run.
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
prior to direct elections to the union parliament. The exact timing of such a referendum
remains unclear but may come in early 2006. Montenegro’s leaders have stated that
progress toward achieving an SAA with the EU does not hinder prospects for

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Montenegro’s independence. In fact, they view 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 mid-2004
in order to allow for differentiated treatment toward the two disparate
economies. The EU now appears prepared to move forward on SAA
negotiations with Serbia and Montenegro. Further progress on this front
would appear to reinforce the staying power of the union for the near
term.
! 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. The April 2005 amendments
reinforced Montenegro’s claims to its right to hold a referendum but also
called for Montenegro to cooperate with the EU on respecting democratic
standards on holding referenda. The preparations for such a vote,
expected in early 2006, 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. The Montenegrin public will likely soon face a referendum
on independence, if the current government carries out its pledge.
Eventually, both publics will also have the opportunity to register their
views on the union in direct elections to the union parliament.
! Serbia’s Political Landscape. Serbia’s political situation has stabilized
somewhat since the 2003-2004 parliamentary and presidential elections.
The current Serbian government remains committed to the Constitutional
Charter and to achieving closer EU association. However, the political
landscape remains fluid and the prospect of early elections still looms.
! 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 beginning in the fall. While no formal linkage exists between the

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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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