Order Code RS21568
Updated December 29, 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
Serbia and Montenegro are united in a highly decentralized joint state under an
agreement brokered by the European Union (EU) in 2002 and 2003. Authorities in
Montenegro are planning to hold a long-awaited referendum on independence in April
2006, as provided for in the union agreement. A sizeable minority of the population and
the political opposition in Montenegro oppose independence. Most of Serbia’s political
leaders support continuation of the union but say they will recognize any result that is
accepted by the EU. Uncertainty about the state’s future comes at the same time as the
EU is negotiating an association agreement with Serbia and Montenegro and 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 .
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.
Congressional Research Service ˜ The Library of Congress

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Despite the agreement, the
complicated union arrangement did not
Leadership and Key Dates
resolve significant political and
President of Serbia and Montenegro: Svetozar Marovic
structural differences between the two
President of Serbia: Boris Tadic
republics that have contributed to
Prime Minister of Serbia: Vojislav Kostunica
difficulties in integrating with the EU,
President of Montenegro: Filip Vujanovic
Prime Minister of Montenegro: Milo Djukanovic
a primary incentive for concluding the
union agreement in the first place.
March 14, 2002 — “Belgrade Agreement” (Agreement on
Brussels has since devised special
Principles of Relations between Serbia and Montenegro
arrangements for Serbia and
within the State Union) signed, witnessed by EU High
Representative Javier Solana
Montenegro to overcome these
challenges and achieve further progress
April 9, 2002 — Both republic parliaments passed the
Belgrade Agreement
toward EU association. Nevertheless,
Montenegro’s leaders continue to
June 18, 2002 — Inaugural meeting of the Constitutional
pursue independence for the small
Commission created by Agreement
republic. Meanwhile, the EU, the
July 2002 — Agreement on an Economic Action Plan to
United States, and the rest of the
harmonize economic policies between two republics
international community have begun a
Dec. 6, 2002 — Constitutional Commission adopted
process to address the question of
Constitutional Charter
Kosovo’s future status. While the
Kosovo issue more directly involves
Feb. 4, 2003 — Constitutional Charter came into effect
Serbia than Montenegro, the status of
March 3, 2003 — New Serbia and Montenegro parliament
Kosovo and the status of the union may
convened, elected Svetozar Marovic (of Montenegro)
President of Serbia and Montenegro on March 7
bear some mutual impact.
Sept. 4, 2004 — The EU adopted a “twin-track” approach
with Serbia and Montenegro to reflect their disparate
Shape of the Union
economies, but endorsed continuation of the state union
The Belgrade Agreement and
April 7, 2005 — EU, Serbian and Montenegrin officials
signed amendments to the Charter to keep union parliament
Constitutional Charter envisaged Serbia
in office and postpone direct elections until next republic-
and Montenegro to be a loose
level parliamentary elections
confederation of two member states
Oct. 10, 2005 — The EU opened Stabilization and
with joint state powers remaining
Association Agreement negotiations with Serbia and
limited and split roughly equally
Montenegro
between the two republics. Federal
Dec. 16, 2005 — The Council of Europe’s Venice
institutions are comprised of a
Commission issued an opinion on Montenegro’s planned
president, parliament, council of
referendum on independence
ministers, and constitutional court. The
Feb. 7, 2006 — Scheduled date for an extraordinary
agreement called for the 126 seats in
parliamentary session in Montenegro to set a date for a
the union parliament to be nominated
referendum before end of April 2006
first by the republic parliaments, and
then openly contested in direct
elections by early 2005 (a missed
deadline addressed by amendments to the Constitutional Charter in April 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
1 Montenegro retains its own minister for foreign affairs.

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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 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
EU integration. Since playing a key international role in brokering the Belgrade
Agreement, the European Union has remained the primary force promoting continuation
of a joint Serbia and Montenegro state. As both republics share the goal of attaining EU
membership, EU officials have 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 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. The EU 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, 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) delayed further work
on the SAA feasibility study with Serbia and Montenegro in 2003 and early 2004.
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 progress by Serbia since late 2004 on ICTY cooperation helped to overcome,
if not entirely eliminate, this hurdle.4 In April 2005, the EU approved a feasibility study
on opening SAA negotiations with Serbia and Montenegro. SAA talks formally opened
on October 10.
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 See also CRS Report RS22097, Balkan Cooperation on War Crimes Issues: 2005 Update, by
Julie Kim.

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A further hurdle to EU integration was the status of the Serbia and Montenegro union
parliament, whose 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 called for separate direct elections to
be held in each republic at the time of the next republic-level parliamentary elections.
The amendments also called for any possible referendum on secession to meet
“internationally recognized democratic standards.”
Other Factors. 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. The Serbian government has rejected Podgorica’s proposal to dissolve
the state in favor of a union of independent states. 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 a growing margin favoring independence over
continuation of the union. Still, a future referendum could register a large voice of
opposition to Montenegrin independence.
Factors for Dissolution
Structural Differences. Since the union’s founding in 2002-2003, different
policy priorities and concerns in each republic have caused development of the union to
languish. While economic revitalization and reforms are the dominant concerns for both
Serbia and Montenegro, their respective governments have sought different policy
approaches and strategies that reflect substantial differences of economic structure and
scale between the two republics. This in turn presented insurmountable hurdles in the
process of trying to harmonize the republics’ economic policies. 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.
Position of Montenegro. The Montenegrin government remains 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 have since renewed their commitment to independence. They have
proposed direct talks with Belgrade on negotiating a separation in the form of a “union
of independent states,” which Belgrade has rejected. They also insist on holding a
referendum in 2006, possibly by April, in advance of parliamentary elections.
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

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independence as a means toward quicker European integration. The government’s critics
charge that the government’s focus on independence diverts attention away from other
pressing policy problems in Montenegro.
Referendum Outlook
Montenegro’s leadership has consistently insisted that the republic be allowed to
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 to the Charter 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 international community’s approach to
the referendum has focused on process and preparations for the vote; key issues that
emerged have included required turnout, necessary margin of victory, and voter eligibility.
In June, Serbian Prime Minister Kostunica presented to the EU a list of over 250,000
Montenegrins living in Serbia that he argued should be eligible to vote in a future
referendum in Montenegro. The Montenegrin government rejected this position and
charged Kostunica with interference in Montenegro’s internal affairs.
The Venice Commission, a legal advisory body to the Council of Europe, issued an
opinion on Montenegro’s referendum law in mid-December.5 Among other things, the
Commission recommended that the majority and 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, and he is tasked with
facilitating dialogue between the government and opposition on the terms of the
referendum. Presently, the opposing parties appear far apart on many of these issues.
Montenegro has called for its parliament to meet on February 7 to set a date for the
referendum before the end of April. The actual date of the vote and wording of the
referendum question are to be determined later. Other outstanding issues include whether
and by what margin parliament may need to ratify the referendum results, whether
opponents of independence may call for a boycott of the vote, how the international
community may judge the process and outcome, and how the EU-led SAA process might
be affected by a pro-independence outcome. Montenegro has said it will invite
international observers to the vote. Belgrade has pledged not to interfere with the
referendum plans.
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 have commenced and are likely to intensify in
5 Text of the opinion can be found at [http://www.venice.coe.int].

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early- to mid-2006. 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 could affect the other and open a broader discussion of borders,
sovereignty issues, and state relationships. Montenegrin officials have claimed, although
the EU has not confirmed, that EU officials have sought a postponement of the
referendum until later in 2006, after the Kosovo status negotiations are well under way.
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 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 U.S. suspension of
some FY2005 assistance to Serbia announced in January 2005.7
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. With regard to Montenegro’s plans to hold a referendum, U.S. officials
have said that the United States will accept any outcome that is achieved through
democratic means and through a process accepted as legitimate by all sides. They
emphasize U.S. support for Serbia and Montenegro’s progress toward Europe, within or
outside of the state union.8
6 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.
7 The FY2006 foreign operations appropriations (P.L. 109-102/H.R. 3057) maintains ICTY-
related conditions on aid to Serbia. For more information, see CRS Report RS21686, Conditions
on U.S. Aid to Serbia, by Steve Woehrel.
8 Testimony of Undersecretary of State for Political Affairs Nicholas Burns before the Senate
Foreign Relations Committee, November 8, 2005.

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