Order Code RS21568
Updated March 3, 2006
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 2002-2003. After extended
mediation by the EU, the Montenegrin government and opposition agreed to terms for
holding a long-awaited referendum on independence, which will be held on May 21,
2006. Montenegro’s pro-independence government is confident of victory, although 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
union’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 international
July 2002 — Agreement on an Economic Action Plan to
community opened talks on Kosovo’s
harmonize economic policies between two republics
future status in early 2006. While the
Dec. 6, 2002 — Constitutional Commission adopted
Kosovo issue more directly involves
Constitutional Charter
Serbia than Montenegro, the status of
Kosovo and the status of the union may
Feb. 4, 2003 — Constitutional Charter came into effect
bear some mutual impact.
March 3, 2003 — New Serbia and Montenegro parliament
convened, elected Svetozar Marovic (of Montenegro)
President of Serbia and Montenegro on March 7
Shape of the Union
Sept. 4, 2004 — The EU adopted a “twin-track” approach
with Serbia and Montenegro to reflect their disparate
The Belgrade Agreement and
economies, but endorsed continuation of the state union
Constitutional Charter envisaged Serbia
and Montenegro to be a loose
April 7, 2005 — EU, Serbian and Montenegrin officials
signed amendments to the Charter to keep union parliament
confederation of two member states
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 and
between the two republics. Federal
Association Agreement negotiations with Serbia and
institutions are comprised of a
Montenegro
president, parliament, council of
Dec. 16, 2005 — The Council of Europe’s Venice
ministers, and constitutional court. The
Commission issued an opinion on Montenegro’s planned
agreement called for the 126 seats in
referendum on independence
the union parliament to be nominated
March 2, 2006 — The Montenegrin parliament passed a
first by the republic parliaments, and
referendum law that incorporated EU recommendations on
then openly contested in direct
procedures and set a date of May 21 for the vote.
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 to move the region toward European integration through a
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.
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.
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
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. 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, which
formally opened in October.
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, by Julie Kim. The
EU may suspend SAA talks in 2006 if top indicted war crimes suspect General Mladic is not soon
found and apprehended.

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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.
Some 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 that reflect 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 economic priorities 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 advance of parliamentary elections in 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

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toward quicker EU integration. The government’s domestic 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 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 has focused on process and
preparations for the vote; key issues that emerged have 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.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
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%. After the government and opposition accepted these terms, the Montenegrin
parliament passed a new law on the referendum on March 2 that set a voting date of May
21, 2006. The referendum question will ask: “Are you in favor of Montenegro as an
independent state with full international subjectivity?” The parties continue to negotiate
on other aspects of holding the referendum, including media access.
At this point, the outcome of the referendum seems wide open. Recent polls cited in
the media indicate that about 41% of voters support independence, 32% oppose it, and
25% remain undecided. With turnout and the majority threshold now closely linked,
opposition parties are promoting higher turnout of its anti-independence supporters, rather
than considering a boycott. Montenegro has said it will invite international observers to
the vote. Belgrade has pledged not to interfere with the conduct of the referendum.
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
5 Text of the opinion can be found at [http://www.venice.coe.int].

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resolution. Talks headed by a U.N. envoy have commenced and are likely to intensify
throughout 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 insist that Montenegro’s case for
independence has nothing to do with the Kosovo situation.
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 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 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.