Montenegro Arrests Ex-Minister Over Aluminium Plant Guarantees

Montenegrin police on Monday arrested former Economy Minister Branko Vujovic for damaging the state budget to service guarantees given for the failed Podgorica Aluminum Plant, KAP, in 2009.

Media reported that the State Prosecutor interrogated Vujovic and former government officials Damir Rasketic and Refik Bojadzic on suspicion of misuse of office.

“The former officials denied those accusations. The State Prosecutor decided to declare this case an official secret, which is why we cannot disclose more information,” lawyer Nikola Martinovic told the media.

Vujovic was Economy Minister from 2009 to 2013. when the government signed a contract of guarantees with Hungarian OTP bank and Deutsche Bank to support 135 million euros in loans to KAP.

The government tried to revive KAP by issuing government guarantees for a loan to the firm’s Russian owner, to persuade him to continue production.

Russian oligarch Oleg Deripaska’s Central European Aluminium Company, CEAC, acquired a 58.7 per cent stake in Montenegro’s only aluminum plant in 2005, following an international drive by the country to attract foreign investment to restore the financial fortunes of ailing state-owned companies.

The loan was never returned, however, and the government was forced to pay more than 100 million euros in credit to KAP from the state budget in 2013.

In its 2013 report, the State Audit Institution, DRI, warned of violations of regulations over the state guarantees for the loans to KAP. They noted that the government had issued guarantees for the KAP loans without proper counter-guarantees, and despite a significant risk that the guarantees could be activated.

“The state guarantees approved to KAP were issued without a detailed analysis of the financial position and economic viability, as well as without a proper assessment of the possible consequences to the state budget of activating them,” the report said.

On April 4, Vujovic told the daily Pobjeda that state guarantees were approved according to Montenegrin laws, accusing the new ruling majority of political revanchism.

The Movement for Changes, PzP, part of the ruling majority, called on the prosecution to arrest other former officials involved in the state guarantees contract.

“Then government officials PM Milo Djukanovic and Finance Minister Igor Luksuc also approved the guarantees for KAP, even when they knew it would damage state budget. The prosecutor should investigate them as well,” the PzP press release said.

KAP fell into bankruptcy in October 2013, by which time it had debts of around 360 million euros. In June 2014, the metal company Uniprom bought the bankrupt plant for 28 million euros and promised to invest 76 million euros over the next four years.

Deripaska launched arbitration proceedings in December 2016, claiming that Montenegro had breached its obligations to protect his investment after CEAC lost money that it invested in the plant.

In October 2019, the Arbitration Institute of the Stockholm Chamber of Commerce declined to rule on the reported 600-million-euro claim brought by a Russian billionaire for the alleged loss of his investment in Montenegro.