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Southeast Europe: Weekly rundown

Southeast Europe: Weekly rundown Belgrade protest on December 29; Source: Alliance for Serbia

SOFIA (Bulgaria), January 4 (SeeNews) - Serbia completely suspended exports to its southern neighbour Kosovo, Romania took over the rotating presidency of the Council of the European Union, while Bulgaria extended once again the bidding deadline in a tender for awarding a concession contract to run Sofia airport: these were some of the major events in Southeast Europe (SEE) in the first week of 2019.

We look back at these, and some related developments.

 

TENSIONS MOUNT IN SERBIA - KOSOVO RELATIONS

Relations between Serbia and Kosovo entered another rough patch in the last two months of 2018 after the government in Pristina decided to increase the import tax on all goods produced in Serbia and Bosnia to 100% from 10%. The decision prompted Serbia to completely suspend exports to Kosovo as of December 31.

Kosovo's decision has resulted in direct damages estimated at 46.1 million euro ($52.3 million) for the Serbian economy between November 21 and December 31, according to Serbia's trade minister Rasim Ljajic.

"Now we can say that trade has been completely halted. There were many appeals from the international community to abolish the taxes, but the Kosovo authorities only radicalised the situation and adopted new measures," Ljajic said.

On November 21, Kosovo government decided to increase the import tax on all goods produced in Serbia and Bosnia to 100% from 10% set earlier that month in order to protect Kosovo’s sovereignty and interests. The scope of the tax was expanded on December 29 to include products manufactured under international brands in Serbia and Bosnia.

Kosovo's decision drew fire from the EU. Johannes Hahn, the EU enlargement commissioner, said the new tariffs on imports from Serbia and Bosnia are unacceptable and against the principles of the Regional Economic Area (REA) and Central European Free Trade Agreement (CEFTA).

Serbia was the biggest importer into Kosovo with around 450 million euro ($511 million) of imports in 2017, whereas imports from Bosnia amounted to around 82 million euro, according to data from Kosovo’s statistical office.

Kosovo, considered a potential candidate for EU membership by the European Commission, unilaterally declared independence from Serbia in 2008 and has so far has been recognised by more than half of the 193 UN member states. Serbia and Bosnia, however, do not recognise
the independence of Kosovo, the former southern province of Serbia populated predominantly by ethnic Albanians.

Kosovo’s government decision on the new import taxes for Serbian and Bosnian products gave a boost to bilateral relations with Albania. A few days after Pristina announced its decision, Albania’s prime minister Edi Rama said Albania and Kosovo will remove all trade barriers between them in the first half of 2019.

“Zero tariffs and zero non-tariff barriers within the first half of next year between Albania and Kosovo,” Rama said. The two countries will advance a project for unification of customs and remove border controls within the first half of 2019, he noted, adding that from January 1, Kosovo will have a customs office in Albania's biggest sea port of Durres. Albania and Kosovo will also work towards harmonization of legislation for all documents and certificates of products within six months, implement an agreement for mutual recognition of driving licences within the first half of 2019, and scrap roaming fees.

Rather than subside, tensions between Serbia and Kosovo were further heightened a few weeks later when Kosovo's parliament adopted three laws initiating the process of the transformation of the Kosovo Security Force into a professional army.

The decision was backed by the US, while NATO warned that it was ill-timed.

In a letter to Serbia's president Aleksandar Vucic and another one to his Kosovo counterpart Hashim Thaci, US president Donald Trump encouraged both Belgrade and Pristina to seize the opportunity for reaching a deal on the normalisation of their relations. "It would be extremely regrettable to miss this unique opportunity for peace, security and economic growth," Trump said. He added that he is looking forward to hosting Thaci and Vucic at the White House "to celebrate what would be a historic accord."

The United Nations Under-Secretary-General for Peacekeeping Operations, Jean Pierre Lacroix, too said Serbia and Kosovo need to find ways to re-engage in the dialogue aimed at the normalisation of their relations.

Speaking at an urgent meeting of the UN Security Council requested by Serbia, Vucic said that the UN has to assume a greater role in the dialogue between Belgrade and Pristina, in accordance with Security Council Resolution 1244. "We have nothing against the dialogue being under the auspices of the EU, but we want the United Nations to get more involved in the process," Vucic said.

For his part, Thaci described the decision as "normal, legal, [and] just”. “If Kosovo was wrong in something, it was because it waited for five years for the formation of an army. The decision is delayed, but it is by no means wrong. We were late because we waited for the goodwill of those who had not shown it so far," Thaci said.

 

MORE PROBLEMS FOR VUCIC AT HOME

Domestic politics too was giving Vucic a headache in the last days of 2018. Thousands of people rallied in Belgrade on December 30 for the fourth weekend in a row to protest against him and the government led by his populist conservative party SNS. 

More than 35,000 citizens protested against what they see as an increasingly autocratic rule by Vucic, and called for the resignation of interior minister Nebojsa Stefanovic and for media freedom, the organiser of the rally, opposition Alliance for Serbia led by former Belgrade mayor Dragan Djilas, said.

A series of protests has been held in Belgrade since December 7, following the assault on Borko Stefanovic, leader of the Serbian Left party. The December 30 rally was organised under the "One of five million" slogan, referring to a statement by Vucic that he would not fulfil any of the protesters' demands, even if they were five million. 

"The protests are political, but people have the right to protest. As long as they are peaceful, there will be no police at the protests. I am ready to see what these people are dissatisfied with," Vucic said in an interview with TV broadcaster Studio B on December 29.

The Alliance for Serbia accuses SNS and Vucic of provoking the attack against Stefanovic, who was assaulted by a group of men on November 23 in Krusevac, in southern Serbia, and suffered injuries from being beaten with an iron rod.

"People are in the streets because they are sick of the injustice, corruption, violence and extortion. Today in Serbia we cannot fight this through institutions as they are, in fact, suspended,"  Vuk Jeremic, former foreign minister and leader of the People's Party, a member of Alliance for Serbia, said in a video file posted on the website of Bulgarian private TV broadcaster bTV on December 30.

The Alliance for Serbia was established before the local elections in Belgrade held in March 2018. It was later joined by the leading opposition parties in the country - the Democratic Party, Serbian movement Dveri and the People's Party. The Serbian Left party is a member of the alliance.

 

ROMANIA TAKES OVER EU PRESIDENCY AMID POLITICAL TENSIONS

Romania, another country in SEE where political tensions are boiling, took over the six-month rotating presidency of the Council of the European Union on January 3.

Support for EU enlargement in the Western Balkans and reaffirming the importance of the Black Sea on EU agenda, including from the perspective of reinvigorating the Black Sea Synergy, are among the priorities of the Romanian presidency.

The new presidency begins against the backdrop of political divisions in the country and criticism from Brussels of Romania's amended justice laws, the pressure on the independence of the judiciary in general, and efforts to undermine the country's anti-corruption agency DNA.

On December 20, the coalition cabinet led by prime minister Viorica Dancila survived a vote of no-confidence submitted by the National Liberal Party (PNL), Save Romania Union (USR) and Popular Movement Party (PMP), which accused the coalition government comprising left-wing Social Democratic Party (PSD) and centre-right Liberal-Democrat Alliance (ALDE) of poor performance.

The government led by Dancila was voted into office on January 29. It is the third cabinet formed by PSD and ALDE since December 2016 election.

Its main opponent is President Klaus Iohannis, who has repeatedly urged Dancila to resign, mostly because of excessive loyalty to PSD, which in his opinion makes her unfit for the office. Iohannis has also said that Romania is unprepared to take over the EU presidency.

The latest flare-up between Iohannis and the coalition cabinet was prompted by the government's plans for a fiscal overhaul.

In mid-December, finance minister Eugen Teodorovici said the government plans to pass an emergency decree introducing major fiscal changes that include a 'greed tax' for banks, capping gas prices, as well as new rules for the operation of private pension funds. Iohannis slammed the controversial measure, saying it may lead to economic chaos. The business too reacted harshly, with indices on the Bucharest Stock Exchange hitting a six-month low.

 

BULGARIA EXTENDS BIDDING DEADLINE IN SOFIA AIRPORT CONCESSION TENDER

While Romania and Serbia were rattled by political turbulence, politicians in neighbouring Bulgaria had a calm Christmas and New Year. Perhaps he most interesting event in the country in the first week of January was the transport ministry's decision to again extend the deadline for submitting offers in the tender for awarding a 35-year concession contract to run Sofia international airport - by one week to February 5.

Tendering for the contract worth an estimated 3.9 billion euro ($4.6 billion) was launched in July with October 22 set as the original deadline for submitting offers. In October, the transport ministry extended the deadline by one month, to November 22. Subsequently, in November the transport ministry prolonged the bidding period once again, this time to January 29.

The one-off concession payment will carry the highest wеight in the procedure for selecting a concessionaire, of 55%. The remaining 45% will depend on the submitted development plan, business plan, financing plan, general strategy, traffic estimates and capital expenditure.

The requirements for the potential candidates include having a net asset value of at least 200 million euro throughout the last three years and operating at least one international airport with annual traffic of over 10 million passengers.

In June 2016, the transport ministry launched the Sofia Airport concession tender, seeking at least 550 million levs ($326.7 million/281.2 million euro) as a one-off upfront payment. The tender was cancelled in April 2017 by the then caretaker government, which said that the concession would lead to a rise in airport charges and a decline of passenger traffic.

After the current coalition government led by prime minister Boyko Borissov took office in May 2017, the transport ministry said it intends to relaunch the tender and use the revenue from the concession to provide aid to indebted state-owned railways operator BDZ Holding. At the time, German airport operator Fraport, which runs the Bulgarian airports of Varna and Burgas, announced it was still very interested in winning a concession contract for operating Sofia Airport.

Passenger numbers at Sofia Airport rose by 30% to 6.5 million in 2017, the last full year for which data is available. Take-offs and landings at the airport of the Bulgarian capital increased by 11.3%, reaching 57,673.

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