Former economy minister of Montenegro detained over Podgorica Aluminum Plant guarantees

On 26^th April 2021, the Montenegrin police detained former Economy Minister Branko Vujovic for damaging the state budget to service guarantees given for the failed Podgorica Aluminum Plant, KAP, in 2009.

As per our report, the State Prosecutor interrogated Vujovic and former government officials Damir Rasketic and Refik Bojadzic on suspicion of misuse of office.

Nikola Martinovic, the Lawyer, informed: “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.”

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

The Montenegrin government attempted to re-establish KAP by issuing government guarantees for a loan to the firm’s Russian owner, to influence him to pursue production.

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

Due to obligatory conditions, the government paid more than €100 million in credit to KAP from the state budget in 2013, as the loan was never reinstated.

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

The report clearly stated: “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 former minister on 4^th April commented, according to Montenegrin laws, the state guarantees were approved and he also accused the new ruling government to place this issue as a political vendetta.

Movement for Changes (PzP) a populist, sovereignist, and reformist political party in Montenegro and also a part of the ruling majority, demanded on the prosecution to detain other former officials involved in the state guarantees contract.

PzP press published: “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.”

In October 2013, KAP collapsed into bankruptcy, at a time when it had debts of around €360 million. However, in June 2014, the metal firm Uniprom acquired the bankrupt aluminium plant for only €28 million and committed to injecting €76 million over the next four years.

In December 2016, Oleg Deripaska, shoot arbitration proceedings, contending that Montenegro had breached its obligations to safeguard his investment after CEAC lost money that was invested in the plant.

The Arbitration Institute of the Stockholm Chamber of Commerce in October 2019, declined to rule on the reported €600-million claim brought by Deripaska for the alleged forfeiture of his investment in Montenegro.