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. Last Updated: 07/27/2016

State Eyes Lucrative Yugoslav Contracts

Russian companies can expect lucrative contracts to help rebuild war-ravaged Yugoslavia, Economic Development and Trade Minister German Gref said Tuesday.

Gref, speaking after a meeting on foreign investment with advisers, told reporters that Russia is set to reap rewards from the role it played in establishing a democratic regime in Yugoslavia.

Gref said that the Russian government has already worked out a cooperation program with new Yugoslav President Vojislav Kostunica’s government, and has established a state commission on the issue.

"The most important thing, however, is that political stability should be restored in Yugoslavia," Interfax quoted Gref as saying.

Last week’s peaceful change of leadership in Belgrade has already resulted in a number of European Union economic sanctions being lifted, and the EU has offered $2 billion in aid to help rebuild the county.

Monday’s repeal of the export embargo on oil and oil products to Yugoslavia could mean a competitive advantage for Russia over other countries.

In August, the Russian government signed a free-trade agreement with Yugoslavia that stipulated a gradual five-year shift to a duty-free regime on oil, oil products and natural gas, a source in the Economic Development and Trade Ministry said Monday. Under the agreement, Yugoslavia would not apply an import duty, and the goods would be exported from Russia under general terms.

Not surprisingly, Russian oil companies reacted to the lifting of sanctions with optimism.

"A new market is opening, which is of great interest," said LUKoil press secretary Dmitry Dolgov.

The government hopes that the EU’s next step will be to lift the ban on arms sales. Representatives of arms producers have already said that the Yugoslav market is particularly promising for Russia.

"If the government gives us the green light after the sanctions are lifted, then we will certainly begin work in this area, and Yugoslavia will become an important market for us," said a source in the Rosvooruzheniye arms company, who asked not to be named.

Russia is focused not only on trade with Yugoslavia, however, but also on helping to rejuvenate the country’s shattered economy. The market for reconstruction work alone is estimated to be worth at least $30 billion.

Russian gas deliveries to Yugoslavia on credit might also be considered and, according to sources in Gref’s ministry, natural gas monopoly Gazprom is already mulling the possibility of participating in the privatization of Yugoslavia’s chemical and petrochemical enterprises. This might be conducted through the receipt of shares in exchange for debt, which according to unofficial sources is $400 million.

However, few believe this is a realistic possibility.

"I doubt the new leadership will be prepared to give up their key assets. Especially now, when the country is set to receive help from the European Union," said Dmitry Avdeyev, an analyst with United Financial Group.

The $2 billion the EU has earmarked for rebuilding would logically go to companies from EU member states. Though the Economic Development and Trade Ministry suggests that Russia may be used primarily for rebuilding the energy, chemical and transport sectors, officials say that even these contracts may be divvied up among the Europeans.

Russian companies participating in rebuilding work have so far achieved little.

Russian Transstroi was supposed to get the contract to build a bridge over the Danube in Novi Sad, but this project is still up in the air, according to Transstroi officials.

In order to increase Russia’s competitiveness, the government could create a banking group that "would provide soft credits to companies participating in the restructuring of Yugoslavia," the ministry source said. The government committee for rebuilding Yugoslavia was created in the summer of 1999, but it hasn’t convened since last year, and since then nothing has been heard of its work, said the head of public relations for the Interros group, Larisa Zelkova. Vladimir Potanin, president of Interros, is chairman of the committee.

According to an official at the Economic Development and Trade Ministry, the temporary lull was due to personnel changes in the committee — it was previously headed by then-Prime Minister Vladimir Putin, and is now to be steered by his successor, Mikhail Kasyanov.

Vedomosti, MT