Kosovo and former Yugoslavia: One Step Forward, Half a Step Back

2009 ended with great news from the former Yugoslavia, as Serbia has at last requested its application to the European Union. The reintegration into the Balkans within a greater European context looked closer than ever. These positive environment encouraged Montenegro, which broke away from Yugoslavia last, to launch diplomatic ties with Kosovo. This step was retaliated by Serbia withdraw its ambassador from Montenegro.

The normalization of the Montenegro-Kosovo relations is more important than one would suspect based on the sizes of the two national economies. As Serbia still cannot accept the independence of Kosovo, which had been an important part of the country for a long time, inevitable economic ties between Serbia and Kosovo often take a detour through Montenegro. An upgrade in the official Montenegro-Kosovo relations can narrow the gap between official rhetoric and real informal economic and personal relations in the region.

Two notes for investors: Montenegro is pushing its tiny nationbuilding project, as it wants a legal status of the "Montenegrin" ethnicity within Kosovo. Serbia could hardly avoid some sort of reaction to the news, as it still fights a bitter and uphill battle to derail Kosovo's independence, but in the long-term it is questionable that they really want this. The net effect of these diplomatic movements is very positive from an investors point of view.