BUDVA, Montenegro -- The global financial crisis has buffeted the
balance sheets of Russia's legion of billionaires. But suitcases of cash and
Russian-owned luxury yachts keep arriving in this idyllic town on the Adriatic,
helping Montenegro earn the nickname Moscow-on-the-Sea.
Among the biggest investors is the Russian developer Vyentseslav Leibman,
a young millionaire who is pressing ahead with investments of $310 million,
including plans for a 27-floor modernist hotel, luxury seaside villas, docks
for the pleasure boats of the Russian superrich and a water park for their
children.
The investment might seem daring given the way the economic downturn has
hit several of his fellow wealthy Russians. But Mr. Leibman, a Muscovite
who is managing partner at Mirax Group, the company owned by the Russian
billionaire developer Sergei Polonsky, insists he can barely keep up with
demand.
He said more than half of the sprawling condominiums in Mirax's new complex
-- which sell for more than $10,400 per square foot and come with outdoor
marble Jacuzzis -- had been sold to executives of giant Russian companies like Gazprom, Lukoil and VTB. They paid,
he said, upfront and in cash.
Despite the financial crisis, ''the money keeps coming,'' said Mr. Leibman,
who recently helped bring Madonna to perform in Budva to promote his
development. ''And hopefully the global financial crisis will help sober up the
cost of land here, which is now more expensive than in Monaco.''
Thanks in large part to wealthy Russians, Montenegro has received more
foreign investment per capita than any other country on the Continent. In
recent years, Russian investors have gobbled up land on the Montenegrin coast,
a fashionable alternative to the South of France and coastal Turkey.
Russians, including the heavily leveraged Russian billionaire Oleg Deripaska,
have also made huge investments in the country's industrial sector.
In neighboring Serbia, Gazprom, the Russian state energy
monopoly, recently bought a majority stake in the national energy company,
Petroleum Industry of Serbia, for $520 million and agreed to invest another
$650 million by 2012. The deal will give Gazproma dominant position in Serbia's energy market while transforming Serbia
into a gateway for the transportation of Russian gas into western Europe.
As governments across the western Balkans have turned toward the United States and Europe -- and actively seek
European Union and NATO membership -- the influx of Russian capital is seen by some
in Brussels and Washington
as a retaliatory move by Moscow
to assert influence in a formerly Communist region with which it has long had
close ties.
Gen. Blagoje Grahovac, a senior adviser to the speaker of Montenegro's Parliament, warned in a
recent interview with the Serbian newspaper Nedeljni Telegraf that the United States,
the European Union and NATO were being ''outmaneuvered'' in the western
Balkans. ''Whoever holds the upper hand economically will also do so
politically,'' he said.
The European Parliament late last year commissioned a study of Russian
investment; among its concerns is that a burgeoning property market provides an
ideal front for illegal transactions. The European Commission has repeatedly
warned of money laundering in Montenegro.
But Dmitri S. Peskov, spokesman for Prime Minister Vladimir V. Putin of Russia,
dismissed the notion that Russian investment was geopolitically motivated as
''utter nonsense.''
''When British people 30 years ago were investing in Spanish coastal areas,
it would never come to anyone's mind to speak about enhancing political
influence,'' Mr. Peskov said. ''When tens or hundreds of thousands of British
or American people are investing in the Gulf countries, this is not a political
pressure. But every time when it comes to Russia or Russians, it is
immediately treated as flexing political muscle.''
But the Russianization here is unmistakable. Russians can be seen and heard
everywhere: on the beaches, in clubs, in upscale restaurants and in a recently
opened Russian-language elementary school. Until recently, a billboard at the
airport in Podgorica, the capital, greeted visitors in Russian: ''Come where
they like you!''
Lazar Radenovic, Budva's young deputy mayor, said Russians started to
invest here eight years ago, after the Balkan wars of the 1990s, when real
estate prices were severely depressed. Russian investment has since grown to
more than $13 billion, he said. In Budva, he noted, the influx had created a
new class of millionaires -- 500 at last count -- who had improved the town's
tax base and development.
Mr. Leibman said Russians were attracted to the Balkans by a
cultural connection stretching back to the 18th century. Serbia and Montenegro,
he noted, share a Slavic Orthodox identity with Russia. ''When Russians come
here,'' he said, ''we don't feel like we have crossed over the border.''
Zarko Radulovic, co-owner of Hotel Splendid -- luxury penthouse suites,
swimming pools and boutiques backed by a Russian investment fund -- insisted
the threat of economic colonization was exaggerated. ''The perception that the
Russians have bought everything is wrong,'' he said. ''Only 1 percent of Montenegro is owned by foreigners.''
But the European Parliament report countered that official statistics had
minimized the scale of Russian investment because many Russians invested
through third countries or by teaming up with Montenegrins.
Mr. Radulovic insisted that most businesspeople support Montenegro's
entry into the European Union, since being outside the bloc hampers business.
When he recently decided to invest $12 million for new air conditioning to make
the hotel's kitchen comply with European Union regulations, he waited two days
for a visa to travel to Belgium to buy it, an annoyance, he said, that ''makes
me want to buy Russian technology instead.''
Many here argue that Russian investment, paradoxically, will help
Westernize Balkan countries by aiding economic development, thereby
accelerating readiness to join the European Union and NATO.
Branimir Gvozdenovic, minister for economic development and a close ally of
Prime Minister Milo Djukanovic, said that Russia
was Montenegro's
second-biggest foreign investor after Hungary, and that Russians
accounted for 12 percent of tourists last year. ''We welcome investments from
more than 80 countries, so why not Russia?'' he said.
Yet the relationship does appear to have a political dimension. Russia's emergencies minister, Sergei K. Shoigu,
has warned that relations between Russia
and Montenegro could
be damaged if Montenegro pursued NATO membership. Two years ago, when Mr. Putin received Mr. Djukanovic
in his residence at Sochi, Mr. Putin praised Montenegro for promoting business with Russia and
urged closer ties. In July, Mr. Putin moved to permit visa-free travel between
the two countries.
Meanwhile, in neighboring Serbia,
where the pro-Western government of President Boris Tadic has been pressing for
European Union membership, some critics argue that Russia
is using pipeline politics to keep Belgrade in Russia's sphere
of influence.
In a recently announced energy deal, Gazprom agreed to make Serbia a transit country for its South Stream
pipeline, a $14 billion project that will stretch 560 miles undersea from Russia to Europe.
The project -- which Gazprom insists will forge ahead
despite the global financial crisis -- is a direct challenge to Nabucco, a
pipeline championed by the United States
and the European Union to bring natural gas to Europe via Central Asia,
offsetting energy dependence on Russia.
Danica Popovic, chief economist at the Center for Liberal-Democratic
Studies in Belgrade, an economic research
institute, argued that economic relations shifted fundamentally in Russia's favor after Moscow
repeatedly invoked its veto in the United Nations Security Council to prevent
it from recognizing Kosovo, which declared independence from Serbia last
February.
''By Moscow controlling our energy sector,
we can become vassals of Russia
just like South Ossetia and Abkhazia in Georgia,''
she said, noting that attitudes toward the European Union were hardening in Serbia, even
among members of the pro-Western government, who are increasingly frustrated
with the union's conditions for membership.
Milutin Nikolic, director of Citadel, a Belgrade-based mergers and
acquisitions firm that has advised on the biggest Russian deals in Serbia, said he
did not believe the recent influx of Russian investments reflected a
coordinated Kremlin strategy.
If Moscow had influence, Mr. Nikolic
contended, it was because Serbs were still smarting over recent history,
including the NATO bombing of Serbia
in 1999 and the West's backing of Kosovo's independence. ''Russia doesn't need to economically colonize Serbia,'' he said, ''because Moscow already has serious political
influence here.''
PHOTOS: Russians are everywhere around Budva, including in the Adriatic Sea. Residents say Russians are the only ones
who would be swimming this time of year.; Russians, building a $310 million
hotel and condominium complex on a rocky peninsula at Budva and dining al
fresco in Kotor, another seaside resort, are helping give Montenegro more foreign investment per capita than any other country on the Continent. | 
