Cash and Carry

Russians just love Montenegro. The tiny republic, which became the world's newest nation after voting recently for independence from neighboring Serbia, is an island of Slavic culture on one of the most beautiful stretches of the Adriatic. The religion is Orthodox. The local Serbian dialect is readily understandable by Russian speakers. And it's one of the last Mediterranean destinations not requiring visas for Russians.

No wonder they're descending on the place in droves. What more could the place possibly offer? Well, for one thing--extremely liberal laws on cash. Unlike most other places in Europe, Montenegro has no problem with folks who come bearing suitcases full of money, especially if they pour such lucre into the local economy. And that, of course, is exactly what Russians are doing in ever-growing numbers. According to British real-estate consultant Ian Giddings, property prices in popular seaside resorts like Kotor and the nearby Lustica peninsula have doubled in the past year alone, thanks largely to Russian money.

As many as six charter flights have been arriving daily at Tivat airport this summer from Moscow and other cities, reports Andrei Sazonov, a Russian real-estate agent in Herceg Novy. Wealthy Russians have booked out the glorious hotel in Sveti Stefan, a medieval fishing village occupying an entire island just off Montenegro's coast. One local newspaper, the Monitor, estimates that Russian millionaires are buying up half of all properties in the $500,000 range. Real-estate brokers in Bar have been spotted cruising up and down the coast with Russian clients, looking for that perfect villa.

Much of this is perfectly legit. Example: Russian oligarch Oleg Deripaska recently bought Montenegro's only major industrial facility, the KAP aluminum plant, which produces 80 percent of Montenegro's (legal) exports. As for the illegal exports? The European Union has mounted a major effort to curb massive smuggling of cigarettes by speedboat to Italy, which for years has been a mainstay of the Montenegrin economy. (Prime Minister Milo Djukanovic is wanted in Italy for suspected involvement.) Erhard Busek, coordinator for the EU's Stability Pact for Southeastern Europe, fears that Montenegro could soon become "a stronghold of the Russian mafia" and a hotbed of gambling and smuggling. Nonsense, retorts Sazonov. The Russians buying in Montenegro are "terribly cultured, professional, middle-class people." They just prefer to pay cash.

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