Reports. In-depth reports on the risk factors and threat implications of economic and financial statecraft.

Montenegro is a unique country in the region, in that its economic and financial relationship with Russia is not centered on energy. The country has no production assets, major pipeline infrastructure or even downstream petroleum refinery assets of consequence, and its energy needs are primarily met by hydroelectric power generation and imported fuel.

The economy is most exposed to Russian E&F pressure via the dominant role of its services sector, which contributes over 70% of the countrys GDP. This sector is driven by the countrys real estate and especially its tourism industry. Russia plays prominently in these two areas, with its activity in these industries adding up to an estimated 5% of the countrys total GDP.

With more than twice as many persons visiting Montenegro annually than actually living there and with Russian tourists (according to the most recent statistics) making up some 22% of this total, the country is clearly exposed, to a degree, on Russian market forces (and policies with regard to permitting such tourism, as seen leveraged in the case of Turkey following the shoot down of the Russian fighter jet) in this critical sector of the Montenegrin economy.

Russia has also consistently ranked as one of Montenegros top sources of FDI. The majority of Russian assets in the country are reportedly real estate holdings, hotels, cafes and restaurants. As of 2014, Russian FDI inflows comprised roughly 25% of the countrys total, and, by late 2015, Russian FDI constituted roughly one-third of the countrys total with that emanating from Western European countries making up just under 5%.As of 2010, according to other figures, roughly 32% of businesses in Montenegro were reportedly owned by Russian individuals.

Excerpted Deals and Transactions:

• It is in the real estate sector that Russian economic and financial activity in Montenegro has been the most visible (along with the tourism sector). In recent years, despite waning relations between Moscow and the Montenegrin leadership, Russian investors continue to own the lions share of property in Montenegro (and are still buying). In 2014, Moscow remained the countrys largest FDI contributor (accounting for half of total real estate inflows).Along the Adriatic coast, Russian real estate investment is largely in land and hotel holdings, while inland Russian buyers have focused more on industrial assets. As it stands today, according to local sources, Russians are reputed to own as much as 40% of the countrys real estate.

• Tourism is likewise extremely important to the Montenegrin economy, reportedly bringing two times as many visitors as the countrys population annually. Because of the affinity of Russian oligarchs for the country, Montenegro has come to be referred to as a Russian VIP resort. Tourism accounts for an estimated 22% of GDP and is expected to reach 40% by 2024. Russian tourists (facilitated by a visa-free system) have accounted for the large majority of this market.

• According to estimates from the Russian embassy in Montenegro, between 5,000 and 7,000 Russians are permanent residents in the country. The Adriatic coastal town of Budva has seen a significant destination for Russians, to the point that it is sometimes referred to as Moscow-on-the-Sea.

• Moscow has a track record of taking advantage of Montenegros ethnic Serb population as a means of exerting influence over the countrys leadership. In the weeks leading up to Montenegros NATO membership offer, pro-Russian political parties, specifically the New Serbian Democracy (NOVA) party (the countrys second largest party, which has a pro-Serbia, anti-NATO, pro-Moscow platform), led protests on the streets of Podgorica, demanding the resignation of Prime Minister Djukanovic. Moscow has both publicly encouraged those in Montenegro to be suspicious of the military alliance, while issuing not-so-veiled threats if the country were to proceed with membership.