Cause and Effect in European Politics and Law

Russia Has Got Croatia by the .... Agrokor

Adelina Marini, August 18, 2017

Someone I know recently asked me whether Russia is leading a hybrid war in Croatia. I had no hesitation in answering - the whole situation around Agrokor is an example of this, but there are other examples as well. Just two days after this conversation (August 13), one of the most popular Croatian national daily newspapers, Vecernji list, published a troubling interview [in Croatian] with the Russian ambassador in Croatia, Anvar Azimov, which quite clearly reveals the intentions of Russia regarding the toughest bit for Russia to swallow on the territory of the former Yugoslavia. The interview is troubling for several reasons: disgusting servile questions, a provocative photo on the front page (in military uniform), complete frankness about Russian intentions in Croatia, the geopolitical context, the timing.

When Russia leads a fierce (dis)information war in the Western world; when investigations into Russian intervention in electoral processes in the West are being conducted; when the transatlantic link is facing a break-up; when the strongest ally of Europe, especially its South Eastern part, (USA) is out of balance; when the situation in the Balkans is still unstable; at the height of summer holidays in Croatia (when there is nothing else to read) and among the tension surrounding the problems of the giant Croatian conglomerate 'Agrokor', Vecernji list publishes on its front page a photo of Anvar Asimov, a diplomat since the time of the USSR, in official military uniform. It is not for the first time that this newspaper gives a tribune to the Russian ambassador. Last year the ambassador wrote a special op-ed for the newspaper. 

In the interview, he shamelessly repeats the words of Vladimir Putin, spoken many years ago, and to which the West did not pay enough attention at the time, that the collapse of the USSR was a great mistake. Imagine what this sounds like in Croatia, which paid a high price for its separation from the former Yugoslavia, and is still paying for it by the way. He also said Putin was a gift from God, and although he likes Croatian wines, he drinks vodka in Russia. "We have superb vodka Putinka, it's great." Anvar Azimov did not appear in the uniform for the interview. The photo is a newspaper selection, but the interview mentions him appearing at a press conference in an official uniform with many medals. The ambassador's explanation is that, according to the president of Russia, all ambassadors should appear in ambassadors' uniforms at national holidays and when handing out letters of accreditation.

Culture as part of the hybrid arsenal

Against the backdrop of the above-mentioned context, it is disturbing that journalist Hassan Haidar Diab chose to ask questions related to the ambassador's summer holiday and the cultural policy of Russia. The whole interview presents the ambassador, and above all Russia, in a perfectly acceptable light – the presumption being that a country with so much culture could not be hostile to the EU and its neighbourhood. Such a tactic is very appropriate for a country like Croatia for which Russia is more or less a terra incognita, because Yugoslavia was not part of the Soviet sphere of influence and that is why many Croats see nothing wrong with doing business with Russia, not aware of the dependencies this creates. There are many examples in the neighbourhood of Croatia, with the most obvious one being the situation in Serbia.

Despite its ignorance, Croatia is a hard nut to crack for Russia, which has a destabilising influence in almost all countries of the former Yugoslavia. Serbia is called the Balkan Russia and is a conduit of Russian interests in the region; in Montenegro Moscow relies on the support of the Democratic Front and even orchestrated a coup attempt last year to prevent the country from joining NATO; in Macedonia, Russia assisted the VMRO regime to keep this country away from NATO and the EU; in Bosnia and Herzegovina, Russia also has a loyal dog in the face of Milorad Dodik; and Slovenia is friendly and even welcomed with great honours Russian President Vladimir Putin last year. Kosovo and Croatia remain outside Moscow's influence. Albania is also not a country with warm ties with Russia.

In Kosovo, the situation is different, as although Russia has no direct influence in the country, Kosovo's unresolved status places it under the indirect influence of Moscow - a strong ally of Belgrade in its resistance to Kosovo gaining additional legitimacy through its membership in international organisations such as UNESCO. This leaves Albania and Croatia. Croatia being oblivious to the Russian threat is the reason why the country fell into the Agrokor trap.

And where was the West?

Agrokor is a giant concern for the size of the Croatian economy, practically a monopolist in some spheres. The conglomerate enjoyed the support of a number of governments and reached its unsustainable size completely untroubled by regulators, politicians or media. Things were rolling undisturbed until the winter of 2017 when no one else but the Russian ambassador to Zagreb raised the solvency issue of the conglomerate that holds some of the largest Croatian companies in its portfolio and alongside them a huge number of small, medium and large suppliers that would be left without business if Agrokor fell apart. The words of Anvar Azimov led to the immediate reaction of the credit rating agencies.

Why him? Because the Russian bank with a solid government share Sberbank is Agrokor's biggest lender. When it became clear in the spring that the company could not pay its debts, it was a "Lehman Brothers" moment for Croatia. If the concern was left to collapse, it could have thrown Croatian economy into a deep recession that would have repercussions in all the countries of former Yugoslavia where 'Agrokor' has subsidiaries and is a big employer. Until recently, the ambassador explained that there was no politics in the purely business relations between Sberbank and Agrokor, but in his interview last weekend he said:

"I urge that we are unbiased and grateful to Sberbank because their investments have ultimately helped the survival of Agrokor. Let's not forget that it was precisely Russian banks, not European or Western ones, that played a decisive role. This proves once again how dear Croatia is to Russia. Even in the active phase of the March crisis, Sberbank still found opportunities to finance the Croatian company with an additional 100 million euro. Sberbank and VTB combined invested almost 1.5 billion euro". Is there really no politics in this statement?

Sberbank had insisted from the outset to take control of the company, being the largest lender. If that had happened, Russia would have received a considerable portion of the Croatian economy on a plate, plus parts of the economies of the neighbouring countries where Russia already has a great deal of influence. Estimates vary according to the measurement methods, but the share of Agrokor in Croatia's total GDP varies between 3% and 4%. If you measure consolidated earnings then the share jumps to 14%, but this does not give a clear enough idea of ​​the real size of the conglomerate.

Its fall in Russian hands was avoided by the government pushing through parliament in an emergency procedure the so-called 'lex Agrokor' - a law on companies of systemic importance that allowed the government to appoint a manager with the task of restructuring the company. The commissioner and the government say that the situation is currently stable, but in his latest report published last week, commissioner Ante Ramljak admitted that there is already an avalanche of claims, the largest of which is precisely on behalf of Sberbank, brought before various courts - Belgrade, Ljubljana, and London Court of Arbitration. "We very well understand that the stability of Agrokor also means Croatia's stability," says the Russian ambassador to Zagreb.

Two axes of Croatian foreign policy towards Russia

Around the adoption of lex Agrokor, it became known that Andrej Plenković's government was aware of the geopolitical importance of the concern. The Croatian prime minister is a former MEP, who was a deputy chair of the European Parliament's foreign affairs committee and headed the delegation of this institution for relations with Ukraine. With his inauguration, he made it perfectly clear where Croatia stands regarding Ukraine, going there being one of his first visits abroad, where he proposed Croatia's experience of "peaceful reintegration of territories" occupied by neighbouring countries, such as is the Ukrainian case and what the Croatian case was. According to some Croatian analysts, it is precisely this position of Mr Plenković that lies at the heart of Russia's decision to begin to destabilise the situation surrounding Agrokor.

"We do not agree at all with the initiative for a peaceful reintegration of territories. This issue should be resolved after all the problems between Donbass and Kiev have been settled. Besides, such a settlement requires Donbass to agree with it too, not just Kiev", says Anvar Azimov in his interview for Vecernji list. He uses the opportunity to remind that there is no benefit of sanctions against Russia. "We are very sorry that Croatia also suffers from the sanctions, annually losing up to 40-50 million euro, because it can not export its agricultural produce and fish", he said, hoping his words would fall into fertile soil at a time when Croatia suffered a complete fiasco with its attempt to help Croatian farmers by imposing drastically higher prices for phytosanitary control for imports of fruit and vegetables from non-EU countries, causing negative effects mostly at neighbouring countries.

The measure was supported by the Croatian Chamber of Economy and producers, but provoked a fierce regional reaction and the minister of agriculture was forced to withdraw it. Serious competition in the EU is a good starting point for Croats to see in Russia a good opportunity to export their produce.

The Croatian government is the main driver of Croatian foreign policy, but under the Constitution the president is a co-author. The current president, Kolinda Grabar-Kitarović, has great foreign policy ambitions and her actions are often in conflict with the government. The president advocates improving relations with Russia, and that obviously has not gone unnoticed as the ambassador praises her greatly in his interview. "I have to make a great compliment and acknowledgement to President Kolinda Grabar-Kitarović. I constantly follow her public statements, which are very wise and balanced. I congratulate her position that the EU should develop its relations with Russia as we are also part of Europe, so without Russia it is very difficult to bring peace and stability to the continent". Such words, spoken by a Russian representative, are definitely not a compliment nowadays, because recent years have shown that the sympathies of Moscow go to populists, Eurosceptics and the far right, generally anything that can undermine the European Union.

Kolinda Grabar-Kitarović's views on Russia are not new. As foreign minister, she thought it was good to maintain relations with Russia and visited Moscow in 2006. Much has changed since then, however. After her visit, there were no others until May this year. The taboo was broken by the up until recently right hand man of Andrei Plenković, Davor Ivo Stier, who, shortly before resigning as foreign minister, made the first visit to Moscow in ten years.

"I would like to emphasise that Mr Davor Ivo Stier left a very strong impression on [Sergey] Lavrov. It was most important for us to start contacts at the level of foreign ministers, which we successfully did with the visit of Stier in Moscow in May. We signed a plan for interministerial consultations", said Ambassador Azimov. He also said that Russia has plans to increase natural gas exports to Croatia to a billion cubic meters. He says quite directly that Russia prefers the Balkan countries to be out of any blocks. "We do not compete with NATO and the EU in Croatia. And not only in Croatia, but nowhere else in the Balkans", he claims.

The interview is a clear message that if Croatia does not open its arms to Russian interests, it will be hit again through Agrokor. The timing of the interview comes out is indicative. Croatia is currently weak. Political stability is illusory. There is a fierce ideological battle ongoing and in the most crucial sphere - education - between the conservative forces sponsored by the Catholic Church in Croatia and the liberal circles. The manifestations of extreme nationalism and Ustašianism have not stopped and are not condemned clearly enough by the ruling Croatian Democratic Union (HDZ). Some of the far right have separated and created a new party.

All this is fertile ground for Russia to start setting its roots. Should it enter the Croatian economy through Agrokor, it will not take long to buy media and spread the virus of disinformation, nationalism, euroscepticism and corruption. We have already seen this in Hungary, Bulgaria, Serbia, Montenegro, Macedonia, as well as in Western Europe and the United States. So, this interview should by no means be considered harmless. It is part of Russia's hybrid warfare in order to eventually incorporate Croatia into its orbit.

Translated by Stanimir Stoev

In a previous version of this article it was incorrectly stated that the minister of economy imposed new import controls on fruit and vegetables. It was the minister of agriculture. The article was incorrectly referred to Serbian Krajna in the context of peaceful reintegration of territories

euinside in Croatia
Kolinda Grabar-Kitarovic | © KGKKolinda Grabar-Kitarovic | © KGK
Croatia's Nationalistic Paradox*
Aleksandar Vucic, Andrej Plenkovic | © Vlada RHAleksandar Vucic, Andrej Plenkovic | © Vlada RH
The Incident Nobody Saw but Everybody Condemned