Prime Minister Marijanovic in a Triple Role

Vreme, Beograd, FR Yugoslavia, 12/4 1995

Vreme turned out to be a bad forecaster when, two weeks ago, we guessed that Mirko Marijanovic, Serbian prime minister, as an owner of a company "Progresgas-trading" is favored to win the competition for the contract for export of 400,000 tons of wheat; the export of wheat is supposed to finance the import of gas and other fuel from Russia. It turned out that the favorite was actually Mirko Marjanovic, but as the director of the import-export company "Progress" from Belgrade.

Actually, prime minister Marijanovic will, on December 3, 1995, decide whether to accept his own offer of $140 per ton for 400,000 tons of wheat to be exported via the Danube and paid in advance (stipulated in the competition rules), plus $160 per ton for 500,000 tons of which 30% is to be paid in advance or $165 per ton, provided the payment is made after the completed export. Those who witnessed the start of the bidding at noon on November 23, say that the atmosphere was indeed extraordinary. Some 60 people were present, it was noisy, even rowdy when the "Progress'" offer was opened as the 35th out of 36 offers. Truly, so far unseen scene at a commercial bidding whose result was known in advance.

It should be mentioned that the best offer, of $200 per ton, was made by a company from Novi Sad, "Nafta" Inc. (majority shareholder Ilija Radun); however they proposed to export the wheat via Bar [port in Montenegro] and pay for it in oil (and one could discuss the actual price for oil). It is interesting that the "Progress'" offer is just by little higher than many other offers, which went as high as $164 per ton, payment after the completed transaction. The lowest offer , of $71 per ton, was made by "Profi center Panonija" from Novi Sad. Larger state-owned companies offered between $125 and $135 per ton. In the end the majority left disappointed, convinced that Marjanovic's "Progress" had already won, since the representative of the state directorate asked for a ten day delay, after which Marjanovic's government was supposed to reach the final decision. Especially disappointed were those who had been supported by foreign companies, since, as the representative of one of the companies said, a delay "longer than 10 minutes" is always risky.

No Profit for Farmers: Main complaints are based on a suspicion that prime minister Marijanovic had had a chance to get an overview of possible offers from an earlier secret Serbian directorate competition with "open prices" in which some 17 companies took part. Some even believe that "the closed envelopes" were not that closed for a curious director Marijanovic; indeed he had a cheapest possible victory, by the skin of his teeth. The second complaint has a firmer basis, since Marijanovic is suspected of using gas obtained through "Progresgas-trading", that is unpaid gas bills as an advance payment for the wheat.

At the session at which the offers were made public, Milivoj Jonjev, the director of "Koprodukt" from Novi Sad demanded that the competition be annulled, as the majority of participants did not have an equal access to the information about the suspension of the sanctions against FR Yugoslavia. And the offer depended on the information, as the situation is quite different in the situation in which the access to the foreign sources of financing is possible. He stated that he was convinced that the wheat would be exported for $140 per ton, which is below the amount which could be secured for the benefit of the Serbian budget. Of course, Serbian reserves should be motivated to obtain the highest possible price.

One problem for our favorite, "Progresgas-trading", was, it seems, that the import of gas and fuel from Russia is based on open or camouflaged barter arrangements, and barter is the most convenient way to hide the real prices of the traded goods and the profits made. Politika's sources (11/22/95) claimed that the gas import hit a glitch when the Russian side refused to accept to barter gas for clothing and shoes but instead demanded foodstuffs, and not only wheat, but also meat, oil and sugar. It is clear to every trader that the problem here is not in the lack of the latter goods in Serbia, but the assumed prices of the goods in the barter arrangement. In seems that the owners of "Progressgas-trading" on both sides (Russian and Serbian) cannot agree, among themselves and with their states, what sort of profit should be made on the import/export of gas. "Progresgas-trading" is conveniently placed to make a profit both as an importer and an exporter and both deals are set up by the corresponding governments.

In the public there is quite a lot of confusion regarding the "world market price" for wheat. According to an expatriot who is among the leading wheat traders in one of the biggest Swiss firms, there isn't a single world market price for wheat. Depending on the quality of wheat, transport arrangements and the part of the world, the price ranges from $170-180 per ton and $280-300. The prices have significantly gone up since this summer because both European Union and the USA have abolished subsidies to their farmers and the world reserves of wheat are at the lowest level in the last 17 years.

Our wheat can probably fetch between $170-175 per ton ("break even" price), since those willing to pay more will probably choose French or other similar wheat because of its more even quality and better established and more reliable delivery technology.

All together, it is already noticeable that the Serbian directorate for reserves, which has so far only paid two thirds of the amount owed to the farmers for the wheat which had been bought this summer for 280 dinars per ton (which, last summer, corresponded to approximately $60 to $70 per ton) already has made a huge profit, in excess of 100 percent. Now it will divide a part of that profit with an exporter. Besides, if the gas is paid with wheat, based on the prices mentioned by experts, monthly import of 189 millons of cubic meters of gas would correspond to approximately 75,000 tons of wheat. "Progress" offer in theory means that the payment would cover the whole year of gas deliveries. But, the socialism has taught us that there is a lot of difference between the theory and practise.

By the way, the story of "Progress-trading" a company which has, with only 6 employees, reached the 9th position on the Ekonomska Politika list of the most successful Yugoslav companies has recently entered an interesting turn.

It's been heard that prime minister Marijanovic has contested the registration of "Progresgas-trading" as a private company. Although it is impossible to check the validity of that rumor, it is the fact that Ekonomska Politika failed to publish the list of "200 most successful private companies" after the author of the survey informed the editorial board that "there are certain uncertainties in connection with the data used in the survey." Those uncertainties could not be solved so that, on 11/27/95, Ekonomska Politika published the list while failing to name the top company, apparently "Progresgas-trading". The uncertainties arose from a fact that "Progressgas-trading" was registered as a private company, and that prime minister Marijanovic now, three years later, is of the opinion that "Progresgas-trading" is not a private company. The company's director, Toplica Nedeljkovic, stated that "Progresgas-trading" had been founded in 1992 as a "mixed russian-yugoslav company" and that it had been founded by "Progress" from Belgrade and the largest Russian company, "Gazprom"; consequently the investment and profits are equally divided between the founders.

"Private Internationale": the public still hasn't been informed about the nature of the alleged court mistake in the registration of "Progresgas-trading", probably because in that explanation, prime minister Marijanovic would have to explain how the monopoly on import of gas and oil to Yugoslavia was taken from "The Serbian Oil Industry", even before the sanctions had been introduced, and ended up in his hands. According to some rumors circulating through Belgrade three years ago, Marjanovic's main argument for allocation of the gas import monopoly to "Progresgas-trading" was that the Russian side insisted on dealing with a private company. Besides, it is questionable whether the Russian side is represented by a private company, or whether the controlling influence in "Gazprom" is a person in a position similar to that of Marjanovic.

Not only has "Progresgas-trading" snatched away profitable business from the largest state owned company in Serbia, it has also pushed aside an earlier consortium and won the contract for the gasification of eastern and southern Serbia. Toplica Nedeljkovic now claims that the Russian and Serbian sides have agreed to invest this Spring the whole profit (Russian part as well) made from the import of gas into construction of a southern extension of a main gas pipeline (Paracin-Pojate-Dimitrovgrad) which would also extend from Nish on one side towards Kladovo and Prahovo, on the other towards Leskovac and Vranje and on another one towards Kursumlija and Gnjilane (the cost of this project has been estimated at $250 million). Once this pipeline is completed, the total capacity of the Serbian pipeline will jump from the present 3.5 millions of cubic meters to 7.5 billions. Multiplied by 0.33 dinars, which is the present domestic consumption rate for gas, those cubic meters amount to DM 1 billion. Once that figure is compared with the present theoretical capacity of DM 400 million, it becomes obvious that the question of ownership of "Progresgas-trading" is not unimportant.

The problem here is not in the possible profit made by a private company. The problem is that a public official has a conflict between his own interests and that of the public.