The Serbian-Croatian Tobacco War

AIM Zagreb, June 17, 2001

Two months ago no one in Croatia had even heard of Stanko "Cane" Subotic. That changed after a series of articles in the Nacional weekly. His picture was constantly in the newspapers. Today, Cane is as famous as Vjeko Slisko, Nikica Jelavic or Zlatko Bagaric used to be. The only difference is his title, which has more of a "federal" smack to it. Slisko and Bagaric were known as European-oriented Croatian mobsters, while Cane has been labeled "the ringleader of a Balkan mafia organization," operating in the former Yugoslavia...

The story started when the Nacional weekly, possibly by accident, uncovered how the formerly completely anonymous Stanko "Cane" Subotic, allegedly the ringleader of a Balkan mafia organization, had been granted Croatian citizenship. Ljubo "Rojs" Dzesic, Tudjman's henchman from Herzegovina, an ultranationalist and owner of a construction firm that made a pretty penny in the war, vouched for Cane with the the interior ministry, helping him with his citizenship application. The new interior minister, Sime Lucin, confirmed that the Croatian interior ministry had made Cane a Croatian citizen, though, he could not say how. Namely, Cane was one of 243 persons granted Croatian citizenship during the war, most of whom had criminal records. A significant number of Serbs and Montenegrins were among them. As the scandal gained momentum -- it was on Nacional's front page for a week -- it became clearer that this was not by accident.

The Cane story proved not to be just another story about mobsters, but about a smuggling chain linking the highest officials of certain states (Montenegro, Croatia, Serbia, Bosnia and Hertzegovina, the former Hertzeg Bosnia), through cigarette manufacturers, with minor smugglers selling packs of Malboro or Rovinj Ronhill on the street. In short, it was the same story as with oil smuggling during the war, only now it involved cigarettes. Billions of dollars changed hands, many got rich over night, others lost their heads just as easily... Subotic set up his entire "business" with the help of Milo Djukanovic, the Montenegrin president, Jovica Stanisic, the chief of the Serbian secret police, and Milorad Vucelic, general manager of Belgrade state TV. Subotic, Nacional claims, spent the war years finding suppliers and a market for smuggled cigarettes, while Milo Djukanovic secured smuggling convoys, Stanisic took care of customs, and Vucelic gathered information on the plans and activities of the opposing clan headed by Marko Milosevic, former Yugoslav president Slobodan Milosevic's son.

When the Milosevic faction decided to elbow the competition out, Stanisic was dismissed and an arrest warrant was issued for Subotic. Vucelic narrowly avoided death in a car bombing. The story continued to unfold on the level of politics: the pro-independence faction in Montenegro gained momentum -- which Djukanovic used to create his own police and customs service. Subotic was issued a Croatian passport, through his Croatian connections, Ljubo "Rojs" Dzesic. Ivan Penic signed Stanko Subotic's citizenship papers, briefly explaining he was acting on a recommendation from Rojs. Had he said more, he would have probably revealed more details of the structure of Cane's network of associates in Croatia. Given that, according to Nacional, Subotic paid a total DM80,000 for each passport, it is certain that he had many connections in high places. It is no coincidence that Croatian cigarettes account for a fair share of the cigarettes smuggled into Serbia and Montenegro.

Next, Srecko Kestner, Stanko Subotic's main European partner, was interviewed by Nacional. He elaborated on his business dealings with Cane, revealing that the smuggling operations were amply assisted by the Montenegrin, Serbian and Macedonian authorities. However, he conditioned the publication of the interview on the paper not printing the names of the Croatian players. He said every cog in the mechanism, from the minor dealers to Djukanovic and Djindjic, had their share in every single pack of cigarettes sold on the black market.

Blagota "Bajo" Sekulic was killed immediately after the publication of the Nacional series. He was one of Cane's key associates. Sekulic reportedly knew too much about the smuggling operations, in which some key Yugoslav figures were involved. The media estimate that Cane is "worth" some US$500 million; Milo Djukanovic, US$130 million. The Serbian premier, Zoran Djindjic, is said to have used Cane's logistics and money. Those who knew Sekulic say he was unstable and that he probably would have talked, which was why he was eliminated. After the publication of the Nacional article, the Montenegrin foreign minister visited Zagreb, allegedly to ask Mesic to stop the weekly from publishing any more articles.

The Cane scandal, thus, reached international proportions. After the publication of the articles, Milo Djukanovic said he would sue the weekly, while Zoran Djindjic denied having any business connections to Subotic, and banned the sale of Nacional in Serbia. Djindjic, however, allegedly changed his opinion when the director of Swiss BAT, Eddy Walpen, publicly claimed that Subotic was representing the Serbian government in an arrangement for the construction of a BAT factory in Serbia. Djindjic said there would be no construction of tobacco plants in Serbia, and acknowledged using Subotic's private jet for official visits, allegedly, to cut budget expenditure. After the Nacional articles, BAT abandoned its plans to build a tobacco plant near Kragujevac, worth more than DM150 million.

The tobacco war resumed. Immediately after BAT abandoned the construction of its plant in Serbia, the Rovinj tobacco plant, (TDR) possibly the most profitable and strongest factory in Croatia, which made a record DM90 million last year, joined in. Companies in the TDR group had DM1,200 billion in turnover last year. Their stock prices jumped thrice over the last three years. TDR general manager Ante Vlahovic told a special press conference that the factory would have to expand, despite good earnings, or it would be euthanized. Vlahovic explained that the Rovinj tobacco plant intended to become a "regional player." His arguments were pretty solid: the plant was selling about 80 billion cigarettes in the region (the former Yugoslavia) in a market uncontrolled by the multinational tobacco giants, therefore, it was the only market where the company could expand. TDR's goals were to sell 20 billion cigarettes: current sales were about 12 billion. TDR would be building a factory in Novi Sad. Vlahovic said TDR currently controlled over 12 percent of the market, adding that the quality of TDR's products had been recognized in Serbia.

It is difficult to say whether the Nacional weekly's intentions were to rid TDR of its competition. Undoubtedly, the articles were of exceptional benefit to TDR. After eliminating BAT, a key competitor, from the Croatian market, by disallowing it to enter Zadar, TDR has practically accomplished the same thing in Serbia. Some analysts are saying that the Nacional articles were the product of Nacional's editor's friendship with Ratko Knezevic, a Serbian-Montenegrin tobacco magnate living in London, a serious rival of Cane's. Possible the most interesting aspect of the whole thing is that Nacional's article failed to uncover a single player on the Croatian side with the exception of Ljubo "Rojs" Dzesic, who was exposed as an associate of the Serbian-Montenegrin mafia, however, it is fairly certain that he was only a mediator. The smuggling of cigarettes from Rovinj into Serbia, although of a smaller volume than that of the West, was, nonetheless, one of the business deals of the decade. It could not have been carried out without support from the Croatian top. The fact that these players were not named is unclear and has raised suspicions.

Whatever the case, after TDR begins building its factory in Novi Sad, cigarette smuggling in the region will subside greatly, and the market will, as in other places, gradually become normal. The sanctions-era mobsters will probably disappear, one by one, in contract killings, as unwanted witnesses. An association of tobacco, oil and pepper and eggplant salad producers is emerging in the region of the former Yugoslavia. Interestingly, the EU began as an association of coal and steel producers. There weren't so many assassinations, but that can be attributed to regional differences.

Boris Raseta

(AIM)