Three Roles of the Prime Minister

VREME failed in its prediction two weeks ago that Mirko Marjanovic, Prime Minister of Serbia and founder of Progresgas Trading, is the favorite at a government tender for the export of 400,000 tons of wheat from the goods reserves, an export deal to pay for the imports of gas and other fuels from Russia. It turned out that the greatest favorite is Mirko Marjanovic, director of the Proges foreign trade company in Belgrade.

Marjanovic, as Prime Minister, will decide on December 3 whether to accept his offer of 140 dollars a ton for the wheat payable in advance and another 500,000 tons at 160 dollars with 30% payable in advance or 165 dollars a ton payable after the export.

Note that the highest price, 200 dollars a ton, was offered by the Novi Sad company Nafta (Ilija Radunic is the main shareholder) but in the port of Bar with the payment made in fuel at debatable prices. Interestingly, Progres's offer is just slightly higher than others that reached up to 164 dollars a ton with delayed payments. The lowest price was offered by Profi Centar Panonija, 71 dollars a ton. Large state companies offered between 125 and 135 dollars. Most left in disgust, convinced that Marjanovic's Progres has already won since the republican directorate, which published the tender, asked for a 10 day option when the government is to make its final decision. The greatest dissatisfaction was among companies backed by foreign companies who said holding an option for more than 10 minutes is highly risky.

The main complaints are about doubts that Marjanovic had a good insight into a secret tender "with open prices", with 17 companies competing, and offers by his rivals. Some even believe that he managed to see the offers and beat them by just slightly higher offers. The second complaint is stronger; Marjanovic is suspected of planning to use gas, i.e. unpaid gas bills for advance payments.

At the opening of the bidding, Milivoj Jonjev, director general of Koprodukt Novi Sad, asked for an annulment since most companies did not have the same access to assessments whether the sanctions will fall and their payment offers depended on that. He said the wheat will be exported at 140 dollars a ton which is lower than prices that could be achieved. The republican reserves should have the motivation to achieve as high a price as possible.

The problem for Progresgas Trading seems to be the fact that the imports of fuels from Russia are always under open and hidden deals, i.e. trade offs that are ideal for hiding real prices and profits.

Politika sources (November 22) said gas imports were delayed because the Russians would not accept barter including shoes and clothing but wanted only food (wheat, oil, meat, sugar). Every trader knows that the main problem isn't that Serbia doesn't have enough of those goods; problems are the prices in the deal. It seems that Progresgas founders (Russian and Serbian) can't agree among themselves on the profits. The company was conveniently set up to show a profit in both imports and exports with state governments setting up deals.

The public is confused about the world price of wheat. That price actually does not exist because the price of various types of wheat ranges from 170 dollars a ton to 300 dollars based on transport to good sea ports. When river ports are included the prices are 10-15% lower. Prices have risen this summer since both the US and EU have abolished subventions for farmers and reserves are at their lowest level in 17 years.

Yugoslav wheat is a semi-hard type and one expert values it at 170-175 dollars a ton in Danube ports but buyers prefer French or similar wheat because of constant quality and more reliable deliveries.

The republican reserves directorate has only paid for two thirds of the wheat it bought from farmers at a price of 280 dinars a ton (in real terms 60-70 dollars this summer) and has already made a huge profit which it is now going to share with the exporter. If the Russian gas is paid for in wheat around 75,000 tons of wheat are enough for monthly imports of 186 million cubic meters of gas. Progres is offering a theoretic year of gas supplies.

The Progresgas story got another interesting twist recently.

First we heard rumors that Marjanovic was disputing that the company was privately owned. That rumor is impossible to verify but the fact is that Ekonomska Politika weekly did not publish its list of 200 best private companies on November 20 because author Miladin Kovacevic said some things were unclear. That was impossible to get around so the magazine published its list without the first placed company - Progresgas. The company seems to have been registered as private and now Marjanovic says it isn't. Director Toplica Nedeljkovic says the company was formed in 1992 as a mixed Russian-Yugoslav company by Progres Belgrade and Gasprom Russia with equal shares.

No one has said why the court registered the company as private because Marjanovic would have to explain why gas imports were taken away from Energogas Belgrade and NAP Novi Sad just prior to the sanctions. The rumor was that Marjanovic's main argument for the gas import monopoly was Russian insisting on one private company. The question now is whether the Russian company was privatized and whether we have a well placed man there. Progresgas took imports away from Serbia's largest state company and gas installations in southern and eastern Serbia. Nedeljkovic now says the Russians and Serbians have agreed to invest the profits into the construction of a gas pipeline from Paracin to Dimitrovgrad next spring which would expand later from Nis (a deal estimated at 250 million dollars). That would raise imports of Russian gas from the current 3.5 billion cubic meters to 7.5 billion. Multiply that by the current price of 0.33 dinars and you get a total of close to one billion DEM and the issue of whether Progresgas is private isn't so harmless.

Even if it is a mixed company the whole thing would warrant attention. Don't forget that the former Yugoslavia in its clash with the Cominform stressed that Stalin wanted to impose control over the Yugoslav economy through mixed companies. But if Progresgas is a private international company we have no need to fear that.

The problem isn't the fact that a private company has a profitable venture but how state officials are spread between public and private interests.