On January 25, 2024, Natasa Vuksic attended a meeting concerning the Chinese-led, Chinese-financed construction of a new 350 MW unit of the Kostolac coal-fired power plant on the Danube River east of the Serbian capital, Belgrade.
The China Machinery Engineering Corporation, CMEC, began building the unit, B3, in 2017, as part of a burgeoning business relationship between China and Aleksandar Vucic’s Serbia.
President Vucic was in a hurry.
“The president of this country said everything must be finished by March 31st,” Vuksic told representatives of CMEC, state-owned power company EPS, and the project supervisors from state-owned Energoprojekt, according to minutes obtained by BIRN.
“I’m not interested in excuses,” she said. “In my job, I have to achieve the results that the president has set.”
It is unclear, however, what exactly Vuksic’s job is.
According to internal correspondence and documents reviewed by BIRN, Vuksic has been cracking the whip over the B3 power unit at Kostolac since January 2023, with the state energy company, the contractors and technical supervisors all effectively reporting to her.
Yet the former auditor with Deloitte, KPMG and Ernst & Young holds no official position in government. She works in Vucic’s cabinet, reportedly as part of a ‘Delivery Unit’ that Vucic set up a decade ago when he was prime minister on the advice of British former Prime Minister Tony Blair, though even there her formal position is unclear.
Under the constitution, the president has no jurisdiction whatsoever over infrastructure projects.
In the haste, corners appear to have been cut.
Emails seen by BIRN show that Vuksic demanded that experts in charge of supervising the construction sign off on the completion of certain parts without reflecting in the final documents all the changes that were made to the original plan in the process of construction. When the supervisors resisted, Vuksic branded them “sticklers”. One of the supervisors warned his colleagues: “They will keep pushing”.
Sources involved in the project told BIRN that Vuksic also initiated a change to legislation – Article 19 of a government regulation on emissions monitoring – to speed up the project, while CMEC handed over the plant with a so-called ‘punch list’ of unfinished work that ran to 420 items, an amount one expert involved said was “too much” and raised questions about the quality of work.
At one point, on or prior to June 21, 2023, agents of the Serbian intelligence service, BIA, were brought in amid suspicions of sabotage and “external pressures”.
“Whoever is not a friend of the project is not a friend of ours; we should all know this,” Vuksic told the meeting attended by BIA agents, the minutes of which BIRN also obtained.
Vuksic was not just involved in Kostolac, however. In January, Nova Ekonomija reported that contractors on the Chinese-led upgrade of the Belgrade-Budapest railway line had also reported to her.
On November 1, an outdoor canopy at the renovated railway station in Novi Sad, on the route to Budapest, collapsed, killing 15 people and triggering an outpouring of grief and anger that has snowballed into the most serious challenge yet to Vucic’s 13-year hold on power.
The deaths in Novi Sad were seized on by many Serbs as evidence of the corruption, mismanagement and nepotism that they say has come to characterise government under the ruling Serbian Progressive Party, SNS. As president, Vucic should have only a ceremonial role, with real power vested in the government. Instead, power has been concentrated in the president’s office to such a degree that some legal experts say Serbia can no longer be considered a democracy.
Vuksic’s powers appear indicative of the way Serbia’s constitution has been upended and will only fuel widespread concern since the Novi Sad tragedy over the safety of big public infrastructure works.
“The knowledge that some of the president’s associates are directly involved in activities related to the construction or reconstruction of railways, as well as other projects, leads to the conclusion that a ‘parallel government’ has been created and which is acting unconstitutionally and violating numerous legal provisions,” said Irena Pejic, professor of Constitutional Law at the Faculty of Law in the southern Serbian city of Nis.
BIRN contacted Vuksic for comment about all the issues raised in this story, but she hung up the phone without giving any response. President Vucic’s office did not respond to requests for comment.
Presidential delivery unit
According to Nova Ekonomija, Vuksic is part of a ‘Delivery Unit’, a core group of advisers that Vucic first set up when he was prime minister [2014-2017] on advice he received from Blair in 2015 as part of the British former prime minister’s political consultancy work.
Blair famously created his own Delivery Unit after the British Labour Party won a second term in government in 2001, in an effort to speed up delivery of the party’s promised public sector reform agenda. That reform fell firmly within the remit of Blair’s government, just as Vucic at the time led Serbia’s government in pursuing the reforms required of the country, for example, to draw closer to the European Union.
The president’s auditor
Natasa Vuksic has no formal training in construction or engineering but claimed in a meeting, according to a source, she had inherited her father’s “engineering genes”.
Her formal career has been centred on finance and auditing, including time spent at several of the biggest international auditing firms, first Deloitte, then KPMG and later Ernst & Young. It was with the latter that she took part in the concession process that later ended in management of Serbia’s Nikola Tesla international airport being handed to French company Vinci in 2018.
Sources say it was precisely her performance during the ongoing airport concession that saw Vucic bring her into the Delivery Unit by 2017.
Vuksic’s official email address ends ‘gov.rs’, yet her contact address in the Chamber of Authorised Auditors is listed as Andricev Venac 1, the address of the presidency.
In 2017, Vucic moved to the post of president, which has only ceremonial power under the constitution. Yet the Delivery Unit still appears to report to him, and he retained all the levers of power he previously exercised as premier.
The names of those working inside the Delivery Unit have never been made public. It is also unclear how they are paid.
Like other populists, Vucic has made major infrastructure projects the cornerstone of his rule, perceived evidence of Serbia’s development and dynamism even as it backslides on fundamental freedoms. He has turned heavily to China, both for the manpower and the financing.
Work on the B3 unit at Kostolac, however, had been dogged by delays.
At the end of 2022, Vuksic appeared on the project, occasionally joined by Vucic’s chief of staff, Ivica Kojic.
“We were asking ourselves who these people were, seeking clarification,” said a person involved in the project who spoke on condition of anonymity. “They came in and started pushing, saying everything must be sped up, that it was the position of the state and president requires it – you have to do it.”
“That’s when the real arm-twisting started, the cracking of the whip. People had a hard time handling it; there was huge pressure applied.”
This story is based on interviews, internal email correspondence, the minutes of meetings and messages sent on a WhatsApp group created by Vuksic in February 2023 under the name ‘One Goal, One Team’.
They all point to Vuksic as the person in charge, with representatives of CMEC and state-owned EPS as the investor regularly reporting to her with progress reports, employee lists, equipment and visa issues and logistical snafus.
At one point, Vuksic referred to herself as “a person of very high seniority” and “a coordinator with decision-making authority”.
“Only the deadlines set by our president are relevant to us,” Vuksic is cited as saying in the minutes of a meeting held on March 7, 2023.
Vuksic kept her finger on the pulse via the ‘One Goal, One Team’ WhatsApp group, where she posted angry messages. In one message, written in English, Vuksic accused CMEC of “unprofessional behaviour” and signed off with over 100 question marks.
Kojic also attended many of the meetings and was included in the email correspondence between the investor, contractors and supervisors. As Vucic’s chief of staff, Kojic has no formal jurisdiction over infrastructure projects.
The interference did not sit well with some of those involved, including the Interior Ministry, which has to sign off on whether a facility is technically safe and fit for use.
“We have never worked this way when it comes to technical acceptance of a facility,” a representative of the Interior Ministry is cited as saying in the minutes of a meeting on February 28 last year. “Until now, we conducted inspections based on reports from the supervisors and the commission, and then we go to the site and issue our report. Here, the chain has definitely been disrupted.”
One source alleged Vuksic even initiated a change to “legal regulations”, namely Article 19 of the government’s ‘regulation on measuring air pollutant emissions from stationary pollution sources.’
According to the Official Gazette, Article 19 of the regulation was changed by the government in February 2024, removing reference to any time requirements.
‘They will keep pushing’
Vuksic did not stop there.
At one point, she demanded that experts from Energoprojekt, the state-run company supervising the project, sign off on the Project of the Constructed Object, or PIO, without including changes that were made during the process of construction, deviating from the original design. This is vital for the future use and maintenance of any building or facility.
In communication between Energoprojekt supervisors, representatives of EPS and the contractors, one of the supervisors pushed back, saying they should take the “firm stance” that everything must go into the PIO.
“If we give in on one document, I think they will keep pushing for every document, and the line between small and large changes will become blurred,” the expert said.
Another wrote in an email: “Unfortunately, this isn’t about the issue with the main contractor [CMEC] but about the presidency… The state wants us to sign… but I insist that this is not possible, and that almost every change must be recorded in the PIO.”
Vuksic dismissed those resisting as “sticklers”.
In another episode involving the supervisors, Vuksic wrote on WhatsApp: “We’re in the realm of interpretation. Do you think everything must be 100 percent done to sign the statement? As if the punch list doesn’t exist.”
A ‘punch list’, sometimes known as a ‘snag list’, is a list of remaining work items that must be carried out before construction can be considered complete. On the Kostolac B3 project, the list ballooned to 420 items.
“These so-called ‘punch lists’ are a legitimate practice,” one expert said. “They are used in many projects, as these corrections are not considered crucial. However, they usually contain 10 to 20 items. But 420 items – that’s too much.”
Experts BIRN spoke to said the project had been rushed and that the equipment installed had not been properly checked. They questioned whether all the outstanding issues would ever be addressed now that the facility had been handed over to the state.
The supervisors eventually relented “after weeks of pressure”, a source said, though only on condition that the document confirming completion of the project include the punch list of what had not actually been finished or what needed to be corrected.
“This way, the interests of the profession and the wellbeing of the project have been protected,” the source said, on condition of anonymity.
Kostolac B3 went online in December last year.
Nemanja Nenadic, programme director of Transparency Serbia, said there were indications that Vuksic could have “overstepped the limits set by the Criminal Code”.
“It’s one thing when someone, even if unauthorised, rushes the contractors, gives opinions, or helps establish contact with various institutions,” Nenadic told BIRN.
“However, demanding that companies carrying out the oversight act against the rules, as indicated by their communication, contains the key elements of the criminal offence of trading in influence, as per Article 366, Paragraph 3.”
According to this provision of the Criminal Code, anyone using their official or social position or actual or presumed influence to mediate the conduct of an official act that should not be carried out – or to not perform an official act that should be carried out – should be sentenced to between one and eight years in prison, if convicted.
Spy agency gets involved
The avatar of Vuksic’s WhatsApp group was a photo of Vucic with China’s ambassador to Serbia, Li Ming.
The content, however, was less than friendly.
Vuksic frequently referred to the performance of those involved in the project as “shameful”, littering her messages with capital letters, exclamation marks and long rows of question marks.
With frustration over the delays mounting, Serbia’s Security Information Agency, BIA, the main intelligence service, was called in.
The minutes of a meeting held on June 21, 2023, cite a BIA agent telling those present to report “any external pressures” to Vuksic, who would then inform the intelligence agency.
The agent said Vucic was “quite concerned” and would speak to Chinese President Xi Jinping.
“Relations between China and Serbia are at a high level, but we must point out – not everyone views this cooperation favourably, externally and internally.”
“We are the agency responsible for counterintelligence protection from harmful external and internal influences, so I suggest that everyone present, if you’re under pressure from any side, inform Natasa, and that information will come to us.”
One of those involved said the BIA intervention was “very unpleasant”.
“It caused significant damage to the project because she [Vuksic] was rushing everything outside of the so-called ‘timeline activities’ that had been defined.”
‘Violation of the constitution’
Kostolac B3 and the expansion of the Drmno coal mine cost roughly 700 million euros in total. Eight-five per cent of that was covered by a loan from China’s Exim Bank.
It is not known, however, what costs the delays incurred, nor whether CMEC faced any consequences as a result of those delays.
According to the Taking Over Certificate, TOC – certifying that the work has been completed – the punch list still runs to 420 items.
A source involved in the project said there had been difficulties in compelling CMEC to address these items since the state took over the plant. While the issues do not affect the operation of the plant, they can impact its quality, the source said.
Interestingly, the expert did cite one positive consequence of Vuksic’s involvement: she compelled Serbian subcontractors, typically close to the ruling party, to work more efficiently.
“These companies take jobs across Serbia and send five people to do the work of fifty,” the expert said. “The only good thing was that she made them work faster. Everything else was just chaos.”
He said CMEC reps had complained about subcontractors being imposed “from above, even if they were more expensive”.
Pejic, from the University of Nis, said the influence wielded by the president’s office marked a serious violation of Serbia’s constitution.
“Ultimately, the president’s actions outside of his constitutional powers represent grounds for the most serious unconstitutional act – ‘violation of the Constitution’ – for which the penalty is dismissal from office.
The Blair model
The Delivery Unit concept was introduced to Vucic by British former Prime Minister Tony Blair, who created his own unit following re-election in 2001 in order to implement the New Labour vision for the overhaul of the public sector.
Blair’s consultancy was hired in 2015 to advise the Serbian government, when Vucic was prime minister, raising eyebrows given Blair’s leading role in the 1999 NATO bombing of then rump Yugoslavia during the Kosovo war, when Vucic was Serbia’s feared, ultranationalist information minister.
Vucic stressed that neither Blair nor his consultancy were paid from Serbian state coffers. BIRN and The Guardian revealed that the cost was covered by the United Arab Emirates, with the involvement also of the United Nations Development Programme, UNDP.
In 2016, a tender was published on the UNDP website for assistance in the establishment of a ‘delivery unit’ in Serbia.
In a response for this story, the UNDP told BIRN it had provide administrative and HR services “for the engagement of experts during the formation of the delivery unit”. It declined to see how many people were hired or provide any names.
It did say, however, that the work of these “experts” was financed through contributions from the Serbian government to UNDP but noted that the UNDP had not signed up to any projects with the institution of the president.
“Hiding information about who is really involved in the decision-making process on behalf of state authorities and on what basis is bad enough, but a situation in which these people are paid by someone else is especially dangerous,” said Nemanja Nenadic, programme director at Transparency Serbia.
Legal experts at the time questioned the legality of hiring people for such a body outside of the civil service.
The Serbian daily Politika reported the unit consisted of five teams, totalling 15 people, reporting to Vucic’s cabinet and focussed on five priority areas: direct investment; the restructuring of public sector enterprises; reform of the public administration; infrastructure; and agriculture.
COMMENT
The text explains in detail and documents (using just one example – the construction of Block 3 of the Kostolac thermal power plant, for which a Chinese company was engaged), how the authorities of the Western Balkan countries, in the specific case of Serbia, not only do nothing when Chinese companies violate domestic legislation, but also participate in it themselves.
So far, we have repeatedly published texts documenting examples of violations of domestic and international legislation by Chinese companies present in the Western Balkan
countries. Representatives of non-governmental organizations and the media warn about the unacceptable practice of Chinese companies when it comes to respecting domestic and international legislation, but in the Western Balkan countries the authorities have generally not reacted adequately to prevent or sanction these violations.
This text focuses on an even more dangerous phenomenon, which is that the authorities violate the laws of their own country (even the constitution, as the highest legal act of a state). The fact that most of the contracts that Western Balkan governments have concluded with Chinese companies, whether as creditors or investors, are secret, raises suspicions that the governments have to break the laws of their own countries to fulfill the provisions of the signed contracts. This is, to say the least, an unacceptable practice.
