BUDVA, Montenegro: The global financial crisis has buffeted the balance sheets of Russia's legion of billionaires. But suitcases of cash, and a flotilla of Russian-owned luxury yachts, keep arriving in this idyllic town on the Adriatic, helping to earn Montenegro the nickname Moscow-on-the-Sea.
Among the biggest investors is the Russian developer Vyentseslav Leibman, a young millionaire who is pressing ahead with investments of 240 million, or $313 million, including plans for a 27-floor modernist hotel, luxury seaside villas, docks for the pleasure boats of the Russian super-rich and a water park for their children.
The investment might seem daring given the way the economic downturn has hit several of his fellow wealthy Russians. But Leibman, a Muscovite who is managing partner at Mirax Group, the company owned by the Russian billionaire developer Sergei Polonsky, insists that he can barely keep up with demand.
He said more than half of the sprawling condominiums in Mirax's new complex - which sell for 8,000 a square foot and come with outdoor marble Jacuzzis - had been sold to executives from the likes of Gazprom, Lukoil and the banking giant VTB. They paid, he said, upfront and in cash.
When people invest big money during a global financial crisis, it might seem absurd, said Leibman, who recently helped bring Madonna to Budva. "But the money keeps coming, and hopefully the global financial crisis will help sober up the cost of land here, which is now more expensive than Monaco."
Thanks in large part to Russian investment, Montenegro has been getting more foreign investment per capita than any other country on the Continent. In recent years, Russian investors have gobbled up land, a fashionable alternative to the south of France and the Turkish coast for moneyed Russians. Russians - including the heavily leveraged Russian billionaire Oleg Deripaska - have also invested hugely in the country's industrial sector.
In neighboring Serbia, the Russian state energy monopoly Gazprom recently bought a majority stake in the national energy company, Petroleum Industry of Serbia, for 400 million and agreed to invest a further 500 million by 2012. The deal will give Gazprom a dominant position in Serbia's energy market while transforming Serbia into a gateway for the transport of Russian gas into Western Europe.
As governments across the western Balkans have turned toward the United States and the European Union - and actively seek EU and NATO membership - the influx of Russian capital is seen by some in Brussels and Washington as a retaliatory move by Moscow to assert influence in a formerly communist region with which it has long had close ties.
But Dmitry Peskov, spokesman for Prime Minister Vladimir Putin of Russia, dismissed the notion as "utter nonsense." When British people 30 years ago were investing in Spanish coastal areas, it would never come into anyone's mind to speak about "enhancing political influence," he said.
When tens or hundreds of thousands of British or American people are investing in the Gulf countries, this is not political pressure, he said. "But every time, when it comes to Russia or Russians, it is immediately treated as flexing political muscle."
Nevertheless, alarm at Russian investment is such that General Blagoje Grahovac, a senior adviser to the speaker of Montenegro's Parliament, warned in a recent interview with Nedeljni Telegraf, a Serbian newspaper, that the United States, the European Union and NATO were being "outmaneuvered" in the western Balkans. "Whoever holds the upper hand economically will also do so politically," he said.
The European Parliament late last year commissioned a study of Russian investment; among EU concerns is a burgeoning property market that provides an ideal front for illegal transactions. The European Commission has repeatedly warned of money laundering in Montenegro.
Russians can be seen and heard everywhere - on the beaches, in clubs, in upmarket restaurants and in a recently opened Russian-language elementary school. Until recently, a billboard at the airport in Podgorica, the Montenegrin capital, greeted visitors in Russian: "Come where they like you!"
Lazar Radenovic, Budva's young deputy mayor, said Russians had started to invest about eight years ago when real estate prices were severely depressed after the Balkan wars of the 1990s. Russian investment had since grown to more than 10 billion, he said. In Budva, he noted, the Russian influx had created a new class of millionaires - 500 at last count - who he said had improved the town's tax base and development.
Leibman said Russians were attracted to the Balkans and to Montenegro in particular by a cultural connection stretching back to the 18th century.
Some are uncomfortable with the perception of Russian economic colonization. Zarko Radulovic, co-owner of Hotel Splendid - luxury penthouse suites, swimming pools and boutiques backed by a Russian investment fund - insisted that the influence was exaggerated.
"The perception that the Russians have bought everything is wrong," he said. "Only 1 percent of Montenegro is owned by foreigners."
But the European Parliament report countered that the scale of Russian investment was obfuscated in official statistics since many Russians invested through third countries or by teaming up with Montenegrins.
Radulovic said most businesspeople support Montenegro's entry into the EU, since being outside the bloc hampers business. When he recently decided to invest 9 million in new air conditioning for the hotel kitchen to make it compatible with EU regulations, he waited two days for a visa to travel to Belgium to buy it - an annoyance that "makes me want to buy Russian technology instead."
Many here think that Russian investment will, paradoxically, help to westernize Balkan countries by aiding economic development, thereby accelerating readiness to join the EU and NATO.
Branimir Gvozdenovic, Montenegro's minister for economic development and a close ally of Prime Minister Milo Djukanovic of Montenegro, said Russia was the second biggest foreign investor after Hungary, while Russians accounted for 12 percent of tourists last year.
"We welcome investments from more than 80 countries, so why not Russia?"
Yet there does appear to be a political dimension. Russia's emergency situations minister, Sergei Shoigu, has warned that relations between Russia and Montenegro could be damaged if Montenegro pursues NATO membership.
Two years ago, when Putin received Djukanovic at his residence in Sochi, the Russian Black Sea resort, Putin praised Montenegro for facilitating business with Russia and urged closer ties. More recently, in July, Putin moved to facilitate visa-free travel between the two countries.
Meanwhile, in Serbia, where the pro-Western government of President Boris Tadic has been pressing for EU membership, some critics argue that Russia is using pipeline politics to keep Belgrade in Russia's sphere of influence.
In a recently announced energy deal, Gazprom has agreed to make Serbia a transit country for its South Stream pipeline, a 10 billion pipeline Gazprom is building in cooperation ENI of Italy, that will stretch 900 kilometers, or 560 miles, undersea from Russia to Europe. The project - which Gazprom says will forge ahead, despite the global financial crisis - is a direct challenge to Nabucco, a pipeline championed by the United States and the EU to bring natural gas to Europe via Central Asia, offsetting energy dependence on Russia.
Danica Popovic, chief economist at the Center for Liberal Democratic Studies in Belgrade, a think tank, argued that economic relations shifted fundamentally in Russia's favor after Moscow repeatedly invoked its veto in the United Nations Security Council to prevent Kosovo, which declared independence from Serbia in February, from gaining international legitimacy.
"By Moscow controlling our energy sector, we can become vassals of Russia just like South Ossetia and Abkhazia in Georgia," she said, noting that attitudes toward the EU were hardening in Serbia, even among members of the pro-Western government increasingly frustrated with EU conditions for membership.
Milutin Nikolic, director of Citadel, a mergers-and-acquisitions firm based in Belgrade that has advised on the biggest Russian deals in Serbia - including acquisitions by Lukoil, the Bank of Moscow and Deripaska - said he did not believe the recent influx of Russian investments reflected a coordinated Kremlin strategy. Indeed, the region has long sought to forge a path between East and West, particularly in the days of the Yugoslav leader Tito.
If Moscow had influence, Nikolic contended, it was because Serbs were still smarting over recent history, including the NATO bombing of Serbia in 1999 and the West's backing of Kosovo's independence.
"Russia doesn't need to economically colonize Serbia," he said, "because Moscow already has serious political influence here."