Mostar Aluminum and TLM Will Not Survive Without Regional Agreements

Armenia is a beautiful country. Its capital Yerevan is beautiful as well. But one suburban area presents the most horrifying industrial image I have ever seen in my life.

One can drive for kilometers and see the same image of abandoned factory complexes on both sides of the road: halls without glass in the windows, overgrown railway tracks, and endless kilometers of pipes that rust has eaten away to the point of unrecognizability over twenty years.
During the Soviet Union, this was a place where the chemical industry developed. When, in the early 90s, Armenia became the first country of the former USSR to separate from Moscow, the supply of gas, the main driving fuel, ceased. The internal market also collapsed. Within a few weeks, the chemical complex that spanned an area as large as several hundred football fields stopped producing. The first president of independent Armenia ‘took care’ to sell off the machines for a pittance that could be drowned in some neighboring country, primarily Iran.
Today, in other parts of Armenia, one can see what happens when production chains built over decades are severed.

The Caucasus in the Balkans This image from the Caucasus emerged after dramatic announcements that Mostar Aluminum would cease production due to accumulated losses, and consequently, half of Šibenik would be left without jobs after relatively cheap raw materials stop arriving from Mostar to Šibenik’s TLM and all associated companies. This would be an example of what happens when production chains of a once unified internal market are severed.
After a meeting in Zagreb, reassuring news came from the government that ministers Vrdoljak and Linić, along with the leaders of Aluminum, TLM, and Croatian Electric Company, secured the continuation of production. Since there are no financial details, it should be assumed that HEP will continue to subsidize Mostar Aluminum with electricity prices. Of course, this is likely a temporary solution, and the problem will escalate again in some time.
It would be a great shame if the aluminum chain were to break. But patching things together from day to day is not a solution either. The aluminum chain should be an incentive for the Croatian government to finally adopt an industrial strategy, or criteria by which some jobs will be saved, and others will not. This is also a reason to start seeking a platform for defining industrial cooperation regionally. All countries of the former state are in economic distress, and it can be expected that they will compete with each other. But in times when the big players (USA and EU) begin to negotiate joint actions against challengers from BRICS countries, it certainly wouldn’t hurt to at least make a list of former production chains that have survived or could be reconstructed from the surviving parts of once large systems.
It is clear that Croatia has been an EU member since July 1, but this should not be an obstacle for wise leadership to play on multiple fronts simultaneously.

When will the industrial strategy come? The usual market fundamentalists will immediately say that states should not interfere, that there are examples like the cooperation of Split’s AD Plastik and the renewed Fiat car production in Kragujevac. Yes, in that case, the market was stronger than other forces. But there are also weaker chains that need state industrial policy and regional policy.
The mentioned aluminum chain is also in trouble due to the relationship between Sarajevo and Mostar, where the Federation’s Electric Company is not interested in helping production in Mostar. There is a lot of politics involved, but in the overall package of strategic economic cooperation between two (or more) countries, a situation that would be mutually beneficial could probably be achieved. We are competitors to each other, but it would be wise to discover where and how we can become partners. For example, two or three hydroelectric plants from these two countries could be grouped into a consortium with the aluminum complex and share benefits. Aluminum primarily contains electricity costs and is subsidized in some way everywhere.
When it comes to Croatian industrial policy, and the question of TLM’s survival certainly falls under it, it would be time for the government to finally come out with the promised industrial development strategy. In doing so, it should not shy away from state interventionism. Not the ‘hard’ kind that critics always refer to, but rather the ‘soft’ variants in which the most developed countries have excelled. Starting with the USA. Of course, this implies a state apparatus that would know how to lead this sophisticated process.