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Serbia eyes wider trade deal with Russia-minister

BELGRADE (Reuters) - Serbia will try to widen a free trade deal with Russia in order to make its only car maker Zastava more attractive to potential buyers, the outgoing economy minister said on Thursday.

In 2000, Serbia and Russia signed a free trade agreement which allows Serbia to export some goods to Russia without tariffs. Several European Union countries have set up production units in Serbia to take advantage of the tariff free status.

“We shall try to expand the trade agreement with Russia to include more products such as cars,” Mladjan Dinkic said at a meeting with a delegation representing foreign investors.

“It will enable us to attract more investors for Zastava and make Kragujevac a regional centre for the automotive industry.”

Russia has been Serbia’s main ally in its diplomatic struggle to reverse the February 17 declaration of independence by Albanian-majority Kosovo. Moscow and Belgrade have also signed an energy deal as a sign of closer ties.

The tender for Zastava will be called in April.

Zastava, maker of the iconic Yugo hatchback, has been recovering after being damaged during the 1999 NATO bombing campaign to drive Serb forces out of Kosovo.

Last year it clinched deals with Italy’s Fiat to assemble and sell Punto cars for the Balkan and Russian markets and with General Motors for the production of Opel Astras.

Local media reported that several foreign firms were interested in the plant, including Volkswagen, as well as Chinese and Indian car makers.

Serbia has attracted $13.5 billion in foreign investment since the fall of late autocrat Slobodan Milosevic in 2000 ended a decade of war and isolation.

But the country’s economy remains hostage to turbulent domestic politics that has kept investors on hold.

The 10-month-old government collapsed last month in the wake of Kosovo’s secession. A May election is shaping up as a vote on whether the nation should pursue European Union membership despite the EU’s backing for Kosovo.

Dinkic said his outgoing government would also push for free trade deals with Belarus and Ukraine.

“It will make Serbia more attractive for foreign investors,” he said.

Editing by Ellie Tzortzi and Janet Lawrence