CROATIA'S DETERIORATING RELATIONSHIP WITH THE U.S.

C O N F I D E N T I A L ZAGREB 001296

SIPDIS


E.O. 12958: DECL: 06/06/2013
TAGS: PREL PGOV ECON PREF KAWC HR EVN NATO
SUBJECT: CROATIA'S DETERIORATING RELATIONSHIP WITH THE U.S.

REF: 02 ZAGREB 146

Classified By: AMBASSADOR LAWRENCE G. ROSSIN. REASONS 1.5
(B) AND (D)

Summary
--------------


1. (C) So far, 2003 has not been a good year for our
bilateral relationship with Croatia. On issue after issue,
whether Iraq, intellectual property rights, unblocking of
assets of the Former Yugoslavia, or now our proposed Article
98 agreement, the GOC not only has failed to deliver, but has
antagonized us in the process. The GOC's shortcomings --
lack of leadership, political infighting, bad PR, apathy and
arrogance -- are well known and have hampered Croatian reform
and progress on a host of issues. We are not alone in this
problem. Our European colleagues share our frustration with
the GOC's handling of refugee returns, cooperation with ICTY
and (lacking) judicial reform. The difference is that Prime
Minister Racan eventually responds to European concerns, but
not ours.


2. (C) We have begun to press senior GOC officials about the
deteriorating relationship. Most recently, the Ambassador
urged FM Picula to work to get our bilateral relationship
back on track. He told Picula that a good place to start
would be concluding an Article 98 agreement. Picula and the
others left us in a disappointing, if familiar, place that
boils down to: the GOC values the relationship but is
unwilling to take any particular risks for it. They trot out
by-now shopworn arguments that it is in our interest to cut
Croatia maximum slack because of the GOC's "unique
stabilizing role" in the region. We have discounted this
line and stressed that if the GOC puts the U.S. in second
place, we will reciprocate, and that will have consequences,
notably in U.S. support for Croatia's NATO aspirations.
While we see some signs that the GOC realizes it has a
problem, we see less indication it will change its recent
behavior. Racan has made EU accession the leitmotif of his
election campaign; even after that fear of ruffling EU
feathers will be a powerful disincentive to take risks for
us, and in any case Racan's domestic timidity and natural
risk aversion bode poorly for this relationship. End
Summary.

What a difference a year makes
--------------


3. (C) In our mid-term evaluation of the GOC's performance in
January 2002 (reftel),we warned that the GOC's poor
management, the lack of leadership at the top,
intra-coalition and intra-party fractiousness and underlying
lack of sympathy for international community concerns would
slow progress on the core issues of refugee returns,
compliance with ICTY obligations and economic reforms.
Nonetheless, we had registered important bilateral successes:
the GOC canceled dual-use sales to Iran and Libya, was
active to a degree in the Global War On Terrorism and had
helped several ways -- humanitarian assistance, arms for the
ANA and sending Military Police for ISAF -- in Afghanistan.


4. (C) In contrast, 2003 has seen a downturn in our bilateral
relationship. Variously due to an emergent EU tilt, timidity
over domestic "threats to stability" or sheer neglect of the
relationship, the GOC has mishandled or stiffed us on a range
of issues, including but not limited to:

-- IRAQ: Seeking to score domestic political points and curry
favor with Germany and France, the GOC rebuffed our quiet
overtures to join the coalition and then publicly exulted in
its "decisive" no.

-- IPR: The GOC failed to move the 1998 Croatian-U.S. MOU on
intellectual property to its parliament for ratification,
despite repeated high-level interventions and warnings that
inaction would result in Special 301 watch listing -- as it
did this spring.

-- SFRY ASSETS UNBLOCKING: Croatia tried, very obnoxiously,
to obstruct our unblocking of funds frozen in the U.S. under
Milosevic-era sanctions. It is the only country not to have
ratified the Agreement on Succession Issues for countries of
the SFRY.

-- GWOT SHORTFALLS: Despite constant reminders, including by
the G8, since 9/11 the GOC has signed or ratified none of its
outstanding terrorism conventions. It also failed to provide
information we sought on the movement of Iraqis through
Croatia.

-- PUBLIC INSULT: In April Deputy PM Granic, PM Racan's
right-hand man and the GOC point man on many issues of
special IC interest, publicly insulted the Ambassador and
other IC actors most engaged on war crimes matters in words
widely assessed here as "going too far." Racan, while saying

he disagreed, affirmed Granic's right to say what he wanted
publicly and took no corrective measures.


5. (C) We are not the only ones to feel the effects of
Croatian foreign policy incompetence. Granic did not only
attack the U.S. Ambassador in April for insisting on full
cooperation with ICTY: the British Ambassador, the Dutch
government and the last Spanish Ambassador were also
broadsided, and their governments were equally irritated. At
PM Racan's (admittedly insincere) invitation in autumn 2002,
all leading IC representatives here requested a meeting on
refugee return issues. Irritating everyone, Racan then
ignored the letter, never set up a meeting, conveyed that he
never would, and indicated he would not discuss returns
issues anymore with local Ambassadors. More generally,
European ambassadors tell us that the GOC communicates as
poorly with them as it does with us, with Ambassadorial
access to PM Racan virtually non-existent.


6. (C) There is, however, one major difference. The GOC may
not be very responsive to any outside advice or pressure, but
eventually it does bend to EU pressure. The most notable
instance was in early April when Racan overrode a court order
and had ICTY's indictment of General Bobetko delivered -- on
a deadline day set by Chief Prosecutor del Ponte, and after
the British specifically threatened not to ratify Croatia's
Stabilization and Association Agreement if the deadline were
missed. Racan, Picula and other top Croatian officials make
trip after trip to EU capitals to manage their EU relations
and aspirations. As some within the MFA have remarked, they
make no comparable effort with the USG. For example,
internal recommendations that a high Croatian official visit
Washington to discuss the Article 98 issue have not been
implemented.

Can this be turned around?
--------------


7. (C) In a series of discussions over the past few weeks
with senior GOC officials including Croatian Ambassador to
the U.S. Grdesic, Deputy Foreign Minister Simonovic and
Presidential Foreign Policy Advisor Jakic and a frank
one-on-one with Picula on May 29, the Ambassador and DCM have
pressed the GOC to act to reverse this downward trend. They
stressed that the problem ran deeper that just the GOC's
failure to deliver on issues of concern to the United States,
though that was serious. The GOC was failing to tend to the
relationship. Many problem areas had been due to sheer GOC
neglect and apparent indifference. Even quiet diplomacy is
impossible, they noted, since nearly every one of our
diplomatic overtures is leaked, or as often briefed, to the
press. These next-day stories too often include claims by
GOC officials of U.S. "pressure." They feed press
controversy that needlessly limits the GOC's scope to find
common ground with us.


8. (C) The Ambassador and DCM warned that it is increasingly
apparent to us that the GOC has taken a strategic decision to
put its relationship with the EU, its domestic sensitivities
or indeed any competing factor we could identify ahead of the
United States, and even on occasion to pit us against them.
Such an approach would have, indeed already had had serious
consequences in Washington. The Ambassador told Picula that
it was time for Zagreb to demonstrate its interest in and
commitment to our relationship by coming down our way on some
tough issue important to the U.S. Article 98 negotiations
were a good place to start, but this was not about Article 98
alone.

You are right, but...
--------------


9. (C) Picula was at pains to stress the importance the GOC
attaches to its relations with the United States, but
acknowledged that over the past year the GOC had attended
more to its EU interests. The drift in GOC-U.S. ties, he
explained, was more a matter of circumstance than intent --
the GOC is committed to maintaining excellent relations with
both the EU and the United States. He rationalized that
momentum in the U.S.-Croatia bilateral relationship stalled
when the GOC was criticized at home for "failing" to win an
invitation to join NATO at the Prague Ministerial in November

2002. After that, the GOC decided to intensify its EU
membership drive. This and the demands of managing its
oft-stormy relationship with ICTY have been the GOC's foreign
policy emphases this year, but no slight was intended.


10. (C) The GOC, Picula acknowledged, needs to be more active
and positive in managing its relationship with the United
States. That said, Picula reiterated what we have heard
before: the GOC values U.S. relations but cannot conclude an
Article 98 agreement now. Stepped-up EU pressure on Croatia
-- including a very blunt letter from Patten and Papandreou
sent in late May -- and domestic linkage between the ICC and
ICTY make an agreement politically impossible for the GOC.

His argument was the same as he, Racan and others have used
for some time to solicit U.S. understanding of the "delicate"
Croatian position. It is a fill-in-the-blank exercise.
Signing an Article 98 Agreement (or joining the Iraq
coalition, or fulfilling ICTY obligations in the Bobetko
case) would damage this reformist GOC's political prospects;
that would create disorder in Croatia; that would throw
Croatia's process of democratization off course; that would
bring back the rightwing HDZ, end Croatia's contributions to
regional security and thereby damage U.S. interests.
Therefore, it is in the U.S. interest, at least as much as
Croatia's, that Croatia obtain a National Interest Waiver
from ASPA, that we not press for ICTY cooperation, that we
"understand" its vocal rejection of the Iraq Coalition, or
(fill in the blank).


11. (C) We have cautioned our interlocutors that the GOC will
not find much "understanding" in Washington for these
arguments. From our vantage point, it seemed that the GOC
was over-dramatizing the difficulty in negotiating an Article
98 agreement, whether from an EU or domestic opinion
perspective, and it was doing nothing to try to guide public
perceptions, work with us and demonstrate good intentions.
There had been too many such evolutions. Croatia could not
presume that its relations with the U.S. would stay good if
it did nothing to sustain them. If, as appeared to be the
case, Croatia was relegating the U.S. to the second echelon
in its foreign relations, it could be sure that Washington
would do the same. This would have consequences. As one
example: a year ago, the USG had championed Croatia's entry
into NATO's Membership Action Plan. The GOC knew that other
Allies had been skeptical but we had prevailed, as we can in
NATO when we use chips. Who could imagine that Washington
would get out front pushing Croatia's NATO aspirations again?
Indeed, that Zagreb would fail to husband its U.S. relations
knowing that its support at NATO HQ is thin raised questions
about how seriously the GOC even took its NATO bid.

Comment: Prospects Not Good
--------------


12. (C) The GOC's disappointing handling of our request for
an Article 98 Agreement has followed familiar patterns.
There is careless incompetence: the GOC ignores issues until
the 11th hour, shuns quiet diplomacy, then boxes itself in by
needless media spin so that it reaching agreement is much
more difficult for it, even if it wanted to try. There is
political cowardice: instead of focusing on how to frame and
sell hard issues to Croatian voters, the GOC preemptively
capitulates. There is arrogance: the GOC really believes
that it is indispensable to stability in the region, even
though rapid changes in Serbia and Montenegro, slow but
incomplete reform within the opposition HDZ and other
developments render this claim increasingly overblown. That
arrogance leads the GOC to take for granted the substantial
financial and political assistance we have provided since the
Racan government came to power in 2000: roughly $175 million
in SEED and military assistance and strong backing for its
NATO and EU membership drives.


13. (C) We will keep pressing the GOC to understand that
U.S. attention and support is not Croatia's birthright, and
that there must be more mutual benefit in the relationship.
We've seen some small signs that the message is registering
-- media commentary is beginning to watch this seriously,
there is some unease in marginal elements of the governing
coalition and a few second-echelon ministers have expressed
personal concern and interest in working for improvements.
We have not seen such concern or interest at the level where
it counts, however, and we are not sanguine that PM Racan, in
whose hands this responsibility rests, will do anything to
turn this trend around anytime soon. Apart from being at the
root of some of the GOC weaknesses that have undermined the
relationship, Racan has decided that his only foreign policy
priority in this election year, at least, is the EU. He has
been ready, even eager to "choose for Europe, against the
U.S." to further that goal, even gratuitously when nobody is
requiring it.


14. (C) We, of course, must continue to seek ways to impose
costs as well as offer benefits keyed to the GOC's handling
of our bilateral relationship. Realistically, however, we
assess that we will not be able to bank on Croatian support
on any risky issue, not only in this election year but (at
least as long as Racan is in office) for as long as the EU is
keeping its shaky membership application under scrutiny and
ICTY is pursuing Croatia indictments.
ROSSIN
NNNN