AMBASSADOR ENGAGES ON KEY BILATERAL ISSUES WITH

1. (C): With the political class returning from the Dalmatian
coast, the Ambassador had separate tour d'horizon meetings
this week with Foreign Minister Picula, Deputy Foreign
Minister Simonovic, and Croatian Ambassador to the U.S.
Grdesic to re-energize work on some key issues that have lain
largely dormant over the summer vacation season. FM Picula
said he has given his staff a two week deadline to develop a
serious proposal on an Article 98 agreement, as he
understands a meeting at the Department around his UN UNGA
visit will depend on real progress in this key area. The
Ambassador stressed that we needed to see concrete, positive
steps on this issue to help steer the bilateral relationship
back on track.



2. (C) FM Picula said that the GoC wants to use the planned
visit of a U.S. Navy ship to the BiH port of Neum in
September to show that Croatia can work with the U.S. The
Ambassador stated bluntly that the real measure of Croatian
cooperation with the ICTY will be General Ante Gotovina's
transfer to The Hague. On refugee returns, the GoC must work
to harmonize its statistics with its neighbors' and the
international community's so that we can have a clear
understanding of what kind of progress has been achieved.
Picula said that Croatia was trying to build more cooperative
relations with BiH and Slovenia, but the GOC's initiatives
were being spun the wrong way in the Slovenian and BiH press.
END SUMMARY.

ARTICLE 98


--------------------------





3. (C) The Ambassador met with Deputy Foreign Minister
Simonovic on August 26 and with Foreign Minister Picula and
Croatian Ambassador to the U.S. Grdesic (separately) on
August 27. The Ambassador's calls were simultaneous to a
flurry of press reporting suggesting that Croatia had made a
new offer to the U.S. on Article 98. DFM Simonovic clarified
that the GoC's approach was still the same. Croatia could
accept an agreement where the U.S. agrees to start some form
of U.S. investigative or judicial proceeding against an
accused person which would allow Croatia to halt extradition
of that individual to the ICC. Simonovic said further expert
level discussions could work out what phase or what kind of
U.S. process would be needed to satisfy Croatian legal
concerns. Subsequently, FM Picula told the Ambassador that
he had charged his experts with coming up with a new,
creative proposal in the next two weeks.



4. (C) The Ambassador commented to Picula that Croatia's
position on the Article 98 issue and the Iraq war remained
prominent in Washington's thinking about the U.S.-Croatia
relationship. The GoC would need to take a series of steps
to change this thinking and get the bilateral relationship
moving forward. He cautioned Picula that U.S. views on
Article 98 were clear and had not changed, and it would be
important for the GoC to present to the U.S. a meaningful
proposal.



5. (C) Picula asked where discussions on Article 98 stood
with the EU, as their position was key. The GoC is under the
impression that the UK and Italy are pushing the EU to bring
forward a position that would permit members to conclude
Article 98 agreements with the U.S. Such a move would
facilitate Croatia,s efforts to conclude an Article 98
agreement. The Ambassador commented that Croatia would have
to come to its own decision on an Article 98 agreement in the
context of its relationship with the EU, but noted that it
was hard to believe that this single issue could decide
Croatia's membership prospects, particularly when other
countries seeking EU membership had signed Article 98
agreements with the U.S.

NEUM SHIP VISIT


--------------------------





6. (C) The Ambassador stressed in all his meetings that by
clearly demonstrating its support for the U.S. Navy ship
visit to the BiH port of Neum, Croatia can help steer the
U.S.-Croatia relationship back on track. FM Picula said the
GoC was ready to support the ship visit, and and asked that
the U.S. request for specific GoC assistance to support the
ship visit be conveyed in writing. DFM Simonovic told the
Ambassador that the GoC was satisfied with the BiH dipnote
(generated by the GoBiH subsequent to reftel) requesting
assistance for the U.S. ship visit. (COMMENT: Given the lack
of BiH maritime infrastructure or support services at Neum,
Croatian support will be critical to the success of the ship


visit. END COMMENT).

IRAQ TROOP CONTRIBUTION


--------------------------





7. (C) Picula said that the MFA was working with the MoD to
prepare the appropriate documentation for the Sabor to begin
consideration of a Croatian contribution to coalition forces
in Iraq. He said the decision document would be submitted to
the Sabor for approval in the regular session beginning
September 15. He predicted approval prior to parliamentary
elections expected on November 23. Picula asked the
Ambassador's assistance in lobbying for support of key Sabor
deputies. Picula observed that a new UNSC resolution thought
to be under consideration that would go beyond UNSCR 1500
would make the GoC political position easier.

EU ACCESSION


--------------------------





8. (C) Simonovic noted that political conditionalities on EU
membership will drive much of the next government's
post-election actions, including cooperation with ICTY,
refugee returns, and justice system improvements. He noted
that the UK was being very tough on Croatia, making its
approval of the EU SAA contingent on the surrender of General
Ante Gotovina to the ICTY. Simonovic hoped that Prime
Minister Racan's upcoming visit to London in September would
help smooth out this problem and facilitate UK approval of
the SAA.

ICTY


--------------------------





9. (C) DFM Simonovic commented that the timing of the next
ICTY indictments could affect the political situation in
Croatia, but observed that the GoC would be able to handle it
even if the announcement came before the elections. He asked
if the international community's impression of GoC
cooperation had changed. The ambassador warned bluntly that
the international community's perception is that the GoC is
not doing enough to capture Gotovina and transfer him to The
Hague. That Gotovina could grant an interview with a leading
Croatian weekly magazine and pose for photos for the cover
made it hard for the international community to believe that
Gotovina simply could not be found. The message to Gotovina
must be clear that his only choice is to appear in The Hague.
Anything else will hold up EU accession and just about
everything else Croatia wants with the international
community. Simonovic responded that the international
community's perception of Croatia on this issue was "worse
than I thought."

REFUGEE RETURNS


--------------------------





10. (C) When asked about the international community's
perception on refugee returns, the Ambassador observed that
because of poor record keeping and a lack of agreement on
definitions for categories of returnees made it imperative
that the GoC get the basic issue of how to count returnees
resolved with its neighbors and the international community.
Until that happens, we would never be able to agree on what
the remaining tasks are. Simonovic hoped that President
Mesic's upcoming trip to Belgrade will help Croatia's image
on this issue. The Ambassador responded that the
international community is looking for measurable progress,
and the consensus is that we are not there yet.

RELATIONS WITH SLOVENIA


--------------------------





11. (C) Simonovic complained that relations with Slovenia
are burdened by Slovenia's emotional approach to key issues
like the GoC plan to declare an exclusive economic zone
(EEZ). He noted that the Italians have the rational approach
of wanting to preserve a sustainable fishery for their own
fleet and are ready to talk about options, including an EEZ,
to prevent non-European vessels from devastating the Adriatic
fishery. Working with Slovenia was much more difficult as
the GoS will not say directly what it wants and keeps linking
an EEZ with the issue of access to the high seas. He
admitted that poor GoC diplomacy had led to the initialed
(but unratifiable) agreement on Piran Bay which, despite
having no legal standing, had created political expectations
in Slovenia and Croatia that were hard to overcome.
Simonovic believes that arbitration may be the only long-run
way to depoliticize and resolve the EEZ issue, as well as
border delimitation and the Ljubljanska Banka issue.

RELATIONS WITH BOSNIA


--------------------------





12. (C) Simonovic observed that the GoC was finally finding


the right level of engagement with BiH and now believes it
can play a positive role in Bosnia. However, he was unhappy
how the corridor 5C roadway issue was developing. Simonovic
commented that some in BiH are using this issue to claim the
GoC is back to its old ways of meddling in BiH internal
affairs. He feared the GoC response will be to become once
again too "hands-off." Croatia was on the "side of the
angels" on the 5C corridor; the real issue is that BiH
authorities are letting the whole tendering process smell of
corruption.
FRANK


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