THE STABILITY PACT: PRESSING REFORM THROUGH

UNCLAS SECTION 01 OF 04 BRUSSELS 004181

SIPDIS

SENSITIVE

STATE FOR EUR/DAS Kathleen Stephens, EUR/SCE Chuck English,
EUR/ACE Tom Adams, Pat Nelson-Douvelis and Monica O'Keefe

E.O. 12958: N/A
TAGS: PREL EAID ZL EUN USEU BRUSSELS
SUBJECT: THE STABILITY PACT: PRESSING REFORM THROUGH
REGIONAL COOPERATION

REF: (A) Belgrade 008 (B) Sarajevo 2208; (C) Zate-Holtzapple

9/15/04 email

SUMMARY
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1. (SBU) With South Eastern Europe facing a decisive year in
2005, the Stability Pact (SP) continues to generate pressure
for further political and economic reforms in the region and
to draw the region closer to European and Euro-Atlantic
integration. The Pact is complementing its ongoing efforts
in the areas of democratization, economic reform and in the
security field with a strong push for implementation and
regional ownership of programs and commitments undertaken by
SEE governments. There has been particular success on the
economic front -- promoting regional free trade agreements
and restoration of the regional power grid, improving the
investment climate -- and in fostering regional cooperation
on migration and refugee returns as well as law enforcement.
The Pact and Senior Coordinator (SC) Erhard Busek have
helped restore an atmosphere of cooperation among SEE
governments and political leaders. As intended at its
creation in 1999, the Pact plays an important supporting
role, as individual SEE governments, the Contact Group and
other members of the international community work toward for
lasting political solutions in the areas of greatest
challenge: Serbia and Montenegro, KOSOVO and Bosnia-
Herzegovina (refs A and B). END SUMMARY.

Five Years of the Pact: Creating "Critical Mass" of Regional
Communication
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2. (U) Launched under Presidential auspices in the aftermath
of the spring 1999 KOSOVO air campaign with the goal of
helping restore peace and stability to the Balkans, the
Stability Pact initially captured some 200 so-called "quick
start" assistance programs under its umbrella. The Pact's
early years under the leadership of Bodo Hombach were marked
by feverish activity and a fair measure of coordination
challenge as it sought to bring coherence to international
donor efforts in the war-torn Balkans. Since 2001, with
former Austrian Vice Chancellor Erhard Busek as Senior
Coordinator, the Pact's activities have become much more
streamlined and clearly focused on six core objectives (see
para five below). The Pact is also placing strong emphasis
on implementation of existing agreements and commitments
undertaken by regional governments and is pressing hard for
further regional ownership of a range of important
initiatives. With evident progress in the region toward EU
integration on the part of EU candidates Bulgaria and
Romania as well as Croatia and most recently Macedonia, the
Pact has contributed to achieving the twin goals of bringing
peace and stability to the Balkans as well as further
European integration in the long-challenged South East
European region. The Pact also represents a useful channel
to draw Moldova closer to the European mainstream, although
with evident limitations on near-term prospects for
significant progress.


3. (SBU) Conversations with government officials and
politicians confirm the sense of achievement by the Pact as
a concerted undertaking by international donors and regional
assistance recipients. Both in public statements and in
September 27 comments to Deputy Special Coordinator (DSC)
Mozur, EU Commission Director for the Western Balkans
Reinhard Priebe strongly praised the accomplishments and
positive impact of the Stability Pact and stressed its role
as a key partner for the EU in the region. Typical comments
from the region stress, as a leading Bulgarian
parliamentarian recently noted to DSC, the clear benefit of
the "critical mass of communication" created by the Pact in
the region. A senior Hungarian Interior Ministry official
highlighted the Pact's success in providing a venue for
close collaboration among regional Ministers of Interior,
citing the stark contrast between the cordial and productive
September 14 meeting of regional Ministers in Brdo, Slovenia
with the icy, distrustful encounters of just a few years
ago. Other examples abound.


4. (U) Some skeptics remain, however. Regional and donor
critics hit the Pact for its inability to deliver fully on
promised infrastructure and other economic improvements and
perceived shortcomings in assistance coordination. On the
former, such criticism often draws on long existing
skepticism and opposition dating from the Pact's early days,
when it was finding its place in the overall international
community effort in the Balkans. Criticism from the region
often implies the expectation that the Pact was to serve as
a Marshall Plan in the Balkans, rebuilding and restoring the
region to some version of perceived pre-1990 halcyon days.
Critics of lapses of coordination do not see the Pact's
efforts to streamline and focus on core objectives and fail
to recognize the extent to which assistance levels have
decreased as peace and stability have settled into the
region. And there have been some bumps in the road on some
initiatives, where results have been less than expected or
where poor performance by individuals has undercut
achievement.

SP Initiatives have Impact, Economic Objectives to the Fore
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5. (SBU) A brief overview of key Stability Pact activities
confirms success in its role of supporting a return to
diplomatic normalcy and regional cooperation in South
Eastern Europe. These activities have to be viewed in
context, against the backdrop of substantial but declining
bilateral assistance from the US and other donors and a
build-up of EU pre-accession assistance - focused on acquis
requirements -- to candidates Bulgaria, Romania, as well as
Croatia and prospectively Macedonia.

-- Democratization and Human Rights (Working Table I) with
core objectives of Media and Local Democracy/Cross Border
Cooperation: Among key priorities, the Pact is joining
forces with donor governments and leading NGOs to promote
active inter-parliamentary cooperation. The goal: to ensure
that regional parliamentarians and staffers have the
information, understanding and political will they need to
ratify and implement the web of already-concluded regional
economic agreements in trade and energy as well in other
policy areas. Among other SP initiatives is a media task
force with the goal promoting responsible standards for the
regional media and tempering corrosive and irresponsible
journalism in tense areas. The Pact is seeking to deepen
regional commitment to reconciliation by proposing
government-supported youth exchanges between Serbia and
Montenegro, KOSOVO, and Bosnia-Herzegovina (and perhaps
others) along the lines of successful past Franco-German
programs.

-- Economic Reconstruction, Cooperation and Development
(Working Table II) with core objectives of Interregional
Trade/Investment Compact and Regional Infrastructure/
Energy: The Pact has worked extremely hard in tandem with
the OECD, EBRD, other IFIs and such bilateral donors as the
U.S. to win regional governments' commitment to an
interlocking system of free trade agreements (creating a
common market of some 60 million people),economic reform
measures under the "SEE Investment Compact", and the so-
called Athens Process to restore the regional power grid.
As a supporting measure, SPSC Busek is devoting considerable
time and effort to heighten the role and influence of the
regional Business Advisory Council (BAC),with the US Deputy
Senior Coordinator exploring further ways to strengthen the
role of US business in the BAC. All are mature and highly
applauded initiatives. They now demand a concerted effort
and political push by all concerned -- most significantly by
regional governments and parliaments -- for final
ratification and implementation. This task is perhaps the
Pact's key priority for the year immediately ahead.

-- Security Issues (Working Table III) with core objectives
of Anti-Organized Crime and Migration/Asylum/Refugees: The
Pact has worked successfully on initiatives involving
regional cooperation on migration and refugees, border
cooperation, against trafficking in persons (graduating the
initiative to the broader mandate of a special OSCE
representative),against organized crime and corruption and
on such military issues as arms reduction and small arms
control. The SP Disaster Preparedness and Prevention
Initiative has set the stage for meaningful regional
cooperation should a cross-border natural disaster occur in
the seismologically unstable and infrastructure-poor region.
An initiative addressing military "conversion" is evolving
in tandem with NATO, the World Bank and other donors
(possibly Nordic). The concept posits limited regional
cooperation in dealing with military down-sizing, base
closing, defense plant conversion, and environmental issues,
with Serbia-Montenegro the primary country of concern. NATO
SG de Hoop Scheffer agreed to explore possibilities with the
SP and other donors during his September 15 meeting with SC
Busek, expressing support for the undertaking while
cautioning on NATO's clear resource constraints.

Progress toward Meaningful Regional Ownership
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6. (SBU) Achieving regional ownership of reforms and of SP
initiatives is a leading priority of the Pact. Here, there
is evidence of success. Regional governments are assuming
costs and responsibility by seconding personnel and
providing facilities to a number of regional initiatives.
For example, the Sava River Commission -- involving four
regional governments along with several donors in Sava River
environmental management -- is opening (in October) a
regional office in Zagreb. Similarly, the Croatian
government is strengthening the regional center for arms
control and verification (RACVIAC) in Zagreb and promoting
it as a regional center for defense conversion issues, doing
so with support from donors and expertise from various
quarters, including NATO. There are other examples. The
regional anti-corruption initiative (SPAI) based in Sarajevo
and the newly established regional center in Skopje to
address migration and related issues which were formerly the
focus of the Pact's MARRI initiative, led most recently by
new UNMIK head Soren Jessup Petersen. By year's end, the SP
education reform initiative plans to move the secretariat of
the Austrian-led "Graz process", incorporating South Eastern
Europe into a European area of education, to Zagreb with its
Vienna activities winding down as a result. The SECI anti-
organized crime center in Bucharest, now loosely associated
with the Stability Pact due to SC Busek's lead role in both,
is a success story, highlighted by a forthcoming positive EU
assessment that lays out a vision of SECI cooperation and
possible incorporation into EUROPOL over the coming decade.


7. (SBU) One particular challenge: reinforcing the move to
regional ownership by re-energizing the South East European
Cooperation Process (SEECP). Present chair Romania,
distracted by its upcoming elections, could be doing more,
although Romanian officials are hosting Foreign Ministers in
October and are planning a regional Defense Ministerial to
discuss issues related to defense conversion. With an eye
to the Greek SEECP chairmanship beginning in April 2005, SC
Busek has already started to bolster Greek interest and
leadership in ensuring that SEECP plays a more significant -
- and positive -- role in the future.

The Coming Two Years: Stability Pact will be a Useful Tool
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8. (SBU) The SP can further contribute regional stability
and progress over the crucial next years. The context
through 2007 is gaining clarity. Bulgaria and Romania,
together with the EU, are working toward the January 1, 2007
target date for their accession to the EU. Croatia is
progressing along a similar path and initial discussions
with Macedonia have started. With such accession prospects,
the Pact's target area will necessarily shrink. But
regional leverage, spearheaded by the SP, international
partners and EU candidates in the region, will generate
additional pressure on the remaining countries of the
Western Balkans whose reform efforts and commitment to
European integration are lagging. We should use this
evolving leverage, now and in the future, to strengthen the
position of reformers and to press governments and political
oppositions in Serbia and Montenegro, Bosnia-Herzegovina,
and Albania to embrace the realistic vision of full
integration into Europe and the EU over the coming decade.


9. (SBU) With this in mind, the next two years will be
critical for the region, particularly in Serbia/Montenegro
(Ref A) and certainly for KOSOVO, where pressure for a
change in the status quo is building. Ref B lays out some
elements of the 2005-2006 picture in Bosnia-Herzegovina with
the suggestion that a change in the IC posture in that
country will be a significant discussion issue in this
period. Albania is moving ahead at times, while stepping
back at others. On September 14, the EU delivered a tough,
critical message to Tirana (backed by Embassy Tirana - Ref
C) on its mixed record and uncertain commitment on reform,
making clear the need for Albania's 2005 elections to
demonstrate the country's readiness to progress toward
European integration. With the clear challenges facing
these countries, the Stability Pact's consistent role of
facilitating regional cooperation and of providing steady
regional pressure for continued reform -- linked to the EU
and Euro-Atlantic integration and the holy grail of eventual
EU accession -- remains essential to the international
community's set of diplomatic tools and pressure points.


10. (SBU) Like other international players and donors active
in South Eastern Europe, the Stability Pact is assessing
next steps and medium-term objectives. Discussion with the
EU on CY 2006 funding is ongoing, with initial soundings are
upbeat. EU officials are positive on the Pact, supportive
of its continued work, but clear to ensure that it plays a
supporting and complementary to the EU's main thrust of
promoting accession for candidate countries and progress
toward candidacy status by the others.
SC Busek: On the Road, On Message in Advancing the Reform
Agenda
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11. (SBU) Through his seemingly indefatigable travels and
his straight talk and problem solving, and a senior EU
political figure concentrating exclusively on the Balkans,
SC Busek has won great respect and considerable credibility
with senior government officials and politicians throughout
the region. He sees Prime Ministers and senior cabinet
ministers regularly and constantly presses hard on the
reform agenda and on cooperation with Stability Pact
initiatives. His efforts underpin the Stability Pact's
success to date and will likely ensure further positive
regional government cooperation and action. He and the Pact
are working toward a successful meeting of the Pact's
Regional Table November 18-19 in Skopje, where regional
leaders and donors will meet to assess progress, set
priorities, and establish the Pact's work plan for the
turning point period 2005-06.

MCKINLEY