AGREEMENT ON SUCCESSION ISSUES RATIFIED

1. (U) SUMMARY: LATE ON MARCH 3, THE CROATIAN
PARLIAMENT RATIFIED THE AGREEMENT ON SUCCESSION ISSUES
AND ADOPTED A CONCLUSION COMMITTING THE GOVERNMENT TO
CONTINUE THE INVESTIGATION INTO $589 MILLION WHICH ARE
"MISSING" FROM JOINT VENTURE BANK ACCOUNTS. CROATIA IS
THE LAST COUNTRY OF THE FORMER YUGOSLAVIA SUCCESSOR
STATES TO RATIFY THE AGREEMENT FIRST REACHED IN VIENNA
IN 2001. END SUMMARY.



2. (U) LAST MONTH THE NEW HDZ-LED CROATIAN GOVERNMENT
PROPOSED TO PARLIAMENT THAT RATIFICATION MOVE FORWARD ON
THE SUCCESSION AGREEMENT OF THE FORMER YUGOSLAVIA, WHICH
ONLY CROATIA HAD NOT RATIFIED. PRIME MINISTER IVO
SANADER POINTED OUT THAT IT WAS THE COUNTRY'S OBLIGATION
TO RATIFY THIS AGREEMENT. FOREIGN MINISTER MIOMIR ZUZUL
SAID THAT PROLONGING THE RATIFICATION OF THE AGREEMENT
WAS DAMAGING FOR POLITICAL REASONS AND ALSO BECAUSE
PROPERTY VALUES SUBJECT TO THE SUCCESSION AGREEMENT WERE
DETERIORATING. THE PREVIOUS GOVERNMENT, NERVOUS ABOUT
WHAT SORT OF CRITICISM THE DEAL WOULD FACE, HAD REFUSED
TO SEND IT TO PARLIAMENT FOR A VOTE.



3. (SBU) AT THE EXPERT LEVEL, ZDRAVKO ROGIC, A TOP
ADVISOR ON SUCCESSION ISSUES, WHO UNDER THE PREVIOUS
GOVERNMENT HAD VIGOROUSLY OPPOSED THE DEAL WITHOUT A
FULL ACCOUNTING OF THE MISSING MONEY, TOLD US LAST MONTH
THAT IT WAS TIME TO MOVE AHEAD. HE INDICATED THAT THE
GOVERNMENT WOULD STILL WORK WITHIN THE FINANCIAL
COMMITTEE OF THE SFRY STATES TO GET AN ACCOUNTING OF THE
MISSING MONEY. HE PRAISED THE NEW LEADERSHIP AT THE
SERBIAN CENTRAL BANK AS BEING WILLING TO COOPERATE, BUT
NOTED THAT POLITICAL UNCERTAINTIES IN BELGRADE RENDERED
PROGRESS SLOW.



4. (SBU) RECENT PRESS REPORTS CLAIMED THE EU AND U.S.
WERE PUTTING PRESSURE ON THE NEW GOVERNMENT TO RATIFY
THE SUCCESSION AGREEMENT EVEN THOUGH CROATIA STILL
CLAIMED $589 MILLION HAD GONE MISSING FROM JOINT VENTURE
BANKS (SOME 90 PERCENT OF THE AMOUNT "VALUED ON 21 MARCH
2001" IN THE AGREEMENT). WHILE WE HAD NOT MADE THIS A
TOP PRIORITY IN OUR DISCUSSIONS WITH THE GOC, WE HAVE
CONSISTENTLY MADE CLEAR THAT THE GOVERNMENT NEEDED TO
MOVE AHEAD ON THIS ISSUE. IN REGARD TO THE MISSING
MONEY, WE HAVE URGED ROGIC TO FIND A WAY TO RESOLVE
DIFFERENCES WITH BELGRADE. THE U.S. DE-BLOCKED USD 225
MILLION IN U.S. BANKS A YEAR AGO USING THE VIENNA
AGREEMENT ON DIVISION OF ASSETS OF THE FORMER SFRY.
CROATIA BECAME ENTITLED TO USD 56 MILLION AS OF MAY


2003.



5. (SBU) ACCORDING TO ZAGREB'S EC MISSION, THE
EUROPEANS HAVE TAKEN A SIMILAR TACK. THEY HAVE WANTED
TO SEE THE AGREEMENT RATIFIED, BUT HAD NOT BEEN APPLYING
PARTICULAR PRESSURE ON CROATIAN AUTHORITIES IN RECENT
MONTHS.



6. (SBU) ACCORDING TO A PRESS COMMENTARY ON MARCH 3 IN
ZAGREB DAILY DNEVNIK, RATIFICATION OF THE SUCCESSION
AGREEMENT COULD TRIGGER RESISTANCE TO THE RETURN OF
PROPERTY AND TENANCY RIGHTS GUARANTEED BY THE AGREEMENT.
ASKED IF TENANCY RIGHTS WERE COVERED IN THE AGREEMENT,
BOZO MARANDIC, THE GOVERNMENT'S POINT PERSON ON THE
SUCCESSION TALKS, SAID ONLY, "YES AND NO." IN FACT,
PRIVATE PROPERTY AND "ACQUIRED" RIGHTS ARE COVERED IN
ANNEX G OF THE VIENNA AGREEMENT. ACCORDING TO
BELGRADE'S AMBASSADOR IN ZAGREB, ANNEX G, NOT MISSING
MONEY FROM THE JOINT VENTURE BANKS, WAS THE REAL SOURCE
OF CONSTERNATION PREVENTING THE PREVIOUS GOVERNMENT FROM
TAKING THE SUCCESSION AGREEMENT TO THE PARLIAMENT FOR
RATIFICATION.

FRANK

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