SLOVENIA: PM JANSA AT THE HALF-WAY MARK

C O N F I D E N T I A L LJUBLJANA 000402

SIPDIS

SIPDIS

DEPT FOR EUR/NCE TRIM, NSC FOR D WILSON

E.O. 12958: DECL: 06/23/2016
TAGS: PGOV PREL SI
SUBJECT: SLOVENIA: PM JANSA AT THE HALF-WAY MARK

REF: A. 2005 LJUBLJANA 611


B. LJUBLJANA 171

C. LJUBLJANA 386

Classified By: COM Thomas B. Robertson for Reasons 1.4 (b) and (d).


1. (C) Summary: Prime Minister Janez Jansa is nearly
half-way through his first term in office. In that time we
have enjoyed a much closer bilateral relationship with the
Government of Slovenia (GOS) than with the previous,
center-left government. He is a true believer in NATO and
strong promoter of the trans-Atlantic relationship. Jansa
shares our view of NATO's potential beyond Europe's borders
and in the face of intense public criticism committed
trainers to the NATO Training Mission in Iraq (NTM-I). Jansa
has also made a point of pushing his small country on to the
international stage by taking on leadership positions in
international organizations such as the Human Security
Network, the International Atomic Energy Agency (IAEA) and,
in 2008, the presidency of the European Union. Slovenia's
small size should not belie its strategic usefulness. Beyond
the obvious role it plays as bridge from the EU to it's
former compatriots in the Western Balkans, it embodies the
success of the most recent round of EU enlargement, and it
has a good story to tell on inter-ethnic dialogue. Slovenia
is steadily emerging as a solid partner on global and
regional issues from democracy in the EU Neighborhood to
European energy policy. We should seek ways to further this
cooperation and find opportunities to engage Slovenian civil
society outside Slovenia's borders.


2. (C) Our bilateral economic relationship does not benefit
from the same robust engagement we enjoy on political issues.
Slovenia's small size and short history as an independent
country mean that it is loathe to see its crown jewels fall
into foreign hands even if this would mean more jobs,
profitability and stability. With only one significant new
U.S. investment on the horizon, we should ensure PM Jansa
appreciates the importance of success in this endeavor to
future economic relations. End Summary.

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JANSA AND THE POLITICS OF REFORM
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15 Years of Independence
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3. (C) On June 25, 2006 Slovenia celebrated 15 years of
independence. Janez Jansa played a critical role from
rallying Slovenian forces to face down Yugoslav National
Armed forces in 1991 to leading it through its first years as
a member of NATO and the EU. Jansa began his political
career in the 1980's as a dissident and was at the center of
the struggle for democracy. His activities landed him in
detention and prison for six months, including a period in
solitary confinement. His experiences seemed only to
strengthen his resolve, and he helped to found the first
opposition political party, the Slovene Democratic Alliance.
In 1990 he was elected to Parliament, and in May of that year
he was named Minister of Defense. In 1994 he left government
and went into the political opposition. Ten years later his
party won a majority in Parliamentary elections and he was
named Prime Minister.


4. (U) In his anniversary speech to the Slovene public, Jansa
breathed some new life into his campaign call for reform. He
encouraged Slovenians to continue their tradition of
cooperation which began with the fight for independence in
1991 and continued, more recently, with the decision to join
the European Union in 2004. Now, in a time of relative
stability, he exhorted them to think big and beyond
Slovenia's borders and to stand together in a vision for the
future. He told them that in order to preserve their strong
social safety net, quality of life and accessibility of
education and health, economic development was crucial. He
ended his speech by saying "We seek to become nothing less
than one of the most successful countries in the world. On
our way to achieving this goal we seek to make use of the
best that is in our national character: creativity, hard
work, entrepreneurship, dedication, justice, openness,
tolerance, honesty, solidarity."

Taking on International Commitments -- Emphasizing the
Trans-Atlantic Partnership
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5. (C) Since PM Jansa formed his government in December 2004,
he has done well in meeting many of his political goals
including strengthening ties with the United States. His
visit to Washington will be the culmination of 18 months of
re-aligning the domestic and foreign policy of Slovenia
towards a more expansive view of the trans-Atlantic
relationship and how Slovenia can, and should, play an active
role in NATO and other international fora. Since
relinquishing chairmanship of the OSCE at the end of 2005,
Slovenia has signed up to chair the IAEA, the Human Security
Network, and the EU in the first half of 2008. Slovenia has
been a strong advocate of human rights and was disappointed
not to have been voted on to the UN Human Rights Council this
year. It will try again next year as it believes membership
on this Council will be critical when it takes on the EU
presidency.

Challenges in the Coalition
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6. (C) Jansa has been less successful at realizing goals of
economic reform, privatization and attraction of foreign
direct investment. Jansa's coalition is made up of four
political parties, one of which represents a very narrow
political base of pensioners and, other than Jansa's own
Slovene Democratic Party (SDS),none of which enjoys more
than 4% of popular support as reported in recent polls.
Nonetheless, since the coalition only holds a one-seat
majority in the parliament, each vote is important and even
the smallest partner has the potential to scuttle important
issues if provoked. Jansa has blamed this somewhat tenuous
political arrangement for some of the difficulties he says he
has on economic reforms.

Political Realignment?
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7. (C) But, experience has shown that when Jansa decides he
wants something, such as troops in Iraq, he can methodically
work through the issues to make it happen. And, it is not
clear that Jansa, at this point, is prepared to force
economic reform on his coalition and the nation. Slovenia
has benefited thus far from a gradual approach to reform, and
there is not consensus with in society that privatizing
troubled industries and inviting greater FDI is necessarily
in Slovenia's best interest. Jansa continues to make the
rhetorical push for recharge and reportedly has a plan to go
forward with privatization and tax reform in the fall of

2006. With local elections slated for the fall, however, and
with no successor to Joze P. Damijan, the Minister of Reform
who resigned in March, we do not expect any dramatic new
initiatives on this front in 2006.


8. (C) That said, there are also many rumors that Jansa will
change his coalition as early as this Fall. The opposition
Liberal Democracy Party (LDS) has been in disarray since
October 2004 and may experience a schism soon as the new
party president, Jelko Kacin, is a very polarizing figure.
Borut Pahor, president of the Social Democrats (SD) and a
member of the European Parliament, has aspirations to join
government, though it is unlikely he could get the SD, in its
current configuration, to go along. Jansa himself and his
government continue to enjoy solid support from the public
and it would be a surprise if any in the current opposition
could pull off a strong challenge in the 2008 parliamentary
elections.

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EXPANDING OUR PARTNERSHIP
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Political-Military
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9. (C) After 10 years in the opposition, Janez Jansa became
Prime Minister in October 2004. For the first time, power
transferred from the long-time center-left ruling coalition
headed by the LDS to Jansa and his center-right collation led
by the Slovene Democratic Party. Since we last surveyed his
progress (ref A) Jansa has continued to develop as a strong
and skillful leader on foreign policy. He overcame
resistance both public and within his coalition to put troops
in Iraq. He was unflappable in the face of intense media
criticism and made a convincing case for involvement based on
Slovenia's obligations as a member of NATO. Jansa has since
continued to ensure Slovene participation in every new NATO
mission. In addition, the GOS has recently contributed
another $120,000 to the NTM-I trust fund. We should thank
Jansa for his courage in bucking the European trend in Iraq
and encourage him to continue supporting Slovenia's active
participation in NATO.


10. (C) The GOS has been clear that providing stabilizing
forces for KFOR and the EU mission in Bosnia is its priority
for troop deployment outside of Slovenia. Nonetheless, it
has made a solid contribution to our efforts in Afghanistan.
While we do not expect the GOS to offer more in the way of
military support, it has repeatedly expressed interest in
becoming involved in civil reconstruction. The Prime
Minister's visit to Washington presents an excellent
opportunity to explore this offer in more detail and we
should engage the GOS and find opportunities to involve
Slovenia in civil reconstruction efforts.

Transformational Diplomacy
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11. (C) Over the last nine months, as USAID has been
planning to withdraw from the region, we have been looking
for opportunities to cooperate on democracy promotion and
civil society building projects. Our Public Diplomacy
Section has made a priority the funding of projects proposed
by Slovene NGOs with a regional focus. Slovenia boasts
several world-class NGOs including the Together Foundation
which provides psychosocial support for children victims of
war and other trauma and helps to develop the concept of
volunteerism and promotion of civil society among children
and youth in troubled regions such as the western Balkans,
Iraq and South Ossetia/Chechnya. We hope Together will be
successful in its request for funding from the National
Endowment for Democracy for a project in Chechnya.


12. (C) The International Trust Fund for Demining (ITF),
which the USG provides with up to USD 9 million in matching
funds annually, has provided the region with a decade of
outstanding service in mine removal and victim
rehabilitation. It has more recently begun to explore
opportunities to assist further afield in the Caucasus and
Afghanistan.


13. (C) The recently inaugurated Center for European
Perspective (CEP) provides an interesting option for us to
partner with Slovenia in the region. The GOS has backed the
creation of this NGO with USD 1 million in seed money. Among
EU members, there is no more vocal advocate for EU expansion
than Slovenia which believes peace in the region cannot be
fully secured without the eventual inclusion of all former
Yugoslav republics into the European Union. The GOS will use
the CEP to promote this goal, one which we share, and a
program for training of Kosovar civil servants has already
been developed. The GOS has also indicated it will use the
CEP to discuss cross-cultural issues including Islam in
Europe. We should take advantage of the newness of CEP to
partner with it early in its history in order to ensure it
develops a strong Euro-Atlantic personality and provides a
basis for a constructive partnership in the future.

Economy - Still a Ways to Go
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14. (C) While we have seen our political and diplomatic
relationship flourish since Prime Minister Jansa took office,
we have not enjoyed a commensurate experience on the economic
side. Promised reforms and privatizations have been slow to
materialize, little is done to attract and retain foreign
investment, and vested interests in the status quo seem to
win the day in most situations. Much of this can be
attributed to the politics of a small country and is not a
unique phenomenon of one political party or another. There
is a potentially huge U.S. investment in the offing.
Harrah's, owner of several casinos in Las Vegas and Atlantic
City, would like to develop a casino resort in southern
Slovenia near the border with Italy. This investment, valued
at over USD 700 million would provide Slovenia with a much
needed shot of investment which would expand the tourist
base, provide jobs, and increase tax revenue. Discussions
between Harrah's and the GOS have been ongoing since the
Spring of 2005. Harrah's has recently expressed some
frustration with the slowness of its negotiations with the
GOS and apparent resistance in some quarters to see this deal
concluded. PM Jansa should be urged to commit the GOS to
this project or risk seeing Harrah's look elsewhere for its
first European venture.

Energy - The Russians are Coming?
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15. (C) Slovenia is a small country of 2 million inhabitants
with a moderate amount of industry and a well diversified
energy base. It does not figure as a major player in the
European energy discussion, however, it occupies a
potentially strategic location on the route of proposed gas
and oil pipelines supplying western Europe. Recently, it has
objected to the Italian proposal of placing liquid natural
gas terminals in the Bay of Trieste, and it has resisted
signing on to the construction of a pan-European oil
pipeline, in both instances, primarily on environmental
grounds. After the Prime Minister's visit to Moscow in May,
Gazprom has recently been in Ljubljana wooing the Minister of
Economy and the CEO of the main petroleum retailer.
Discussion ranged from building a gas pipeline from Russia
through eastern Europe and terminating in Slovenia to supply
Italy and western Europe, to investment in a defunct
Slovenian oil refinery (ref C). Given Slovenia's track
record on foreign direct investment, we do not expect either
of these projects to move forward with alacrity. Any
project, however would only proceed with the express support
of PM Jansa.

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COMMENT
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16. (C) Over the next 18 months, Jansa and his government
will be preparing to take on the monumental job of EU
President in the first half of 2008. Slovenia will be the
first of the new EU states to take on this responsibility.
There will be a strong pull from Brussels for resources and
attention and the temptation will be for Slovenia to adopt a
neutral stance on issues of importance to us once it takes
over the Presidency. We should ensure, beginning with the
Prime Minister's visit to Washington, that we actively engage
the GOS on our priorities. Drawing Slovenia into close
partnerships on issues from NATO peace-keeping missions to
human rights initiatives in the UN and the building of civil
society in emerging democracies and regions recovering from
war and other disasters will ensure an EU presidency in 2008
that understands and appreciates U.S. priorities in the
trans-Atlantic relationship and around the globe.
ROBERTSON