BOSNIA: SCENESETTER FOR HIGH REP VISIT TO

C O N F I D E N T I A L SECTION 01 OF 02 SARAJEVO 000829

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SIPDIS

DEPT FOR D (SMITH),P (BAME),EUR (DICARLO),EUR/SCE
(ENGLISH, SAINZ, FOOKS),NSC FOR BRAUN, USNIC FOR WEBER,
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E.O. 12958: DECL: 04/14/2016
TAGS: PREL PGOV BK
SUBJECT: BOSNIA: SCENESETTER FOR HIGH REP VISIT TO
WASHINGTON APRIL 19-21

Classified By: AMBASSADOR DOUGLAS MCELHANEY. REASON: 1.4 (B) AND (D).


1. (C) SUMMARY: High Representative Christian
Schwarz-Schilling's April 19-21 visit to Washington will be
an opportunity to review his first three months in office.
CSS (his staff's abbreviation, not used in speech) sees
himseslf as the antidote to former High Rep Ashdown's
activist intervention in BiH's political development. But
his hands-off approach has drawbacks, as described in some
detail below. On a major U.S. priority, constittional
reform, CSS has been more engaged -- but ithin clearly
defined limits. We will want to psh him to be constructive
in the end-game, and t work with us to craft "phase two."
Schwarz-Schiling will look for strong U.S. support for
transiion from High Representative to EU Special
Representative by next March. We should remind CSS that we
have policy objectives in Bosnia, and that we believe that
the international presence must be used to move this new
state forward. That sometimes must include pressure on
politicians and others alike if we are to remain on the same
wavelength. END SUMMARY.

SCHWARZ-SCHILLING: THE OPPOSITE OF ASHDOWN


2. (C) With his slow manner and deliberate speech,
Schwarz-Schilling is the polar opposite of the activist,
energetic former High Rep Ashdown. CSS believes Bosnians
need to take increased responsibility for their own political
decision-making; under his leadership, OHR has adopted a
distinctly "hands-off" approach. While there are many areas
where Bosnians can and should gradually take on more
responsibility, the abrupt shift has left many Bosnian
officials dazed and confused. His staff has also had
difficulty re-orienting itself. In the two key decisions
which have defined his tenure to date, CSS's strong
disinclination to intervene (and Eurocentric orientation)
have caused significant problems -- and kicked bigger ones
down the road.

TWO DECISIONS DEFINE HIS TENURE


3. (U) The High Rep's first major decision was whether or
not to extend the mandate of Indirect Taxation Authority
(ITA) Governing Board (GB) Chairman Joly Dixon (reftel).
Dixon's mandate originally expired in January 2006. Former
High Rep Ashdown, keenly aware of the increasing criticism of
Dixon's performance, did not want to saddle his successor
with a long-term problem. But nor did he want CSS to face a
crisis immediately upon arrival. As one of his last acts,
Ashdown opted to extend Dixon's mandate until the end of
March. As the new deadline drew near, the new team at OHR
was paralyzed between its desire for "local ownership" of
decisionmaking and the European Commission's insistence that
Dixon be reappointed. Repeated attempts to get the Bosnians
to voluntarily accept Dixon failed. The Council of
Ministers, which has the authority to appoint the GB
Chairman, refused to extend Dixon or even ask the High Rep to
take action. The state-level Finance Minister declined to
request Dixon's reappointment. The RS government explicitly
demanded Dixon's removal. Despite this, the High Rep bowed
to EC pressure and extended Dixon for another three months,
with an "option" for an additional four. The result:
gridlock as both the RS and the state-level government refuse
to work with Dixon and neither entity has received any
revenues from the single account in April.


4. (U) In areas where EC equities are not on the line, the
High Rep's insistence on non-intervention has been taken to
extremes. Not by coincidence, the non-intervention came in a
case where an important U.S. program to rationalize one of
Bosnia's many governmental bottlenecks was at stake. That
challenge was legal issues arising from amendments to the
Federation Constitution imposed by OHR in 2002. The
amendments are confusing, contradictory and dangerous in that
one possible interpretation would give each ethnic group in
the Federation a veto over all legislation. The issue came
to light when the Croat-led HDZ party filed a Vital National
Interest (VNI) challenge (the first since the 2002
imposition) to a U.S.-backed law creating a system for the
non-political, transparent and stable distribution of
revenues. Unable to understand the imposed amendments, the
Federation Constitutional Court asked for guidance from
Federation Parliament's Constitutional Committee. But since
the amendments were imposed by OHR, the Committee could
provide little help. Both turned to OHR with explicit

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requests for an interpretation of the OHR-imposed amendments.
However, the High Rep maintained that providing an
interpretation would be "undue interference" in an ongoing
case. Strong requests from the USG failed to sway the new
High Rep. In the end, the Court ruled against VNI but left
the procedural issues unaddressed.


5. (U) CSS is likely to regret this approach when faced
(soon) with the next crisis: the Federation-level law on
public broadcasting services (PBS),an EC requirement for a
Stabilization and Association Agreement (SAA). Passed on the
heels of the revenue allocation law, it is also the subject
of a VNI challenge by the Croats. It is highly likely that
this law will fail if the Court is forced to rule under the
current procedures. OHR will likely again face the a choice
between its desire for local ownership (even, paradoxically,
of laws OHR had to impose) and an SAA requirement. OHR's
failure to act risks not only significant delays in the SAA
process, but the entire reform agenda.

MORE ACTIVE ON CONSTIUTIONAL REFORM


6. (C) Even under Ashdown, OHR held back from the
U.S.-orchestrated constitutional reform negotiations. Once
the package was completed, OHR offered assistance; we are now
working cooperatively with OHR and the Europeans on lobbying.
CSS has been particularly useful with the Croat community,
and is unafraid to pull strings in Berlin. However, as the
end-game approaches, CSS has once again argued that less is
more -- saying we need to "convince" rather than "pressure."
We will want to emphasize that, on this issue, we will need a
full court press and OHR is a key player.


7. (C) CSS has assured skeptical Croat politicians that he
will be personally involved in "phase two." We should
underscore that U.S. support for "phase two" is conditioned
on successful completion of "phase one." CSS will look for
our thoughts on the process; we should indicate we are still
exploring the options, which include utilizing lessons
learned from the successful defense reform model. We should
assure CSS that we will work with OHR as planning progresses,
but we strongly believe that a central place for the High Rep
in this process would only bureaucratize a process requiring
political muscle.

THE FUTURE OF OHR


8. (C) CSS's major goal is to transform OHR into an EU
Special Representative office by next March. In his view,
that means relinquishing the Bonn Powers which allow the High
Rep to impose legislation and remove relacitrant political
officials. Many of our European PIC colleagues are concerned
about implications for Balkan stability, especially with a
Kosovo decision on the horizon. We should underscore that,
on this issue, the U.S. is one of CSS's strongest supporters.
Effective planning for a phase out is essential, but we
should not begin now to pull back from doing everything we
can to, yes, "pressure" Bosnians to make the reforms that
will bring them into the EU and NATO. At its last meeting,
the Peace Implementation Council asked OHR to present a
detailed transition plan at its June session. We should tell
CSS frankly that we will give it careful scrutiny; our
continued backing for early transition depends on it.

MCELHANEY