BOSNIA - EUR/SCE DIRECTOR CHRIS HOH'S OCTOBER

C O N F I D E N T I A L SECTION 01 OF 03 SARAJEVO 002309

SIPDIS

SIPDIS

E.O. 12958: DECL: 10/26/2017
TAGS: PGOV PREL PINR EU BK
SUBJECT: BOSNIA - EUR/SCE DIRECTOR CHRIS HOH'S OCTOBER
16-20 VISIT

Classified By: Classified by DCM Judith B. Cefkin for reasons 1.4(b),(
d)


1. (C) SUMMARY. During his October 16-20 visit to the Brcko
District, Banja Luka, and Sarajevo, visiting EUR/SCE Director
Christopher Hoh expressed concern about the current political
stalemate, but pledged continued US support to help Bosnia
move forward. While the economy has visibly improved in
recent years, most interlocutors agreed that the political
environment has deteriorated. Many, including OHR High
Representative Miroslav Lajcak, stressed the need to combat
corruption and politicians with links to organized crime
figures. With HiRep Lajcak, Hoh expressed USG opposition to
plans to supplement EUSR staff by hiring personnel from the
EU Monitoring Mission. Given the failure of the reform
process several interlocutors were concerned that the
international community would give up on Bosnia, but were
reassured to hear the US remains committed to robust
engagement in Bosnia. END SUMMARY.

BRCKO GOVERNMENT A "NEST OF CORRUPTION"
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2. (SBU) In Brcko District, Hoh heard conflicting
perspectives from international and local interlocutors.
Deputy Supervisor Gerhard Sontheim painted a bleak picture of
political developments in Brcko since the 2004 election
calling the government, "a nest of corruption." He said that
the Office of the High Representative (OHR) is not yet ready
to certify that Brcko institutions function effectively.
Deputy Mayor Anto Domic, a Croat, claimed that Brcko is more
advanced in many ways than the rest of BiH and insisted that
Brcko should maintain its autonomy in the context of any
future constitutional reforms. Deputy speaker Ivan Krndelj,
also a Croat, said Brcko remains a positive example for the
rest of the country but that it was too early for the
international community to leave Brcko. Hoh assured him that
the U.S. will stay engaged and, at this time does not support
ending the supervisory regime.

DODIK FOCUSES ON ECONOMIC SUCCESSES
--------------


3. (SBU) During an October 17 meeting, RS Premier Milorad
Dodik highlighted the RS's economic successes and told Hoh
that the RS government is currently considering how to spend
the 1.5 billion BAM (over one billion USD) in revenues from
privatizations of the telecom and oil industries. He also
praised USAID involvement in the RS, particularly a program
focused on eliminating regulatory impediments to business.
Dodik complained that larger political issues pushed by the
international community detract politicians from
concentrating on the economy. He said that RS leaders are
aware that there is no alternative to a European future, and
"we will work to harmonize our institutions towards that
goal." Dodik urged Hoh to "soften" the EU stance on police
reform, so that BiH could sign a Stabilization and
Association Agreement (SAA). Hoh said that the U.S. will
continue to guarantee the Dayton accords and the existence of
the RS within the Dayton framework. He reminded Dodik of the
negative effects of his inflammatory rhetoric.

RADOJICIC ON POLICE REFORM
--------------


4. (SBU) On October 17, RSNA speaker Igor Radojicic told Hoh
that the adoption of a comprehensive police reform model is
all but impossible now, given the negative political
atmosphere and the deep, irreconcilable differences between
BiH leaders. Radojicic preferred a "more practical approach"
involving the implementation of individual elements, such as
a BiH-level forensics institute, that the parties can agree
on now.

CAVIC AND MIKES CONCERNED ABOUT POLITICAL SITUATION
-------------- --------------


5. (SBU) Former RS President Dragan Cavic described his
ongoing struggle with the leadership of his Serb Democratic
Party (SDS). Cavic confirmed recent media reports that the
SDS is considering ousting him from the party, because he
released transcripts of conversations between ICTY Chief
Prosecutor Carla Del Ponte and former RSNA speaker and SDS
president Dragan Kalinic, that took place in Cavic's office.
He said the party has been steadily radicalizing in recent

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years, and claimed that the people of the RS are tired of the
"wartime fossils" in the SDS leadership.


6. (SBU) Constitutional law professor and deputy speaker in
the RS council of peoples Miroslav Mikes, a Jewish member of
the SNSD, told Hoh that he is, "completely disappointed with
the situation in BiH," saying that, "society is much more
divided than it was three to four years ago." He said that
it is impossible to build a state when Bosniaks portray
themselves as the only victims, and Serbs as the only
aggressors. Foreshadowing things to come, Mikes said that
the High Representative should start imposing more measures,
in order to improve the functionality of the state and propel
it on the path towards Europe.

EXPERIENCE OF AMERICAN BUSINESS REPRESENTATIVES
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7. (SBU) Over lunch, representatives of American investors
in the RS challenged Dodik's rosy views on the economy,
saying that they have not noticed any economic upturn at the
micro level. Kentrik representative Scoggins Berg praised
the RS government, saying that the company is moving forward
with several projects including a nurse exchange, the
development of an emergency response system, and the
rehabilitation of the Banja Luka airport. Nicholas Penny,
Director of the Banja Luka Brewery, described being forced to
retain a larger workforce than needed due to a privatization
agreement and general opposition to change. Penny, however,
praised VAT legislation, saying that it prevents tax evasion
and has reduced financial irregularities to almost zero.

HIREP LAJCAK ON RUSSIANS, EUMM AND ANTI-CORRUPTION
-------------- --------------


8. (C) In a meeting with High Representative Miroslav Lajcak,
Hoh expressed strong US support for OHR and the need for
continued close consultation. Lajcak expressed appreciation
for U.S. support and agreed it important for OHR and US to be
on the same page. Lajcak lamented Russian opposition to the
decisions imposed on October 19 and the apparent Russian
desire for international community inaction in Bosnia.
Lajcak stressed that if we are serious about staying for the
long haul, we must define OHR's mission and make the
investment to accomplish it.

9 (C) Hoh raised the issue of supplementing the EUSR
political section with personnel from the winding-down EU
Monitoring Mission. Hoh made it clear that the USG opposes
changing the PIC-agreed balance between EUSR and OHR, that
the current political situation requires greater focus on
OHR's Dayton priorities, and that additional personnel
resources should go to areas such as the reconstituted OHR
Crime and Corruption Unit. Lajcak said others in his office
were pushing this initiative without his blessing and that he
was ambivalent. He recommended voicing our displeasure about
this to Brussels, which Hoh promised to do. Lajcak agreed on
the importance of increased OHR anti-corruption efforts and
asked us to support them in the upcoming PIC.

LAGUMDZIJA AND TIHIC
--------------


10. (C) In a meetings with SDP President Zlatko Lagumdzija
and SDA President Sulejman Tihic, Hoh expressed deep US
concern at the political stalemate in Bosnia and urged the
party presidents to move Bosnia forward on the road to
Euro-Atlantic integration. Lagumdzija blamed Dodik and
Silajdzic for current political problems. He lamented that
Silajdzic's calls for the abolishment of the RS have
strengthened Dodik. He added that Silajdzic had radicalized
Bosniaks by claiming the west has turned its back on them.
Lagumdzija also emphasized the growing link between political
party leaders and major organized crime figures. Hoh urged
Lagumdzija to speak out and ensure his part played the role
of constructive opposition.


11. (C) Tihic faulted Silajdzic and Dodik for blocking police
reform and protecting organized criminals for economic gain.
Tihic accused some of his own party members, and Islamic
Community head Ceric, for undercutting his influence. Tihic
lamented the radicalization of Bosniaks and reiterated his
commitment to a tolerant, open, and multi-ethnic environment.
Tihic said "if I am scared by the long beards and short
pants of Wahhabis, I can only imagine how Croats and Serbs

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feel." In order to put things back on track, Tihic said the
High Representative should enforce the full implementation of
Dayton, including complete refugee returns, catching war
criminals, and Annex IX implementation. Hoh stated that the
IC would continue to apply pressure to get Bosnia back on the
reform path, but urged Tihic to speak out more and weigh in
with recalcitrant politicians.

DEFENSE MINISTER ON PROPERTY TRANSFER
--------------


12. (C) Hoh met with Minister of Defense Selmo Cikotic on
October 19. Cikotic provided an update on defense reform
implementation, which he evaluated to be progressing a
successful pace. Cikotic noted two areas of concern: the
transfer of defense properties from the entities of the state
and the lack of readiness among other Bosnian institutions to
undertake the necessary steps to integrate with NATO. Cikotic
said he worried that the defense property working group
charged with drafting the property transfer agreement might
be an "excuse to not solve the problem," and that "there is
no longer any more space to set this issue aside." Cikotic
also noted that the MFA needed to assume substantially more
responsibility in Bosnia's NATO integration process, but
currently lacks the capacity or manpower to do so.

RELIGIOUS LEADERS
--------------


13. (C) In separate meetings Hoh discussed religious freedom,
refugee returns and property restitution with Cardinal Puljic
and the Executive Staff of the Inter-Religious Council (IRC).
Cardinal Puljic highlighted some positive steps in the last
few years, but complained of the failure to enact refugee
returns, specifically of 220,000 Croats to the RS. Although
many wished to return, lack of assistance funds, lack of job
opportunities and infrastructure, and feelings of insecurity
prevent Croat returns. Even in the Federation Puljic
complained some Croats face discrimination in job seeking and
social benefits. Puljic and Hoh agreed that police reform in
which all citizens were protected equally by the police
throughout Bosnia would help the return situation. IRC
Council members stressed the need for the restitution of
religious properties and continued dialogue, even if
agreement cannot be reached on contentious issues. They added
that the lack of steady funding from the State for religious
institutions made religious leaders more dependent on
piecemeal handouts from politicians.

COMMENT
--------------


14. (C) Chris Hoh's visit from October 16-20 came on the cusp
of the failure of police reform and the resulting
announcement by the High Representative of Bonn Powers
impositions. Many interlocutors expressed frustration by the
lack of political progress toward reforms and EU accession as
well as fears that the international community would give up
on Bosnia. Although they may not agree on who is culpable
for Bosnia's political backsliding, all interlocutors were
reassured at expressions of US support and our intention to
stand by Bosnia until the project is complete. END COMMENT


15. (U) This cable has been cleared by EUR/SCE Office
Director Christopher Hoh.
ENGLISH