BOSNIA- RS GOVERNMENT STYMIES DEFENSE PROPERTY

C O N F I D E N T I A L SARAJEVO 002586

SIPDIS

SIPDIS

DEPT FOR EUR (DICARLO),EUR/SCE (HOH, SILBERSTEIN, FOOKS,
STINCHCOMB),EUR/RPM; DEFENSE FOR FATA, BEIN; NSC FOR BRAUN

E.O. 12958: DECL: 12/03/2017
TAGS: PGOV PREL PINR MARR BK
SUBJECT: BOSNIA- RS GOVERNMENT STYMIES DEFENSE PROPERTY
AGREEMENT

REF: SARAJEVO 1563

Classified By: Ambassador Charles English for reasons 1.4 (b) and (d)


1. (C) Summary. NATO HQ,s efforts to finalize a
comprehensive transfer agreement on movable defense property
were dealt a serious setback on November 29. At a meeting in
Banja Luka, Republika Srpska (RS) government representatives
back-tracked on initial commitments made to NATO HQ and
declined to support NATO,s tabled draft transfer agreement.
The agreement, while transferring ownership of all arms and
ammunition to the state, was highly beneficial to the
entities regarding profit sharing mechanisms on the sale of
these items. The RS representatives indicated that they
would only support an agreement in which the RS maintained
control over surplus stockpiles of defense articles. This
position is directly at odds with the July political
agreement on defense property, and raises concerns that the
RS now seeks to retain control of some stockpiles of arms and
ammunition. Following this development, Minister of Defense
Selmo Cikotic encouraged the Ambassador to directly engage
with RS Prime Minister Milorad Dodik to push for a resolution
of the issues. Cikotic also said he was sending a letter to
the High Representative requesting his intervention in the
matter. Considering the importance of this issue, A/S Fried
should raise this with the Presidency and Dodik during his
December 4-5 visit to Sarajevo. End Summary.

RS BLOCKS DEAL ON MOVABLE PROPERTY
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2. (C) RS government representatives effectively scuttled a
deal on the transfer of movable defense property from the
entities to the state during a meeting with senior NATO HQ
Sarajevo officials in Banja Luka on November 29. The meeting
had been scheduled to finalize the draft of the transfer
agreement, originally tabled by NATO HQ. It would have
transferred all arms, ammunition and explosives to state
ownership. During the meeting, the RS team, led by RS
Government Military Advisor Dusko Cetkovic, introduced new
proposals that would have permitted the RS to maintain
stockpiles of these items and determine their final
disposition. Such a proposal was in direct contradiction to
principles established by NATO, EUFOR and OHR and violated
the terms of the July 2007 political agreement on defense
property which had been approved by the state and entity
governments (reftel). Following the surprise introduction of
the RS proposals, the NATO HQ legal advisor told us that all
work and negotiations on the transfer agreement would likely
be suspended until the RS demonstrated a renewed political
commitment to resolving the issue.

A GOOD DEAL FOR THE RS
--------------


3. (C) NATO HQ's draft transfer agreement was extremely
generous in financial terms to the entities. The agreement
had been drafted and negotiated under the auspices of the
defense property working group, composed of representatives
from the state, entities and NATO, which was formed after the
parties had reached the political agreement in July. The
working group had met sporadically for several months, but
found new momentum after the October 2007 Peace
Implementation Council noted the need to resolve the
long-standing defense property issues by the close of the
year. Under NATO HQ's proposed technical agreement, the
entities would be entitled to 80 percent of the proceeds from
the sale of any defense items from their former stockpiles.
The Ministry of Defense had provided further guarantees that
the sale of any defense articles would be conducted in a
fully transparent manner, and RS and Federation government
representatives would be permitted to play a role in
identifying buyers for the surplus items. NATO HQ and the
MOD had thought that such major concessions would ensure
entity approval of the transfer agreement, and the Federation
had already signed on to the proposal. The RS government
negotiating team had also signaled that the agreement was
acceptable, setting up the Banja Luka meeting where only
minor technical issues were to be harmonized.

TIME FOR POLITICAL PRESSURE
--------------


4. (C) The Ambassador raised USG concerns over the recent
setback with other NATO Ambassadors, Minister Cikotic, and
Foreign Minister Sven Alkalaj at a forum discussion December

3. The Ambassador stressed that a continued failure to
resolve the property issues threatened Bosnia's NATO
accession hopes, and undermined the substantial progress
already realized in defense reform. The Ambassador noted
that in the current political environment, the RS' position
seemed a further attempt at political obstructionism and was
troublesome considering the move came at the same time the
broader political crisis in Bosnia was seemingly defused.
The Ambassador urged the NATO Ambassadors to collectively and
bilaterally "bring pressure to bear" on the RS leadership to
meaningfully engaged on defense property and quickly bring
the issue to a close. Minister Cikotic stated that he fully
supported this approach, and that he would soon send a letter
to the High Representative requesting his intervention as
well. Alkalaj said that defense property was a "huge
stumbling block" as Bosnia moved closer to NATO, and urged
the Ambassadors to raise their concerns with Dodik and the
Presidency. In a private discussion following the forum,
Cikotic expanded on his remarks, telling the Ambassador that
Dodik's government had staked out a position that was
completely unacceptable-- that the RS should maintain
ownership of surplus arms and ammunition. Cikotic said that
Dodik was "key" to resolving the impasse, and strong
political pressure should be brought to bear on him.

COMMENT: SERIOUS IMPACT FOR US INTERESTS
--------------


5. (C) The RS government's decision to block the agreement on
movable defense property threatens to derail the process
created to resolve these issues that was established after
the July political agreement. Aside from creating further
delays in a process that, under provisions in the 2005 Law on
Defense, was to be concluded 23 months ago, the failure to
reach an agreement has substantial impact on Bosnian defense
reform, a key USG policy success, and our bilateral security
agenda. While the Armed Forces recently filled out its new
force structure, without formal control over supplies and
other material, the state has been hesitant to move items
across the entity boundary line and fully supply some units.
Furthermore, until the property issues are resolved, the
Armed Forces will remain stretched to the limit guarding and
maintaining the substantial volume of both movable and
immovable (land, bases) property that could otherwise be
liquidated. This in turn has impacted the Ministry of
Defense's and Armed Forces' ability to provide additional
forces to coalition deployments overseas. Without freeing up
forces currently engaged in menial guard duty, the Armed
Forces will be unable to make any further substantial
contributions to Iraq, Afghanistan or other peace support
operations. Considering the importance of this issue, A/S
Fried should raise this with the Presidency and Dodik during
his December 4-5 visit to Sarajevo. End Comment.
ENGLISH