CROATIA'S FISHING ZONE - A TRAIN WRECK IN THE

C O N F I D E N T I A L SECTION 01 OF 02 ZAGREB 001065

SIPDIS

SIPDIS

FOR OES, EUR/SCE, EUR/PPD AND EUR/PGI

E.O. 12958: DECL: 01/01/2017
TAGS: ECON EFIS SENV PREL PGOV HR
SUBJECT: CROATIA'S FISHING ZONE - A TRAIN WRECK IN THE
MIDDLE OF THE ADRIATIC?

REF: A. ZAGREB 1036

B. 2006 ZAGREB 1504

Classified By: Rick Holtzapple, POL/ECON, Reasons 1.4 B/D


1. (C) SUMMARY: The Croatian Peasants' Party (HSS) and its 6
seats in parliament are nearly certain to be a member of any
governing coalition formed after Croatia's November 25
elections. The HSS has said a primary condition for its
joining any coalition is application of Croatia's Protected
Ecological and Fishing Zone (ZERP) to all states, including
EU member states, on January 1, 2008 as currently scheduled
under legislation passed at the end of last year. Italy and
Slovenia (holder of the next EU presidency) condemn Croatia's
'unilateral' application of the ZERP. EC officials in Zagreb
as well as Croatian diplomatic sources have told us they
believe implementation of the ZERP will slow Croatia's EU
accession negotiations. HSS leader Josip Friscic has said
the ZERP issue alone would not bring down a coalition, but
that the HSS would not vote to postpone or suspend the ZERP.
The HSS, however, will find itself in a difficult
balancing-act, trying to avoid reneging on a key campaign
promise while simultaneously not damaging Croatia's relations
with the EU. This issue looms increasingly large as the
January 1 application of the ZERP draws near. End summary.

BACKGROUND ON ZERP
--------------


2. (SBU) In 2003, just prior to the last round of
parliamentary elections, the Croatian parliament passed a law
declaring the creation of a Protected Ecological and Fishing
Zone (ZERP) in the area of the Adriatic between the outer
edge of Croatia's territorial waters and the midpoint of the
Adriatic, where Croatia's Exclusive Economic Zone meets
Italy's. Restrictions within the ZERP include limits on size,
quantity, fishing seasons, and vessel size and horse power.
The creation of the ZERP, long sought by Croatia's fishing
industry, provoked a quick reaction from Italy, whose large,
subsidized fishing fleet regularly trawls the waters of the
Croatian half of the Adriatic, as well as Slovenia, which
while lacking much of a fishing fleet, has argued the
Croatian action infringes on the on-going Croatia-Slovenia
dispute about maritime boundaries in the Piran Bay. At that
time the GOC deferred its application to EU member states,
thus avoiding confrontation with its EU neighbors over the
issue. Prior to opening Croatia's accession negotiations in
2004, the EU urged the Croatians to enter into trilateral
negotiations on the issue with Italy and Slovenia to reach a
mutually acceptable arrangement on how to apply the ZERP.


3. (SBU) The result of this move was that the new rules
applied only to the Croatian fleet, and Italian boats
continued to fish on the Croatian side of the Adriatic
without any restrictions. This situation led to charges of
"discrimination" against Croatian fishermen that found new
political traction in December 2006 as MPs began to look
toward the 2007 elections. At that time, the government
managed to beat back opposition calls (led by the HSS) for
immediate activation of the ZERP, but acquiesced in a
decision to delay its application to EU member states until
January 1, 2008 (REF B). It also reiterated its hope that an
agreement on the ZERP could be reached with Italy and
Slovenia before that date.

ZERP'S POST-ELECTIONS RISE -- AND COMPROMISE?
--------------


4. (U) Although the European Union continued to warn that the
extension of the ZERP to its member states would be an
obstacle to Croatia's accession, the compromise reached in
December 2006 largely neutralized the issue for the 2007
elections. The ZERP was raised as an issue during the
campaigns but never gained much traction. Both HDZ leader
Ivo Sanader and SDP President Zoran Milanovic were able to
defer most discussion by simply noting that the December 2006
law was in place, and that the ZERP's application was
scheduled to expand on January 1. Most observers, however,
believed that any new government, once the elections had
passed, would bow to EU pressure and once again postpone
application of the ZERP at least until after the Slovene EU
Presidency in the first half of 2008. It is the emergence of
the HSS as the "king-maker" that has once again made ZERP a
major issue, and raised doubts whether a new government will
be able to muster the necessary votes for a further
suspension of the ZERP. (NOTE: As the new Sabor will not
convene until late December, any suspension of the ZERP was
unlikely until sometime in the new year, but as long as

ZAGREB 00001065 002 OF 002


Croatia did not vigorously enforce any restrictions, such a
lag would not be a major complication. END NOTE.)


5. (U) On November 29, Italy and Slovenia asked for another
year's delay in application of the ZERP and repeated warnings
that they will not support Croatia for EU accession if the
ZERP is applied January 1st. The next day, EU Fisheries
Commissioner Joe Borg announced that the EU will help
negotiate a temporary solution if asked by Italy and
Slovenia. During a visit to Brussels on December 5, Croatian
President Stipe Mesic is reported to have told EU Enlargement
Commissioner Rehn that he was confident that Croatia's new
government would hold off on applying the ZERP until an
agreement could be reached with Italy and Slovenia.


6. (C) At a December 5 lunch, FM Kitarovic and State
Secretary Biscevic, however, expressed concern to the

SIPDIS
Ambassador regarding the potential impact of the HSS's ZERP
demands. At a minimum the EU would freeze any progress
toward negotiation on the Fisheries chapter. As negotiation
of the chapter has not yet begun, the immediate practical
impact of such an event would be minimal, but it would be a
very negative way for the new government to begin its term on
its single most important priority for the next two years.
Biscevic commented that the ZERP issue would provide those in
Brussels who were looking for any excuse to slow-walk further
EU enlargement with a perfect excuse. Vincent Degert, head
of the European Commission Delegation to Croatia, has been
similarly gloomy, telling the Ambassador privately that
application of the ZERP could wreak even greater havoc in
Croatia's EU negotiations than just in the Fisheries chapter.


7. (U) It is still possible that the HSS will blink. Friscic
has said that if the new government brings further suspension
of the ZERP to a vote, the HSS would vote against it, even as
members of the ruling coalition. However, when asked by the
press if HSS members would leave the government in such a
case, Friscic replied that they would not. Both Friscic and
HSLS leader Djurdja Adlesic insist the HSS is not a
"Euro-skeptic" party and does not want to halt or delay
Croatia's EU accession. But they say Croatia needs a
"different diplomacy" on the issue. Friscic said that if
Italy and Slovenia have their interests, Croatia has its own
interest as well and should not abandon it.

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


8. (C) Although from a conservation perspective Croatia's
regulation of its Adriatic fisheries is sensible, the policy
appears politically untenable. The benefits of the ZERP pale
in comparison to the Croatia government's determination to
join the EU, and Croatia's position as an EU candidate gives
Italy and Slovenia considerable leverage. The nod from
Friscic that the HSS would not bring down the coalition over
the issue may provide the next government the maneuvering
room it needs to seek a face-saving compromise. But having to
reverse the December 2006 parliamentary decision makes this a
decidedly more difficult and more public political u-turn,
and the governing coalition cannot necessarily count on the
opposition to help out. The ZERP could, therefore, still
provoke a crisis in the very early days of the new
government, and clearly highlights how Croatia's new
coalition is likely to find governing more complicated than
the previous HDZ-led government. We expect the government
can manage the issue, but Croatia's repeated concessions to
its EU neighbors over the fishery issue will sour public
opinion in Croatia toward the EU even before the accession
negotiations get to the truly difficult subjects such as
subsidies and shipbuilding. END COMMENT.
BRADTKE