BOSNIA: DODIK REJECTS US-EU PROPOSAL FOR TRANSCO

UNCLAS SECTION 01 OF 02 SARAJEVO 001707 SENSITIVE SIPDIS STATE FOR EUR/FO JONES, EUR/ACE HYLAND, FOOKS, STINCHCOMB E.O. 12958: N/A TAGS: EINV ENRG PINR PREF PREL BK SUBJECT: BOSNIA: DODIK REJECTS US-EU PROPOSAL FOR TRANSCO NEGOTIATIONS REF: SARAJEVO 1623 ¶1. (SBU) Post received a response from Prime Minister of the Republika Srpka on Friday, October 31 that answered the Ambassador English and EU Ambassador Kourkoulas, joint letter proposing reform of Electroprenos (TRANSCO),the state-run electricity transmission company (reftel). The English translation of the letter is as follows: October 31, 2008 Dear Sirs: With reference to your letter dated October 24, 2008, regarding problems in Elektroprenos BiH and proposals for resolving them, I wish to present to you my position on the issue. It is a well known fact that the situation in Elektroprenos BiH is difficult, with a number of problems in the functioning and in the management, which Republika Srpska, as a shareholder, has been stressing for a while now via its representative in the shareholders assembly and has proposed ways for overcoming the stalemate. Our proposal regarding the removal of the said blockage in the functioning (management and decision-making, balanced planning of the development of the transmission network, company,s investments, structure and number of employees) is absolutely substantiated, just and based on the existing legal regulations in BiH. This is especially the case since this is a company that is a specific economic entity (established under special law, the founder are the two entities, there is no profit sharing for 10 years, and other),and when it comes to its functioning, apart from the existing regulations that need to be amended and harmonized, we need to apply the usual standards and principles in managing companies that are accepted worldwide. Any other way of overcoming the problems in the company would represent an act of violence over the principle of legality. We appreciate your intentions as representatives of the international community to help in resolving this problem, but in our opinion, your proposal breaches the framework of local legislation. On the other hand, the said proposal will not contribute to confidence building between the parties, and therefore we are not in a position to accept it. However, the RS Government remains open for all activities in accordance with law that will normalize and improve the work of the company, and thus provide a full realization of responsibilities that derive from the Treaty on the Establishment of the Energy Community and other international agreements. Having this in mind and in accordance with legal regulations and general documents of the company, I have convened an extraordinary session of the shareholders assembly for December 2, 2008, at the company,s headquarters, which will focus on the current problems in the functioning of the company. I sincerely hope and expect that the extraordinary session of the shareholders assembly will be held, at which time we will make decisions in the interest of both shareholders and in the interest of the company as a whole. With Respect, Dodik NEXT STEPS AND COMMENT -------------- ¶2. (SBU) Dodik has now made his intentions known ) he is not willing to negotiate in good faith as he agreed to do with Ambassador on October 16 (reftel). We intend to send a letter back to Dodik, expressing our disappointment with his intentions to move forward with his February proposal at the December 2 shareholders session and making clear that his position is not consistent with the September 12 Peace Implementation Council (PIC) statement on TRANSCO. The clear thrust of his proposal is to re-divide TRANSCO into three, ethnically-based &sub-TRANSCOs8, which amounts to a de-facto dissolution of the company and a roll-back of the reform that was a precondition to the SAA. We will brief the PIC Ambassadors this week on the letter, and encourage SARAJEVO 00001707 002 OF 002 TRANSCO to be a leading agenda item at the PIC meeting in Brussels on November 19. We will continue to push for European support to continue pressure on Dodik to prevent him from moving forward with his plans to essentially destroy TRANSCO. ENGLISH