ZAGREB WEEKLY ACTIVITY REPORT - OCTOBER 2, 2008

UNCLAS ZAGREB 000690 SIPDIS FOR EUR/SCE, EUR/PPD, EUR/RPM AND EUR/ERA OSD FOR POPOVICH E.O. 12958: N/A TAGS: PREL PGOV HR SUBJECT: ZAGREB WEEKLY ACTIVITY REPORT - OCTOBER 2, 2008 ¶1. (U) CROATIA HOSTS HIGH-LEVEL DoD VISITORS: Croatia hosted two senior-level visits from the Department of Defense over the past week. First, on September 25-27, Croatian Chief of Defense General Josip Lucic hosted a gathering of CHODs from the Adriatic Charter and several other European and NATO countries, including Deputy Commander USEUCOM Vice Admiral Gallagher and US Navy Forces Europe and CINC JFC Naples Commander Admiral Fitzgerald. Then, on September 30, Deputy Secretary of Defense Gordon England visited Zagreb for a series of meetings with the President, Prime Minister, Defense Minister and Foreign Minister. Details are reported in ZAGREB 688. ¶2. (SBU) FUGITIVE OFFICIAL VLADIMIR ZAGOREC EXTRADITED FROM AUSTRIA ON CORRUPTION CHARGES: Retired Croatian general Vladimir Zagorec was arrested September 26 in Vienna, and extradited to Croatia on October ¶2. Croatian authorities suspect Zagorec for the theft in the 1990's of gems worth 5.5. million dollars left as a down payment for an arms purchase, when Zagorec was in charge of weapons procurement as an assistant defense minister. For the past year and a half, Zagorec has fought his extradition to Croatia, claiming that his prosecution is politically motivated and that he would be killed as soon as he is committed to Croatian custody. Zagorec claims to be at risk from his ex-friend-turned-enemy Hrvoje Petrac, currently in prison over the 2004 kidnapping of Zagorec's son. During the kidnapping trial Petrac was the first to associate Zagorec with the missing gems, leading to the criminal investigation against Zagorec. Reports indicate that the prosecution could now seek to turn Zagorec into a cooperative witness to develop what could be a larger case against those who may have illegally profited from weapons sales during the nineties. (ZTomic) ¶3. (U) GOVERNMENT FINALLY ANNOUNCES DECISION ON LNG TERMINAL LOCATION: Deputy Prime Minister Polancec has publicly announced the government's acceptance of Omisalj on the island of Krk as the site for Croatia's liquefied natural gas terminal, ending a two-year selection process. The government must now agree on the final structure of its 25 percent stake in the development consortium. The conceptual design of the project will reportedly not be completed until the first quarter of calendar year 2009, after which time an environmental impact study must be completed before construction can begin. (DWestfall) ¶4. (U) CROATIAN WAR VETERANS FUND SELLS INA SHARES TO MOL: The sale of INA to Hungarian MOL took a large step forward with the decision by the Croatian War Veterans Fund this week to sell its block of 700,000 INA shares to MOL at the price of 2,800 kuna per share. The Veterans Fund shares represent 7 percent of INA's total shares. This share acquisition means MOL will now control approximately 33 percent of INA. Previously, fund managers had expressed doubts about the offer, potentially calling into question MOL's plans to acquire a majority stake in INA through an additional share swap with the Croatian government, which still controls 44 percent of INA. Press speculation that the fund's management board had been under heavy government pressure to accept the MOL offer was denied by the Minister of Veteran's Affairs. (DWestfall) Bradtke