1. (U) This cable was coordinated with Embassy Ljubljana.

Summary


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2. (C) The early March visit of Slovenian PM Pahor to
Belgrade marked a new step forward in the bilateral
relationship. Sidestepping Kosovo, Pahor's meetings with
Serbian President Tadic and PM Cvetkovic resulted in progress
on longstanding disputes involving social insurance, minority
issues, and Yugoslav property succession issues. Discussions
between the mayors of Ljubljana and Belgrade, as well as a
delegation of 56 Slovenian businessmen, focused on areas of
economic cooperation in the midst of the economic crisis.
Though both sides are recognizing the value of a rejuvenated
bilateral relationship, longstanding misgivings and
suspicions on both sides will make the improvement of ties
slow and deliberate. End Summary.

Pahor Visit to Belgrade Signals "New Chapter"


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3. (C) Slovenian Prime Minister Borut Pahor's visit to
Belgrade on March 7 was touted by Serbian and Slovenian
officials as a turning point in the bilateral relationship
between Belgrade and Ljubljana. The first high-level
bilateral visit in over two years, the visit included talks
with Serbian PM Cvetkovic and President Tadic, discussions
between Ljubljana Mayor Zoran Jankovic and Belgrade Mayor
Djilas, and meetings between a delegation of 56 Slovenian
businessmen and their counterparts hosted by the Serbian
Chamber of Commerce. Slovenian Minister of Economy Matej
Lahovnik was also a part of the delegation, signaling the
importance of economic ties. President Tadic declared that
Serbia would count on the support of Ljubljana in achieving
Serbia,s goals for EU integration despite the cloud that
Slovenia,s recognition of Kosovo had brought over bilateral
relations. Jadranka Sturm-Kocjan, the Slovenian DCM in
Belgrade, told us that Serbia postponed the visit of Croatian
Prime Minister Sanader to late March to ensure that Pahor
would visit Belgrade first, a signal that Ljubljana believed
indicated Belgrade,s seriousness in rejuvenating bilateral
ties. Kocjan added that the previous Slovenian government of
Januz Jansa had "written off" relations with Serbia and that
Pahor,s desire to reach out to Belgrade signified a more
proactive approach of Ljubljana toward Belgrade.

Agreement to Disagree on Kosovo


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4. (C) Slovenia's recognition of Kosovo in February 2008
effectively froze bilateral relations until Pahor,s
accession to power. Kocjan told us that Cvetkovic and Pahor
had agreed at the outset of their meetings not to discuss

Kosovo and to tacitly agree to disagree. Pahor discussed
Kosovo with Tadic during their 40-minute tete-a-tete meeting,
Kocjan said, but Pahor only revealed to her, without
elaboration, that Tadic said "Serbia has only one plan for
Kosovo." Pahor's Foreign Policy Advisor, Marko Makovec, on
March 9 told Charge in Ljubljana that Tadic asked Slovenia
not to promote its relations with Kosovo too much and that
Pahor agreed to Tadic's request that Slovenia hew to the
"average EU" position.

Progress on Sticking Points...


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5. (SBU) Cvetkovic and Pahor signed a memorandum of
understanding for technical assistance in European affairs
(including support for Serbia's Schengen White List
aspirations), which Cvetkovic said showed that Slovenia and
Serbia reached agreement on "almost all questions." Key
among these was the longstanding disagreement on social
insurance policy for former Yugoslav citizens from Serbia who
settled in Slovenia, and vice versa. (Serbia and Slovenia are
the only two republics of the former Yugoslavia that have not
reached an agreement on social insurance. About 10,000 Serbs
living in Slovenia lack social insurance, according to our
MFA contacts.) Cvetkovic announced that both sides agreed to
a framework for negotiations and expected an agreement to be
reached by the end of the year. Our Serbian and Slovenian
contacts ascribed this breakthrough to the Slovenian
government's adoption of a negotiation framework on March 6,

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in large part motivated by a desire to demonstrate Slovenia's
ability to reach agreement on contentious issues at a time
when Ljubljana is embroiled in a protracted border dispute
with Croatia (reftel).



6. (SBU) The two sides made progress on resolving
disagreements on "erased persons" and minority issues.
(About 26,000 Yugoslav citizens lost their Yugoslav
citizenship without gaining another, thereby resulting in
their being "erased" from any country,s citizenship rolls.
A majority of the "erased" were reportedly Serbs.) Cvetkovic
and Pahor reached an agreement to hold negotiations on how to
quicken the granting of citizenship to "erased persons."
Belgrade has been pushing to attain minority status for
3000-4000 Serbs in Slovenia akin to the treatment Slovenia
grants Hungarians and Italians, a concession Ljubljana
refuses to grant citing constitutional provisions
specifically bestowing such minority status on Hungarians and
Italians. Cvetkovic and Pahor sought to defuse this issue by
agreeing to develop language and education programs for Serbs
in Slovenia.

But Longstanding Misgivings and Suspicions Endure


--------------------------



--------------------------





7. (SBU) The deepening of bilateral relations will be slow
in light of the deep-seated prejudices that afflict both
sides. Resentment of Slovenia's precipitating the break-up
of Yugoslavia in the early 1990s and jealousy of Slovenia's
economic successes are common attitudes in Belgrade. One
mid-level MFA official told us that Serbs see Slovenes as
weaseling to win benefits without working for them. He
pointed to Mercator's acquisition of a 400 million euro loan
from a local branch of Raiffeisen as a case in point. The
same official ascribed the lack of progress in bilateral
relations until recently to the Slovenian Embassy's
preoccupation with business promotion at the expense of
political relations.



8. (C) For their part, Slovenes continue to chafe at Serbian
treatment of Slovenian property in Serbia that was
nationalized following the dissolution of Yugoslavia. While
voicing optimism in Cvetkovic's intent to negotiate to reach
a resolution, Kocjan noted that former Serbian dictator
Slobodan Milosevic had given Slovenian real estate to
Socialist Party of Serbia (SPS) officials and that she
suspected that many Serbian interests had a stake in opposing
a resolution. Kocjan also told us that Ljubljana would not
agree to a presidential level exchange until the Serbian
government apologized for the damage caused to the Slovenian
Embassy in Belgrade in February 2008 following Kosovo,s
independence. During a visit to Ljubljana in February 2009,
Kocjan said, Foreign Minister Vuk Jeremic made clear that
such an apology would not be forthcoming.

Economic Ties Will Bind


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9. (SBU) Slovenia continues to maintain a large economic
footprint in Serbia which ensures continued contact in the
business spheres with spillover into the political realm.
Slovenian companies have invested approximately $2.2 billion
in Serbia since 2000 and Slovenia maintains the largest
numbers of investors in the country, according to Milos
Bugarin, president of the Serbian Chamber of Commerce.
Serbia last year exported about 17 million euro worth of
goods into Slovenia. Serbia's real-estate conglomerate Delta
Holding in March revealed that it placed a bid for a 48%
stake in the Slovenian retail chain Mercator.

Comment


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10. (C) Pahor's visit to Serbia represents another step in
Tadic,s efforts to demonstrate Serbia's ability to be a
responsible member of the neighborhood. Though longstanding
prejudices against Slovenia run deep, Tadic recognizes that
Ljubljana could be a useful voice in the EU for Serbia on
Schengen White List and other accession issues. Slovenia, on
the other hand, will seek from Belgrade the protection of its
markets and economic assets in Serbia as well as seek to
encourage Serbia along the path towards Euro-Atlantic
integration. There is a long way to go to repair the
bilateral relationship, but it is encouraging to see both
sides recognizing the value of closer cooperation, the
success of which would bode well for Serbia's EU aspirations
and regional stability. During a chance meeting, DCM praised

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Serbian presidential foreign policy advisor Jovan Ratkovic on
the constructive and future-oriented atmosphere of both the
Slovenian and March 20 Croatian Prime Minister visits.
(Croatian PM visit to be reported septel.) Obviously pleased
with the two visits, Ratkovic offered that Serbia would next
welcome visits by the Montenegrin and Macedonian Prime
Ministers following their respective elections. End Comment.
MUNTER