BOSNIA - DAS JONES' MARCH 1-4 VISIT TO SARAJEVO

C O N F I D E N T I A L SECTION 01 OF 07 SARAJEVO 000317

SIPDIS

DEPARTMENT FOR EUR (JONES),EUR/SCE (HYLAND/FOOKS)

E.O. 12958: DECL: 03/16/2019
TAGS: PGOV PREL BK
SUBJECT: BOSNIA - DAS JONES' MARCH 1-4 VISIT TO SARAJEVO

REF: A. STATE 18262

B. SARAJEVO 223

C. SARAJEVO 241

Classified By: Charge Judith Cefkin for Reasons 1.4 (b) and (d)


1. (C) SUMMARY During his March 1-4 visit to Sarajevo DAS
Stuart Jones met with leaders of all major political parties,
members of the presidency, Defense Minister Cikotic, Prime
Minister Spiric and Foreign Minister Alkalaj. He also met
with representatives from international financial
institutions and ambassadors from PIC countries. Jones
stressed that the U.S. would remain strongly engaged in
Bosnia, that the U.S. supports the Prud process, that
conditions have not yet been met for closing the Office of
the High Representative (OHR),and that the U.S. could not
accept secession by the RS or even constitutional provisions
for a referendum on secession. These themes were all
highlighted in the extensive local media coverage of the
visit.


2. (C) Party for Democratic Action (SDA) President Sulejman
Tihic drew a dark picture of the Bosnian political scene, and
argued against closing OHR. Republika Srpska (RS) Prime
Minister Dodik was conciliatory during his meeting, said
parliamentarians from his party would support a
constitutional amendment on Brcko, and argued that a solution
on the state property problem is possible. Dodik added that
he would like to visit Washington this spring. Party for
Bosnia and Herzegovina (SBiH) President Silajdzic stuck to
his familiar script, saying that his party opposed the
current proposed constitutional amendment on Brcko, that the
Dayton Agreement has not been implemented, and that RS PM
Dodik is "continuing Milosevic's project" of creating a
political unit based on ethnic cleansing. Social Democratic
Party (SDP) President Lagumdzia stressed the need to fight
corruption in the Bosnian political scene, and said he would
join constitutional reform discussions only if the three
"Prud" partners could first develop a package more
comprehensive than the 2006 April package. Croatian
Democratic Movement in Bosnia and Herzegovina (HDZ BiH)
President Covic expressed optimism about the Prud process,
while Party for Democratic Progress (PDP) President Mladen
Ivanic said that Serbs might agree to piecemeal reform of the
constitution.


3. (C) Bosnian Serb Chairman of Presidency, Nebojsa
Radmanovic endorsed the Prud process and lamented the failure
of the April 2006 constitutional reform package. Croat
Member of the Presidency Zejlko Komsic argued that the new
High Representative needed to have strong personal authority
or come from a strong country that would back him. Defense
Minister Cikotic told Jones that he hoped to send Bosnian
units to Afghanistan by the end of this year, and said ethnic
integration of the Bosnian armed forces is going faster than
he expected. Foreign Minister Alkalaj told Jones he would
work on facilitating the travel to Bosnia of Kosovo's
representative to the Regional Cooperation Council (RCC),and
expressed support for Valentin Inzko to be the next High Rep.
Prime Minister Nikola Spiric said he would work to create
conditions for Bosnia to be able to accept more
infrastructure loans from international financial
institutions. At their dinner with Jones, several European
ambassadors expressed concerns about the procedural mistakes
made in the investigation of corruption in the RS, and said
this would distract from the international political agenda
here. Representatives of international financial
institutions said that Bosnia has not been able to take
advantage of 1 billion USD in possible loans because of
government inefficiency and political infighting. END SUMMARY

SDA President Tihic
--------------


4. (C) DAS Jones thanked Tihic for his efforts in the Prud
process. Tihic drew a dark picture of the Bosnian political
scene, and said it would be difficult to make further
progress on Prud, because RS politicians appeared unwilling
to accept a compromise on state property. However, he said
he had spoken with RS PM Dodik since February 21 when Dodik
walked out of the meeting on Prud issues in Mostar, and Dodik
said he is still willing to discuss the census issue and
state property. Tihic argued that many local media oppose
his efforts on Prud, portraying him as a traitor to fellow
Bosniaks because of his willingness to compromise. He said
he's getting the impression that "more people are ready to
raise rifles than to compromise."

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5. (C) Tihic argued against closing OHR. He said that
meeting "5 plus 2" requirements was not enough to justify
closure. OHR should remain, he argued, until constitutional
reform had created a functional government. Otherwise, he
said, government processes would be blocked as they have in
the past by ethnic interests and no mechanism would be in
place to unblock them. The result could easily be chaos and
violence. Tihic also said that absent constitutional reform
there would be no institution in place to interpret Dayton
after OHR left.


6. (C) Tihic said he would probably meet with EU High Rep for
Foreign Policy Solana in Brussels on March 18 or 19 to convey
his concerns about Bosnia. Jones suggested that Tihic
consider traveling to Washington to ensure that the voice of
his party is being heard there, and urged Tihic to meet both
with government officials and representatives of civil
society. Tihic said he would be happy to visit Washington.



SNSD President Dodik
--------------


7. (C) RS PM and President of the Party of Independent Social
Democrats (SNSD) Milorad Dodik was conciliatory throughout
his meeting. Jones said international financial institution
representatives in Sarajevo had told him that a billion USD
in credit was potentially available to Bosnia for
infrastructure development if Bosnians could work out the
mechanics of how to divide it up and use it. Dodik said he
was interested in infrastructure development, and added that
the RS was already cooperating with the Federation on these
issues. For example, he said, the Federation and the RS were
jointly building a power plant, and the RS and Federation
were making progress in reaching agreements in the Fiscal
Council.


8. (C) Dodik noted that SNSD parliamentarians would support a
constitutional amendment on Brcko. They would attempt to
delete language in the amendment about "one or more"
entities, but would support the amendment even if the text
were not changed. The Ambassador discouraged Dodik from
suggesting changes to the text because it might induce others
to propose revisions. Regarding the Prud process, Dodik said
he feared that he and his "Prud" partners Sulejman Tihic and
Dragan Covic might have endangered the positive achievements
of the negotiations by introducing discussion of
constitutional reform. Dodik said a solution on the state
property problem was possible, adding that a commonly agreed
inventory of the property under discussion would help
considerably to resolve the issue.


9. (C) Jones said he was glad to hear that Dodik was pursuing
the path of dialogue, but noted that the newspapers were full
of talk of secession, and said this was inconsistent with the
"second condition" for closing OHR (a "positive assessment"
of the situation in Bosnia). Dodik said he is "not an
adventurer," and argued that if the RS had the possibility to
secede anchored in the constitution it could develop better
relations with the Federation. Jones said a public statement
to the effect that Dodik is not pursuing the secessionist
path would be welcome.


10. (C) The Ambassador noted that SNSD members such as RS
National Assembly Speaker Igor Radojicic and President
Radmanovic have participated in NGO led-discussions on
constitutional reform. While the Ambassador stressed that he
was not suggesting a new condition for closing OHR, he said
that SNSD participation in this NGO-led process would
contribute to a better political atmosphere and would be a
way to help convince the new administration that the job of
OHR is done. Without directly responding, Dodik said he is
interested in dialogue, adding that he would like to visit
Washington in the spring after the March PIC.

SBih President Silajdzic
--------------


11. (C) President Silajdzic said he was glad to see the new
administration getting deeply involved in Bosnia, and added
that he had a good meeting with former President Clinton
while in the United States last month. Silajdzic presented a
list of grievances, saying that the Dayton Agreement has not
been implemented, particularly provisions regarding returns,
and that RS PM Dodik is "continuing Milosevic' project" of

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creating a political unit based on ethnic cleansing. When
DAS Jones asked why refugees were not returning, Silajdzic
asked rhetorically whether Germans would go back if the
Gestapo were still in place.


12. (C) Jones noted that the USG was concerned about
conditions in Bosnia and wanted to see the political rhetoric
dialed back. He asked how Silajdzic planned to address
Dodik's desire for protection through an entity in a
constitutional framework. Silajdzic said he believed common
ground could be found with Dodik; he committed to make
compromises but insisted that common ground would not be a
"mechanical meeting half way." Silajdzic said Bosnia must
become a normal democracy without ethnic blocking mechanisms.
In return, Silajdzic said, all constituent peoples could be
guaranteed minority rights to protection of their language,
culture and religion. He asked Jones to pass on the message
to the Secretary that if constitutional reform talks were
started, Silajdzic and his party would do everything possible
to see that they succeeded, but he added that the April 2006
package should not be the starting point for these talks.


13. (C) Regarding Brcko, Silajdzic said that his party
opposed the current proposed constitutional amendment. He
said Foreign Minister Alkalaj had erred when he told Deputy
Secretary Steinberg (Reftel) that SBiH would support the
Brcko amendment if former presiding arbitrator Roberts Owen
could support it. Silajdzic's legal advisor Damir Arnaut
later presented a revision to the amendment that would allow
SBiH to accept it. Amb. English agreed to review the
amendment but offered no hope that the USG could support it.

HDZ BiH President Covic
--------------


14. (C) HDZ BiH President Covic expressed optimism about the
Prud process and the resumption of talks with Tihic and
Dodik. He noted that he planned to meet Tihic immediately
after his meeting with DAS Jones and that he would talk with
Dodik within the next two days. Covic attempted to dispel
the media hype about the three leaders' meeting in Mostar on
February 21 (Ref B),arguing that the atmosphere was not
confrontational and that the three men spoke openly about the
personal obstacles each of them faced. Covic noted that
although Dodik is vitriolic in the media, he is an easy
interlocutor in private. Covic promised that the three men
would convene again before the March PIC and would probably
discuss state property and constitutional reform, on which
they had planned to deliberate in Mostar.


15. (C) When DAS Jones asked about the impact of the three
leaders' talks on Covic's political reputation, Covic replied
that the talks have hurt him in Croat political circles but
that he has worked to explain Prud to all Croat parties. He
expressed concern about the specter of opposition from the
Catholic Church, which he is also working to ameliorate. He
emphasized the need to eventually bring Lagumdzija into the
fold on Prud and other future agreements, as "three
nationalist parties and one leftist party" could appeal to
the broadest possible population. Covic noted, though, that
Lagumdzija was a difficult interlocutor and would be
particularly intransigent in the run-up to SDP's party
congress. Covic echoed other leaders' comments that the role
of the USG would be essential to keeping confrontation at bay
and managing the Europeans' "different opinions and
approaches."


16. (C) Covic also was positive about the prospect for a
resolution of the state property issue. He noted that he had
met earlier that day with a key official on the State
Property Commission, who told him that the Commission would
meet on March 10. Covic said he believed all members of the
Commission would support the draft law that the Commission
has prepared and that the law could move quickly into the
Council of Ministers to begin the approval process. Covic
added that he would like to see Parliament pass the law
before the PIC so that, even if the transfer agreement and
inventory were still outstanding, all elements of the Prud
Agreement would have been wholly or partially implemented
before the PIC.

SDP President Lagumdzia
--------------


17. (C) Social Democratic Party (SDP) President Lagumdzia
stressed the need to fight corruption in the Bosnian
political scene and strengthen the rule of law. He cited the

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case of the Federal Development Bank, whose manager,
Lagumdzia said, is favoring clients of his private auditing
firm with development loans. Regarding the investigation of
corruption in the RS, Lagumdzia said the complaint that SIPA
officials had not cleared their criminal report with SIPA
Director Lujic before forwarding it to the Prosecutor's
office is a red herring. According to Lagumdzia, "anyone" in
Bosnia is entitled to forward a criminal report to the
Prosecutor.


18. (C) Lagumdzia congratulated the USG for the way it had
moved ahead with the Brcko constitutional amendment.
Regarding constitutional reform, Lagumdzia said he would join
constitutional discussions if the three "Prud" partners could
first develop a package that went beyond the 2006 April
package in creating a functional state. He said that the
EU's candidate for HighRep, Valentin Inzko, could do a good
job here. He opined that Dodik's long term strategy is to
see if a "silent majority" of Bosniaks can be created that
would go along with secession of the RS.

PDP President Mladen Ivanic
--------------


19. (C) PDP President Ivanic said Bosnia is stagnating and
declared that no real progress is feasible before the 2010
general elections. He did express optimism, though, on
resolving the Brcko and state property issues, assessing that
both could be resolved by summer. On constitutional reform,
he said that the Serbs are ready and willing to negotiate but
will probably balk at the competencies proposal suggested by
Tufts University professor Bruce Hitchner. He suggested,
though, that if the key leaders--with Embassy advice--could
agree on a straightforward list of proposed changes, it
should pass and could be implemented in a piecemeal manner.
Ivanic stressed that throughout the country politicians like
Tihic and himself who are ready for compromise are having a
hard time bringing other credible politicians from the same
ethnic group on board.


20. (C) He suggested the Bosniaks possibly may turn to SDA VP
Bakir Izetbegovic to be "their Milorad Dodik," although he
opined that Izetbegovic probably would not defeat Tihic in
the SDA party congress in May. The Ambassador asked what we
should expect from Dodik following the SIPA report, and
Ivanic reiterated past statements to us that Dodik takes his
conspiracy theories seriously. Ivanic asked why SIPA filed
its report now, when Bosnia is close to an agreement on Brcko
and state property, to which DAS Jones replied that the USG
had nothing to do with SIPA's filing the report. Finally,
Ivanic commended the international community for its
positive--yet not overbearing--presence in Bosnia, which he
suggested would encourage politicians to eventually work
together on their own.

President Radmanovic
--------------


21. (C) Bosnian Serb Chairman of Presidency Nebojsa
Radmanovic told DAS Jones that Bosnia's politicians remain
committed to the unifying goal of Euro-Atlantic integration,
but that their progress towards integration has been slowed
by political differences over the future of a Bosnian state.
Radmanovic said the Prud agreement offered possibilities for
progress, but added that talk of constitutional reforms had
made the situation more difficult and should not have been
part of Prud. He lamented the failure of the April 2006
constitutional reform package, adding, "We need to talk about
Constitutional reform, but it must happen step-by-step."


22. (C) Radmanovic applauded the U.S. efforts to reach
agreement on a Brcko amendment saying that it would resolve
one issue left unsolved in Dayton, fulfill part of the "5
plus 2" agenda, and show that Bosnia's leaders can reach
compromise on important issues. He stated that U.S.
engagement was key: "When the U.S. tells us to reach
agreement, there is no alternative." Radmanovic also said
that although he believed OHR should have closed long ago, he
understands why it is still open. He stated that EU
representatives told him that BiH can make no further
progress towards integration with OHR open. "It's a matter
of sovereignty," he said.


23. (C) Radmanovic expressed concern that the unstable
political climate could hold up the closure of OHR even if
the 5 objectives are met. DAS Jones responded that if there
are still threats of secession, the U.S. would have a

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difficult decision determining whether the second condition
of the PIC's "5 plus 2," a "positive assessment of the
situation in Bosnia," was met. Radmanovic replied that there
would be no such rhetoric if there were no "unprovoked by
calls for the abolition of the RS." He suggested that the
international community could calm the situation with clear
statements that BiH is a single country of two entities that
can neither secede nor be abolished.

President Komsic
--------------


24. (C) Croat Member of the Presidency Zejlko Komsic
expressed concern about the current political situation in
Bosnia. The new High Representative, he said, needed to have
strong personal authority or come from a strong country that
would back him up. He said that Valentin Inzko would likely
be "like Lajcak," and lack the authority to pursue meaningful
reforms. He criticized the attempt to address constitutional
reforms in Prud, saying that it had further radicalized the
political situation in Bosnia, was unattainable, and drew
attention from the more realizable aspects of the agreement,
an amendment on Brcko and agreement on state and defense
property. He was pessimistic that the Prud process would
bring true reform, and said that even the progress on Brcko
was due only to heavy U.S. engagement. He reiterated SDP's
policy on constitutional reforms, that they would not accept
a reform package that was less comprehensive than the 2006
April package and would not undertake attempts at
constitutional reform during an election year.

Defense Minister Cikotic
--------------


25. (C) Minister of Defense Cikotic said the public airing of
the differences between the U.S. and the EU over selection of
a new HighRep was useful, because it reaffirmed for the
public that the U.S. wanted to be seriously engaged in
Bosnia. He added that Valentin Inzko struck him as a nice
person, but not a strong personality. The fact that Inzko
does not appear to have strong preconceived views makes Inzko
someone who the U.S. might well be able to influence, Cikotic
said. Commenting on the investigation of RS officials by
State-level prosecutors, Cikotic suggested that if evidence
of fraud and wrongdoing became public, people in the RS would
gradually give the investigation some degree of acceptance.


26. (C) Regarding military issues, Cikotic said the movement
of 10 Bosnian military officers to Afghanistan under the
auspices of German and Danish forces is proceeding, although
not as quickly as Cikotic hoped. Cikotic said he hoped
larger Bosniak units could be sent to Afghanistan by the end
of the year, but he thought that this deadline might slip.
In response to a question from the Ambassador about the
effect of new rules requiring forced retirement of certain
categories of enlisted soldiers at age 35, Cikotic
acknowledged that about 2800 soldiers would have to retire.
He argued that the depletion of troop strength could be made
up by recruitment over the next several years. In response
to a question from DAS Jones, Cikotic said ethnic integration
of the Bosnian armed forces is going faster than he expected.
He stressed that, although combat battalions are segregated,
many support units are integrated. Cikotic noted that a
Bosniak general commands the support unit in Banja Luka in
Republika Srpska Cikotic said this Bosniak general commands a
large number of mixed units.

Foreign Minister Alkalaj
--------------


27. (C) DAS Jones told Foreign Minister Sven Alkalaj that the
Obama administration is seeking greater engagement in Bosnia,
but Bosnian leaders must tone down nationalist rhetoric and
work on the mechanics of reform. Alkalaj agreed to do his
part by weighing in with his political party boss and member
of the tri-Presidency, Haris Silajdzic. Turning to the
selection of the new High Representative, Alkalaj expressed
support for Valentin Inzko. DAS Jones informed Alkalaj that
Inzko is traveling to Washington for consultations, and that
if he is selected for the HighRep slot, he would have full US
support. DAS Jones also stressed that the US remains
committed to fulfilling the 5 plus 2 PIC agenda and advancing
Bosnia's EU accession efforts. In closing, DAS Jones asked
for Alkalaj's assistance in facilitating the travel of
Kosovo's representative to the Regional Cooperation Council
(RCC),whose UNMIK documentation will expire at the end of
this month. Alkalaj said that he was already working on the

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issue, and that he expects to submit a proposal to the
Presidency on the matter within two weeks.

PM Spiric
--------------


28. (C) In his meeting with DAS Jones, Council of Ministers
Chair Nikola Spiric presented a bleak picture of the current
Bosnian political environment, saying that politicians have
not yet created a culture of dialogue, blame others for their
shortcomings and expect others to make decisions for them.
The Ambassador and DAS Jones asked Spiric about resolving the
continuing political impasse, which makes it difficult, for
example, for Bosnia to tap into the nearly 1 billion USD in
loans intended for infrastructure and other projects which
international financial institutions' representatives say
could be made available in Bosnia. Spiric at first said
representatives from these institutions had not brought this
to his attention, but then promised to work on the issue.

Dinner With EU Ambassadors
--------------


29. (C) In his dinner with a number of PIC Steering Board
Ambassadors Jones noted his concerns about the political
direction Bosnia is taking, and the EU ambassadors expressed
similar views. The Turkish Ambassador noted that EUFOR would
be discussed in early March in Brussels at the EU Political
and Security Committee. He said other EU countries were
becoming more reluctant to contribute troops, but said that
Turkey would continue to supply a large contingent, and would
challenge the assumption in Brussels that Bosnia is a "secure
environment," given the political problems here. On the
other hand, he said he fully expected the Turkish government
to support OHR closure, perhaps in June, based on completion
of an agreement on state property.


30. (C) Several European ambassadors expressed concerns about
the procedural mistakes made in the investigation of
corruption in the RS. The EC Ambassador said the mistakes
made in transferring the criminal report from SIPA to the
Prosecutor's office were "very dangerous" and would harm the
international agenda here. The British Ambassador and
Italian Ambassadors said the problems with the investigation
were a "huge" problem whose consequences were as yet not
known and would distract from the political agenda here.

Lunch with IFIs
--------------


31. (C) In a meeting with representatives from the European
Bank for Reconstruction and Development, the World Bank, the
Regional Cooperation Council and the OHR, DAS Jones heard
many details on the financial and fiscal crisis currently
unfolding in Bosnia and Herzegovina (Reftel C). The
financial experts continued to paint a bleak picture of
Bosnia's economic future and, in particular, the future for
the Federation's current political leaders. Due largely to
systemic failures of Federation political party leaders, the
experts explained that the Federation government is facing a
2008 budget deficit of 280 million KM (1.51 KM = approx USD
1). The World Bank and the EBRD confirmed that Federation
Prime Minister Brankovic and Minister of Finance Bevanda have
already sought assistance from IFIs and Commercial Banks to
cover this debt. EBRD Country Manager Guilio Moreno is
skeptical, however, that the Federation would be willing to
accept the conditions necessary to accept financial
assistance from these institutions. He also clarified that
the EBRD, unlike the World Bank and the IMF, cannot provide
pure budget support and instead must provide loans strictly
for infrastructure projects or through a line of credit for
the deposit insurance.


32. (C) Moreno noted that Bosnia and Herzegovina has a total
of more than one billion Euros worth of projects that have
been approved by all of these institutions, but that the BiH
Government has not implemented due to inefficiency and
political infighting. EBRD alone has approved projects worth
400 million Euros, largely infrastructure projects that could
provide an excellent stimulus to the lagging economy, he
said. The biggest political concern expressed by the group
was that the uneven financial needs of the Federation and the
Republika Srpska, which is still sitting comfortably on
privatization proceeds, could force Federation officials to
cut deals with the RS that could improve the Federation's
budget in the short term, but ultimately result in further
disintegration of State-level institutions.

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CEFKIN