BOSNIA - SCENESETTER FOR THE JULY 11-12 VISIT OF

UNCLAS SECTION 01 OF 04 SARAJEVO 000812

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: PGOV PREL OVIP BK
SUBJECT: BOSNIA - SCENESETTER FOR THE JULY 11-12 VISIT OF
CODEL CARNAHAN

REF: A. SARAJEVO 733

B. SARAJEVO 594

C. SARAJEVO 658

D. SARAJEVO 810


1. (SBU) SUMMARY: You come to Sarajevo to commemorate a
searing event in Bosnia's history, the 1995 genocide at
Srebrenica. Your participation in the event will signal,
particularly to the Bosniaks, a strong USG commitment to
national reconciliation. You also will meet with Bosnian
leaders on the heels of the country's latest political
crisis, a showdown over the High Representative's use of his
extraordinary Bonn Powers to annul an action by the Republika
Srpska (RS) that challenged the structures of the Dayton
Peace Accords (Ref A). Such crises are virtually semi-annual
events in Bosnia, as Dayton's structures, and the Bosnian
state, are still weak and in need of shoring up. The basic
problem here is the total lack of consensus among Bosnia's
three "constituent peoples" -- Bosniaks, Serbs, and Croats --
as to what the state should look like. Our fundamental goal
is to find the compromises needed to create functional,
efficient governing institutions -- which, recognizing
Bosnia's history, requires some degree of ethnically-based
checks and balances -- and get Bosnia cemented into NATO and
the EU. The recent meeting of the Peace Implementation
Council (PIC) confirmed that conditions are not yet right for
the closure of the international community's executive
"governorship" of Bosnia, the so-called "Office of the High
Representative" (OHR). However, in the coming year we will
face increasing pressure to convert OHR to a more
traditional, non-executive advisory "EU Special
Representative" (EUSR). The PIC session exposed deep
fissions among PIC members over the pace of transition. With
this transition -- one for which Brussels, to say nothing of
Moscow, has been pressing hard -- our leverage to promote
reform will be dramatically reduced. Bosnians will have to
step up to make their own decisions and find their own
compromises. You will meet with a number of Bosnian leaders
and will have the opportunity to judge whether Bosnia is now
prepared for such "local ownership." END SUMMARY.

U.S. Policy in Bosnia
--------------


2. (SBU) Our policy in Bosnia -- which Vice President Biden
enunciated during his visit here in May -- has been
straightforward and has enjoyed bi-partisan support for 14
years since the signing of the Dayton Peace Accords. We seek
to maintain Bosnia as a single state and to ensure that the
state is strong enough to take its place and meet its
obligations as a member of NATO and the EU. Any talk of
partition is destabilizing and dangerous. At the same time,
we have sought to ensure that power in Bosnia remains
decentralized enough so that no group -- Bosniaks, Serbs, or
Croats -- feels disenfranchised by the others. Finding the
right balance remains a work in progress. You will want to
stress with your interlocutors our government's concern for
Bosnia's future; commitment to continued engagement;
insistence upon Bosnia's full compliance with the
requirements for closing OHR before agreeing to support
transition to EUSR; and support for a strong, stable,
functional, and democratic Bosnia capable of taking its place
in Euro-Atlantic institutions.

Competing Ethnic Visions
--------------


3. (SBU) Fundamentally, our problem is that the state lacks
legitimacy among all three ethnic groups, and Bosniaks,
Serbs, and Croats differ in their visions about the type of
Bosnia in which they want to live. To simplify:

-- Bosniaks, who make up close to 50 percent of the country's
population, want a strong, centralized state with governing
structures that include minimal ethnic checks and balances.
They support the creation of regions within the country, but
some seek to abolish the Republika Srpska (RS),which most
consider a product of the genocide and ethnic cleansing
during the 1992-1995 war.

-- Serbs, after years of attacking Dayton, have now embraced
it. They want to maintain Dayton's entity-based structures
and weak state. They interpret the language of Dayton
strictly, and over the last two years they have sought to
roll back reforms designed to make Dayton work and advance

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Bosnia's Euro-Atlantic aspirations, arguing that such reforms
were not explicitly provided for in Dayton. Many Serbs would
prefer the abolition of Bosnia as a state through the
secession of the RS.

-- Croats aspire to their own entity. Many Croat politicians
embrace the wartime principle of territorial discontinuity in
order to ensure all Croat majority municipalities, which are
scattered about the Federation -- the Bosniak-Croat entity --
are part of a Croat-majority entity.

-- Our policy in responding to these divergent visions is
that there must be "no unilateral abolition of the entities,
no secession of entities, and no third entity."

Dodik's Poisonous Politics in the RS
--------------


4. (SBU) The greatest danger to Bosnia is Serb efforts to
de-legitimize and undermine the Bosnian state. RS Prime
Minister Milorad Dodik, whom you may meet, is enmeshed in a
campaign to roll back the very reforms that prompted NATO to
invite Bosnia to join Partnership for Peace in 2007 and the
EU to sign a Stabilization and Association Agreement (SAA)
with Bosnia in 2008. Dodik's aim appears to be -- at a
minimum -- to restore to the RS the level of autonomy it
enjoyed at the end of the 1992-95 war, which would ultimately
result in the collapse of the state. The latest
manifestation of Dodik's destructive agenda was an effort by
his government to undermine Dayton by passing official
"conclusions" in the RS National Assembly that claimed that
the state had illegally usurped competencies from the
entities. The HighRep subsequently used the Bonn Powers to
annul these conclusions (Ref A). The Bosniaks and Croats --
frustrated by what they perceive as the HighRep's "light
punishment" of those responsible for anti-Dayton behavior --
are becoming increasingly nervous and angry. This latest
effort by the RS to undermine both the state's ability to
function and the international community's credibility in
Bosnia has therefore knocked off course our efforts to
encourage compromise and consensus. Meanwhile, the
state-level corruption investigation against Dodik and other
RS officials (Ref B) plays a major role in Dodik's calculus.
Depending on its outcome, it could either severely weaken
Dodik or give him further ammunition to portray himself as a
Serb patriot, making his anti-state actions matters of
self-preservation. His control of the RS media amplifies the
claim that efforts against him constitute attacks on the RS
and the Serb people.

Bosniaks: Tihic Strengthens Moderate Voice
--------------


5. (BU) During the October 2008 municipal elections, Bsniak
voters handed Sulejman Tihic, President ofthe Party of
Democratic Action (SDA),a big victory. Tihic then received
a boost from his party in May 2009 when it reelected him
leader over the son of the party's late co-founder and
Bosnia's wartime President. Tihic, whom you may meet, has
sought to seize this political opening to gain the upper hand
over Bosniak tri-presidency member Haris Silajdzic, while
moving Bosniak politics in a more moderate and constructive
direction -- something we support. For his part, Silajdzic
in recent months has attempted to move beyond his
"all-or-nothing" approach to key reforms -- and his earlier
statements characterizing the RS as a genocidal creation --
to create space for what he hopes will be renewed US efforts
at resolving Bosnia's present institutional crises. The
other prominent figure in Bosniak politics is Zlatko
Lagumdzija, leader of the multi-ethnic (but in fact largely
Bosniak) Social Democratic Party (SDP). SDP is in opposition
both at the state level and in the Federation, and Lagumdzija
sees it as his duty to oppose initiatives proposed by the
unwieldy governing coalition, even if his party supports the
substance of those initiatives.

Croats: Battle of the HDZs
--------------


6. (SBU) The leading Croat politician is Dragan Covic, the
chairman of the Croatian Democratic Union (HDZ)-BiH. Covic's
main Croat opponents, the nationalist HDZ-1990, split from
him in 2006 after he decided to support a U.S.-brokered
package of constitutional amendments, which ultimately
failed. Covic is generally a constructive politician, but

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HDZ-1990's rise has constrained him politically over the last
couple of years. Covic defeated HDZ-1990 in the October 2008
municipal elections, so he now has more room to maneuver. He
has taken advantage of this to reestablish an effective
working partnership with Tihic.

Downfall of Prud
--------------


7. (SBU) One such effort at compromise, the Prud Agreement
(Ref C),began as a bold effort by Tihic to find a complex,
compromise-based solution that would encourage the Serbs and
Croats to contribute to building a functional state. Tihic
convened the meeting in November, shortly after his party's
success at the polls, with Covic and Dodik, whose parties
also garnered major election victories. Tihic took a major
political risk at Prud, and his Bosniak opponents -- notably
Silajdzic and Lagumdzija -- heavily criticized his efforts.
Now Tihic has backed off from the Prud process due to his
frustration with Dodik's anti-Dayton behavior and, in his
view, the HighRep's tepid response to it. Although Prud
itself provided few concrete answers to the complex questions
it posed, we had openly encouraged the dialogue it produced.
Our challenge, now that the dust is settling from the
HighRep's annulment of the RSNA conclusions, will be to help
reinvigorate these discussions to include all parties, as the
three Prud leaders alone do not have the requisite majority
in Parliament to implement, for example, constitutional
reform.

The Need for Near-Term Constitutional Reform
--------------


8. (SBU) There is consensus within the international
community and some local political actors that constitutional
reform is necessary, but there is no agreement on how, or
when, would be best to accomplish it. We believe
constitutional reform should be a US-led process -- as only
we have the stature and credibility to lead these reforms --
but also include a strong EU role, as we may need to use EU
membership requirements to leverage agreement among political
leaders on specific aspects of the reforms. Our engagement,
though, should focus on forging compromises among political
leaders, as only local ownership will lend the new
constitution the legitimacy it needs. Our main challenge
will be engaging the Serbs, who have systematically rejected
the idea of international brokering of the process (though
not the involvement of "experts" in an advisory role). The
pull of EU and NATO membership -- which is a distant prospect
for Bosnia in any case and does not explicitly require
constitutional reform -- is unlikely to give us sufficient
leverage with the Serbs. We will need to be prepared to put
considerable pressure on the Serbs to bring them to the table.

OHR and Transition to EUSR
--------------


9. (SBU) These are the challenges we face as we, our European
allies, and OHR work to implement the Peace Implementation
Council (PIC's) five objectives and two conditions ("five
plus two") for OHR's closure and transition to EUSR.
Representatives of PIC member states at their June 29-30
session confirmed that although a number of the "five plus
two" requirements are complete, Bosnia has made little
progress toward fulfilling the others (Ref D). The Europeans
and Russians are anxious for transition as early as possible,
although the Europeans declared at the PIC session that they
will join us in insisting on Bosnia's full completion of
"five plus two" before closure. We believe this approach
would protect the international community's credibility in
Bosnia and thereby ensure that the EUSR has a stable
beginning. Bosnian Serbs seek the immediate closure of OHR,
and Dodik has made numerous, provocative statements
suggesting he will roll back OHR's state-building efforts as
soon as the office closes, and he stated at the PIC that he
will ignore any further use of the Bonn Powers in the
meantime. Meanwhile, the Bosniaks' fear of Dodik's behavior,
combined with the specter of a weakened international
community, tempts them to obstruct efforts to fulfill "five
plus two" to keep OHR open. Tihic at the PIC session went so
far as to declare that OHR's closure "in this complex
political and constitutional situation" could lead to
conflict.

Economic Crisis Further Cripples Bosnian Economy

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10. (SBU) Further crippling the political climate in Bosnia
is its struggling economy. Bosnia is one of the poorest
countries in Europe and has yet to fully recover from the
war. Economic growth over the past few years was an
encouraging six percent annually, but the global economic
crisis has now reached Bosnia. The International Monetary
Fund (IMF) estimates that GDP will decline by three percent
in 2009 and not begin to recover until 2010. The market for
key exports such as aluminum and steel has collapsed,
unemployment is at 23 percent (higher among young people),
and the two entities have both seen their budgets move into
serious deficits. Also, press reports indicate that at least
2,600 Bosnians have recently returned home after losing their
jobs in Western Europe, a trend that is likely to continue.
Although various plans have been announced regarding
government plans to mitigate the effects of the crisis,
little has actually been done. The IMF Governing Board plans
to meet on July 8 to consider approving a proposed $1.5
billion, three-year standby arrangement. The Federation
Finance Minister says that without the IMF loan, the
Federation could be bankrupt by September or October. The RS
is in similarly dire straits.

Srebrenica's Political and Economic Turmoil
--------------


11. (SBU) In July 1995, units of the Serbian Army and the
then-Army of Republika Srpska (VRS) -- under the command of
General Ratko Mladic, whom the International Criminal
Tribunal for the former Yugoslavia (ICTY) has indicted for
war crimes and who remains at large -- killed an estimated
8,000 Bosniak men and boys and drove out 25,000 to 30,000
refugees from the small enclave of Srebrenica. The ICTY in
2004 unanimously ruled that this massacre -- the largest mass
murder in Europe since World War II -- constitutes genocide.
The International Court of Justice (ICJ) concurred with the
ICTY's ruling in 2007, adding that Serbia "had violated its
obligation to prevent genocide." Since the ICJ ruling,
Bosnian politicians have increasingly used Srebrenica as a
stage from which to address their constituents' broader,
ethnic-based concerns. High-level Bosniak visitors, both
religious and political, regularly come to Srebrenica to
"score points" and burnish their images as "good Bosniaks."
On the Serb side, the ethnic Serb Municipal Assembly Speaker
three times this year has led his party in walk-outs of the
Assembly, complaining of the ability of Bosniak refugees to
continue to vote in Srebrenica and thereby outvote the Serbs.
(Note: The Bosniaks hold the mayoralty in Srebrenica because
of an Embassy-led effort to allow and encourage refugees to
vote in Srebrenica. End Note) Compounding the political
turmoil in the municipality is the global financial crisis,
with a number of investors suspending or stopping activity,
and several of Srebrenica's mining-related industries
suffering from a downturn in purchases from processors in the
region. Your visit to Srebrenica will signal to all ethnic
groups that we remain concerned about Srebrenica's future and
committed to ethnic reconciliation.
ENGLISH