SCENESETTER FOR CODEL VOINOVICH

UNCLAS SECTION 01 OF 03 ZAGREB 000084 SIPDIS SENSITIVE FOR SENATORS VOINOVICH AND SHAHEEN FROM AMBASSADOR JAMES FOLEY E.O. 12958: N/A TAGS: PREL OTRA PGOV HR SUBJECT: SCENESETTER FOR CODEL VOINOVICH ZAGREB 00000084 001.2 OF 003 BACKGROUND -------------- ¶1. (SBU) Your visit to Zagreb on February 15 comes in the final week of President Stipe Mesic's second and final term in office, and just three days before the inauguration of Ivo Josipovic, an opposition Social Democrat and legal scholar, who will become Croatia's third president since independence. Just as significantly, your visit will provide an opportunity to engage with the relatively new HDZ government of Prime Minister Jadranka Kosor, who assumed office only in July 2009, upon the entirely unexpected (and still somewhat inexplicable) resignation of Ivo Sanader, who had been Prime Minister since 2003. Kosor has surprised many with her forthright stand against corruption and willingness to make tough decisions on both foreign and domestic issues, and notably defeated an effort by Sanader to stage a political comeback in early January. ¶2. (SBU) Despite these political transitions, the U.S.-Croatian relationship is as good and strong as it has ever been, reflecting the remarkable transformation that has been underway in Croatia over the last decade or more. Having achieved NATO membership in April 2009, and nearing the final lap of its EU accession process, Croatia has nearly completed the tasks of putting the 1990s war and all of its negative legacies behind it, and of effecting its political metamorphosis into a stable and fully democratic member of the Euro-Atlantic community. While work still remains in both politics and economics to cement these changes, our assessment is that Croatia is irreversibly on a positive path. U.S. OBJECTIVES WITH CROATIA -------------- ¶3. (SBU) Our goals with Croatia center on three key objectives: bolstering Croatia as a global partner, promoting regional stability, and supporting the completion of badly-needed domestic political and economic reforms. ¶4. (SBU) Croatia has approximately 300 troops deployed to Afghanistan as part of ISAF. The GoC has been particularly responsive to our encouragements to focus their deployment as much as possible on supporting our policy of training Afghan forces to assume increasing responsibility for security in their own country. The Croatian military at present has three Operational Mentoring and Liaison Teams (OMLTs) on the ground, including one combined OMLT with the Minnesota National Guard. During 2010, the Croatians intend to add two Police OMLTs to that total. In 2009, the Croatian Air Force also deployed to a multilateral PKO for the first time, contributing two helicopters and 20 crew to KFOR which remain based at US Camp Bondsteel in Kosovo. Supporting these deployments is a key focus of our assistance programs (IMET, FMF, 1206, GPOI) with Croatia. Among our mid-term goals is to support Croatia's nascent niche capability in helicopters, capitalizing on their recent acquisition of several MI-171sh helicopters from Russia as payment on old Soviet debts. On our broader global agenda, Croatia has proven a reliable ally, and just concluded a term as a non-permanent UNSC member in which it was consistently supportive of U.S. positions, with a particular emphasis on maintaining international attention to counter-terrorism efforts. ¶5. (SBU) Within the region of Southeast Europe, Croatia's success has promoted stability in two ways. First, through the power of example. Croatia's NATO membership, and its progress toward the EU has communicated as clearly as anything could to its neighbors that if they make the necessary reforms, they can aspire to a better future. Second, the process of integrating into Euro-Atlantic institutions has been a solid incentive to Croatia to improve its policies toward its neighbors. The bad old days of Croatian interference in Bosnia-Herzegovina are long gone. Throughout the recent Butmir talks Zagreb endeavored to support the process and urged BiH Croat leaders to assume more constructive stances on the issues under discussion. In its other relations as well, Croatia has had to address difficult issues ranging from the border dispute with Slovenia, to assisting the return of ethnic Serbs who fled during the war, to taking a principled position on Kosovo's independence despite the strains that would create with Belgrade. None of these decisions have been simple, and none of the issues can yet be considered completely resolved, but the movement is in a positive direction. ¶6. (SBU) Implementing critical domestic reforms has also been a complicated challenge. The Croatian economy is much less productive than it could be given the human capital ZAGREB 00000084 002.2 OF 003 available, and despite several years of solid growth early in the last decade it remains too weighed down by inefficient taxes and regulation. The financial crisis has helped to highlight the need for economic reform if Croatia hopes to reverse the estimated 6% decline in GDP in 2009, but it has also made some desperately needed reforms such as shrinking the bloated government payroll more difficult. Overall, Croatia needs to create a much more business-friendly environment, one that will be attractive to foreign investors and Croatian entrepreneurs alike. (Last year the World Bank ranked Croatia 107 out of 180 countries in this regard.) ¶7. (SBU) On the rule of law and fighting corruption, the Croatians have spent a great deal of effort, and US and EU assistance, into reforming the judiciary and developing more effective legislation and law enforcement institutions. Significantly, since Prime Minister Kosor assumed office seven months ago, the government has been able to capitalize on these institutional reforms in its invigorated and more courageous efforts to weed out and prosecute corruption. Corruption investigations have already ensnared two former ministers, and reportedly could even reach higher in the period ahead. Croatian officials need to sustain these efforts, prosecute them thoroughly, and produce results that justify recent assertions that no one in Croatia is any longer "untouchable." CRITICAL FACTORS FOR SUCCESS: EU'S CREDIBILITY AND KOSOR'S SPINE -------------- ¶8. (SBU) Two factors will be central to the sustainability of the positive developments noted above. First, the EU needs to deliver on the promise that if Croatia makes the tough reforms, then the EU is ready to welcome it. The goalposts should stay where they are. There has been a temptation for some to see EU accession as the last chance for leverage over Croatia on a variety of issues, and to squeeze as hard as they can. One example, but not the only one, has been the dispute with Slovenia. The U.S. has been very careful not to take any position on the relative merits of either country's maritime and border claims. But we have been clear in our disagreement with Slovenia's decision to link this dispute to the EU negotiations. (Resolution now hinges on Slovenia's ratification of the arbitration agreement reached by the two sides, which was ratified by the Croatian parliament in November.) The U.S. position is that bilateral disputes should not be injected into the agendas of NATO or the EU. This principle will be just as important when it comes time for Croatia's eastern neighbors to negotiate their accession. ¶9. (SBU) The second key factor will be whether the Kosor government has the courage to take some risks and continue making tough decisions. On foreign policy, she has a reasonable record over the past months, willing to make the hard calls needed on issues such as the ad hoc arbitration deal with Slovenia, sending tough messages to the Croats in Bosnia, or supporting the US position on Kosovo at the International Court of Justice. Domestically, as well, she is off to a good start by dealing more forthrightly with such issues as the pervasiveness of corruption or the weakness of Croatia's earlier cooperation on war crimes. It is only on economic issues where one can see signs of a lack of direction, or perhaps even a lack of nerve. We intend to increasingly focus our efforts on encouraging the Croatians to make these tough but necessary decisions as well. THEMES FOR YOUR VISIT -------------- ¶10. (SBU) Croatian officials view the U.S. very favorably. We have been a reliable supporter for the country; clear about our interests, but realistic in our demands, and trustworthy in delivering on our commitments. The Croatians know that we are one of their strongest, but also most candid, supporters, and therefore they listen to our advice carefully. ¶11. (SBU) Your visit, which will include a planned quick survey of Croatian helicopter forces, meetings with PM Kosor and President Mesic, a combined lunch with the FM and DefMin, and a concluding dinner at the Residence with President-elect Josipovic, will provide excellent opportunities to advance all of the objectives outlined above. We are providing specific talking points for each event on your planned schedule, but with all of these officials, you can stress the same themes: - Congratulate Croatia on the impressive transition that has ZAGREB 00000084 003.2 OF 003 taken place over the past ten to fifteen years in Croatia. The smooth conduct of the recent presidential elections has once again confirmed Croatia's democratic credentials. - Welcome Croatia as a new NATO Ally, and express appreciation for Croatia's willingness to contribute to important missions from KFOR to ISAF, as well as our hope that they will be able to strengthen those contributions in the year ahead. - Note our understanding that relations with some neighbors, particularly where there are issues remaining from the collapse of Yugoslavia, are difficult and sensitive. Urge them to continue constructive efforts to resolve all outstanding issues, in particular with Serbia, which could form the basis of an improved relationship as Croatia prepares to enter the EU. Probe Croatian views on future evolution of the situation in Bosnia-Herzegovina. - Praise the recent improvements in the government's efforts to fight corruption, and to cooperate with the ICTY. Stress that both efforts are vital to EU accession and to the consolidation of the rule of law in Croatia. Urge a similar commitment to economic reforms and improvement in the business and investment climates. ¶12. (U) I look forward to welcoming you to Zagreb on February ¶15. FOLEY