SCENESETTER FOR DEPUTY SECRETARY LEW'S VISIT TO ZAGREB

UNCLAS SECTION 01 OF 03 ZAGREB 000092

SIPDIS
SENSITIVE

FOR DEPUTY SECRETARY LEW FROM AMBASSADOR FOLEY

E.O. 12958: N/A
TAGS: PREL OTRA PGOV HR
SUBJECT: SCENESETTER FOR DEPUTY SECRETARY LEW'S VISIT TO ZAGREB

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BACKGROUND
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1. (SBU) Your visit to Zagreb on February 18 for the inauguration of
Croatia's third president, Ivo Josipovic, will send a clear signal
of support for the new president and the US-Croatia relationship
overall. Josipovic is a well-respected legal scholar and
self-professed "europhile" who was nominated by the opposition
Social Democrat party (but will officially resign from the party
prior to his taking office). Just as significantly, Josipovic is
expected to work well with the HDZ-led Government of Croatia, so
your visit will not be seen as any sort of partisan gesture, but as
support for Croatia as a whole. Particularly important will be
Josipovic's cooperation with Prime Minister Jadranka Kosor on
addressing corruption and working towards EU membership.


2. (SBU) 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. 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. The only major
concern is Croatia's underperforming economy, which is weighed down
by high taxes, heavy regulation and corruption, and an unattractive
business and investment environment.

BILATERAL ASSISTANCE
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3. (SBU) Since 1990, the USG has provided more than $350M in
assistance to Croatia, although with its graduation from SEED Act
assistance in 2006 and the termination of the USAID mission in 2008,
our assistance funds have fallen significantly. Croatia continues
to receive bilateral military assistance through the IMET, NADR and
Foreign Military Financing (FMF) programs, and these funds have
given Croatia significant help in sustaining its NATO deployments to
ISAF and KFOR. This is the final year of the budget for rule of law
assistance through the ICITAP program, which has had a major impact
in the fight against corruption and organized crime. Post may
shortly propose several one-time projects to INL to further enhance
police and prosecutor capabilities in this critical area. Finally,
the USG provides approximately $2M per year for humanitarian
demining.

MISSION MANAGEMENT
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4. (SBU) Embassy Zagreb takes an active role in the EUR Bureau's
management initiatives: CMI and eServices, FSN empowerment,
regionalization, warehouse reduction, and environmentally friendly
"green" administration. This medium-sized Embassy, located in a new
NEC (2003) well outside of Zagreb proper, has 54 USDH and about 150
local staff from 6 USG agencies. The recent closure of the USAID
mission and other right-sizing measures have resulted in excess
space and increased ICASS costs for the remaining agencies. Post
has creatively mitigated costs with ICASS staff reductions,
warehouse consolidation and reutilization of space. In addition,
some ICASS costs are now shared with Embassy Podgorica, a regional
partner for whom Embassy Zagreb provides most financial and human
resources support. The embassy's distance from the city center does
detract from the mission's diplomatic effectiveness.

U.S. OBJECTIVES WITH CROATIA
--------------


5. (SBU) Croatia's main goal in the next two years is to complete
its accession to the European Union. We strongly support EU
membership because it reinforces all of our bilateral goals with
Croatia, and sends a strong signal to the rest of the region that
reforms will bring positive change. Prime Minister Kosor has taken
courageous decisions to overcome obstacles to Croatia's EU
accession, notably by concluding an Arbitration Agreement with
Slovenia on the maritime border dispute, and invigorating efforts to
cooperate with the ICTY (which has been recognized now by all EU
members except the Netherlands, which continues to block the opening
of a key Chapter in EU accession negotiations). Kosor has also led
a high profile campaign against corruption, another key EU
benchmark.


6. (SBU) Our own 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 particularly in the area of
anticorruption. Since the president's role is largely limited to
foreign affairs and military issues, Josipovic should prove a key
ally with our first two goals. His campaign, however, focused on
anticorruption efforts and we expect him also to be an important
partner with Prime Minister Kosor in Croatia's anticorruption

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initiatives.


7. (SBU) As a global partner, 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. In 2009, the Croatian Air Force also deployed to
a multilateral PKO for the first time, contributing two helicopters
and 20 crew to KFOR who 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. 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.


8. (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 in support of
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. You could encourage Josipovic to pursue
his stated goal of seeking improved relations with Serbia, which
will require pragmatic resolution of several outstanding bilateral
issues.


9. (SBU) Domestically, the Croatian president does not control any
policy levers. But Josipovic's background as a constitutional
scholar gives him weight in calling for legal reforms and other
anticorruption measures. Prior to his election, Josipovic was a key
ally for the US and EU in pushing reform of the judiciary and in
calling for Croatia to deal forthrightly with the issue of war
crimes, both in domestic courts and in cooperation with the ICTY.
During his campaign, Josipovic stressed the need to tackle
corruption and revive the economy. He also campaigned on a pledge
to utilize foreign policy to build trade relations in the region,
which he viewed as crucial to Croatia's economic development.
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.)

THEMES FOR YOUR VISIT
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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. Josipovic has an excellent
relationship with the Embassy and is an alumnus of our International
Visitor program.


11. (SBU) Your visit, which will include a morning meeting with the
Foreign Minister, and a meeting with President Josipovic following
the inauguration ceremony and celebratory luncheon, will provide
excellent opportunities to advance the objectives outlined above.


12. (SBU) With both the FM and President Josipovic, foreign policy
themes include:

- Congratulate Croatia on the impressive transition that has taken
place over the past ten to fifteen years in Croatia.

- Note our support for Croatia's EU membership.

- Thank Croatia for its support to the ISAF mission.

- Note our support for any moves to improve relations with Serbia,
including full completion of the efforts Croatia has undertaken to
facilitate the return of ethnic Serb refugees.

- Thank Croatia for its constructive policies toward
Bosnia-Herzegovina and Kosovo.

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- Praise Croatia's progress on ICTY cooperation and on finding a
resolution to the Slovenia border issue, and stress the need to
continue such cooperation.

In addition, with Josipovic you could add:

- Congratulate President Josipovic on his election and note how the
smooth conduct of the election has again confirmed Croatia's
democratic credentials.

- Stress the importance of tackling corruption, which is vital to
EU accession and to the consolidation of the rule of law in Croatia.



13. (U) I look forward to welcoming you to Zagreb next week.

FOLEY