This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 02 ZAGREB 001031 
 
SIPDIS 
 
TREASURY FOR OFAC 
EUR/SCE FOR DNYSTROM 
 
E.O. 12958: DECL: 05/09/2013 
TAGS: PREL EFIN ECON MK SR BK SI MW EFIN ECON MK SR BK SI MW HR HRPREL
SUBJECT: CROATIA DECIDES TO ACCEPT UNFROZEN FUNDS "WITHOUT 
PREJUDICE" TO RATIFICATION OF ASI 
                       CONFIDENTIAL 
 
 
PAGE 02        ZAGREB  01031  01 OF 02  091345Z 
 
REF: STATE 117150 (NOTAL) 
 
CLASSIFIED BY: ECONOMIC OFFICER ISABELLA DETWILER: REASON 1.5 (B AND D) 
 
SUMMARY 
-------- 
¶1.  (C) AT A CLOSED SESSION ON MAY 8, THE CROATIAN 
CABINET FORMALLY DECIDED TO ACCEPT FUNDS FROZEN IN THE 
U.S. UNDER MILOSEVIC-ERA SANCTIONS.  ON MAY 7 
WE MET WITH MFA SENIOR LEGAL ADVISOR ANDREJA METELKO- 
ZGOMBIC AND AMERICA'S DESK DIRECTOR MIROSLAV KOVACIC TO 
PRESS FOR CROATIAN ACCEPTANCE.  THIS ISSUE WAS ALSO 
RAISED DURING THE SECRETARY'S MEETING WITH FM PICULA ON 
THE MARGINS OF THE SIGNING OF THE ADRIATIC CHARTER ON MAY 
¶2. 
 
¶2.  (SBU) ON MAY 9 WE CONFIRMED WITH METELKO-ZGOMBIC THAT 
THE CABINET HAD DECIDED TO ACCEPT THE FUNDS, WHILE NOT 
PREJUDICING THE PARLIAMENT'S DECISION ON WHETHER TO 
RATIFY THE AGREEMENT ON SUCCESSION ISSUES (ASI).  IN 
COMMENTS TO THE PRESS AFTER THE CABINET SESSION, 
GOVERNMENT OFFICIALS ALSO ANNOUNCED IT WOULD SEEK LEGAL 
ACTION AGAINST ONE OF THE JOINT VENTURE BANKS IN GERMANY, 
WHERE DEPOSITS MYSTERIOUSLY ERODED.  METELKO-ZGOMBIC 
STATED THAT THE PURPOSE OF THE LEGAL ACTION WOULD BE TO 
TRY TO FORCE DISCLOSURE OF THE HISTORY OF THE ACCOUNTS, 
THOUGH IT WAS POSSIBLE THAT SOME SORT OF RESTITUTION 
MIGHT BE SOUGHT.  END SUMMARY. 
 
¶3.  (SBU) ON MAY 8, IN A CLOSED CABINET SESSION, THE 
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PAGE 03        ZAGREB  01031  01 OF 02  091345Z 
GOVERNMENT DECIDED TO ACCEPT THE APPROXIMATELY $56 
MILLION TRANSFER FROM THE USG.  DEPUTY FOREIGN MINISTER 
IVAN SIMONOVIC WAS QUOTED AS SAYING THAT THE GOVERNMENT 
WAS MIXING "PRINCIPLES WITH PRAGMATISM," STRESSING THAT 
ACCEPTING THE MONEY DID NOT MEAN THAT CROATIA WOULD 
RATIFY THE ASI.  SIMULTANEOUSLY, OFFICIALS ANNOUNCED THE 
DECISION TO FILE A LAWSUIT AGAINST THE LHB BANK IN 
GERMANY, APPARENTLY PARTIALLY OWNED BY SLOVENIA'S 
LJUBLJANSKA BANKA.  IN RESPONSE TO OUR QUERY, METELKO- 
ZGOMBIC CLARIFIED THAT THE PURPOSE OF THE LAWSUIT WOULD 
BE TO EXTRACT INFORMATION ABOUT THE DISAPPEARING 
DEPOSITS, THOUGH SHE DID NOT EXCLUDE THE POSSIBILITY OF 
SEEKING SOME SORT OF COMPENSATION FROM THE BANK. 
 
¶4.  (SBU) THE DAY BEFORE THE DECISION, WE MET WITH MFA 
SENIOR LEGAL ADVISOR ANDREJA METELKO-ZGOMBIC AND 
AMERICA'S DESK DIRECTOR MIROSLAV KOVACIC TO PRESS FOR 
CROATIAN ACCEPTANCE OF THE FUNDS FROZEN IN THE U.S. UNDER 
MILOSEVIC-ERA SANCTIONS.  WE STRESSED THAT WE SAW THE 
DISBURSEMENT OF THE FUNDS IN THE U.S. AS SEPARATE FROM 
THE ISSUE OF THE ASI, ALTHOUGH RESOLUTION OF THE LATTER 
WOULD CERTAINLY BE IN CROATIA'S INTEREST. 
 
¶5. (C) METELKO-ZGOMBIC ACKNOWLEDGED THE RESOLUTION OF 
SUCCESSION ISSUES WAS IN CROATIA'S INTERESTS, BUT THE 
PUBLIC AND THE PARLIAMENT WERE DEMANDING ANSWERS.  SHE 
REJECTED THE ARGUMENT THAT "EVERYONE IN VIENNA KNEW" THAT 
THE NUMBERS IN THE ASI WERE NOTIONAL; WHILE ADMITTING THE 
LIMITS OF HER KNOWLEDGE OF BANKING, SHE INSISTED THAT 
"ANY VILLAGE BANK" COULD COME UP WITH A FIGURE FOR ITS 
DEPOSITS.  WHEN CROATIA WENT TO THE OVERSEAS JOINT 
                       CONFIDENTIAL 
 
PAGE 04        ZAGREB  01031  01 OF 02  091345Z 
VENTURE BANKS TO ASK FOR AN ACCOUNTING, IT WAS REBUFFED 
AND SENT TO THE NATIONAL BANK OF YUGOSLAVIA.  METELKO- 
ZGOMBIC INSISTED THAT THE NBY WAS EVADING ITS 
RESPONSIBILITY, AS LAID OUT IN APPENDIX 1 TO ANNEX C OF 
THE ASI, TO FACILITATE THE RELEASE OF INFORMATION FROM 
THE JOINT VENTURE BANKS TO THE SUCCESSOR STATES.  WE 
WONDERED ALOUD WHETHER A FULL ACCOUNTING WOULD REALLY BE 
ENOUGH TO CONVINCE THE PARLIAMENT TO SWALLOW AND RATIFY; 
METELKO-ZGOMBIC RETORTED IT WAS THE LEAST THE GOVERNMENT 
COULD DO. 
 
¶6.  (C) TURNING TO THE DISBURSEMENT OF FUNDS FROM THE 
FEDERAL RESERVE BANK OF NEW YORK, METELKO-ZGOMBIC SAID 
SHE DID NOT UNDERSTAND THE RELATIONSHIP BETWEEN THE 
UNFREEZING OF THE FUNDS, AS WE HAD PROMISED TO DO, AND 
THE DECISION TO DIVIDE AND DISBURSE THE FUNDS, WHICH HAD 
COME AS A COMPLETE SURPRISE, AND THROUGH A RATHER UNUSUAL 
CHANNEL -- THE U.S. BANK COMMUNICATION TO THE CROATIAN 
NATIONAL BANK.  WE EMPHASIZED THAT THE USG HAD DECIDED 
THE QUICKEST AND MOST EFFICIENT WAY TO GET THE SUCCESSOR 
STATES BACK THEIR OWN MONEY, UN-ERODED BY LAWSUITS, WAS 
THROUGH THIS MECHANISM. 
 
¶7.  (C) WHILE REFUSING TO PREJUDGE THE FINAL GOVERNMENT 
DECISION, METELKO-ZGOMBIC SAID THE GOVERNMENT WOULD TRY 
TO FIND A WAY TO ACCEPT THE FUNDS WITHOUT PREJUDICING THE 
 
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                           CONFIDENTIAL     PTQ3465 
 
PAGE 01        ZAGREB  01031  02 OF 02  091345Z 
ACTION EUR-00 
 
INFO  LOG-00   NP-00    AF-00    AGRE-00  AID-00   CEA-01   CIAE-00 
      COME-00  CTME-00  INL-00   C-00     DODE-00  DOTE-00  SRPP-00 
      DS-00    EB-00    EXIM-01  E-00     FAAE-00  FBIE-00  VC-00 
      FRB-00   H-01     TEDE-00  INR-00   ITC-01   LAB-01   L-00 
      VCE-00   AC-01    NSAE-00  NSCE-00  OMB-01   OPIC-01  PA-00 
      PM-00    PRS-00   ACE-00   P-00     SCT-00   SP-00    SSO-00 
      SS-00    STR-00   T-00     USIE-00  PMB-00   DSCC-00  PRM-00 
      DRL-01   G-00     NFAT-00  SAS-00   SWCI-00    /009W 
                  ------------------628C22  091347Z /38 
R 091332Z MAY 03 
FM AMEMBASSY ZAGREB 
TO SECSTATE WASHDC 0150 
INFO AMEMBASSY BELGRADE 
AMEMBASSY LJUBLJANA 
AMEMBASSY SARAJEVO 
AMEMBASSY SKOPJE 
DEPT OF TREASURY WASHDC 
 
C O N F I D E N T I A L SECTION 02 OF 02 ZAGREB 001031 
 
SIPDIS 
 
TREASURY FOR OFAC 
EUR/SCE FOR DNYSTROM 
 
E.O. 12958: DECL: 05/09/2013 
TAGS: PREL EFIN ECON MK SR BK SI MW EFIN ECON MK SR BK SI MW HR HRPREL
SUBJECT: CROATIA DECIDES TO ACCEPT UNFROZEN FUNDS "WITHOUT 
PREJUDICE" TO RATIFICATION OF ASI 
                       CONFIDENTIAL 
 
PAGE 02        ZAGREB  01031  02 OF 02  091345Z 
 
LEGISLATURE'S DECISION ON RATIFICATION OF THE ASI. 
PERSONALLY, SHE FEARED THAT ONCE AN AGREEMENT BEGINS TO 
BE IMPLEMENTED WITHOUT RATIFICATION, THE RATIFICATION 
LOSES SIGNIFICANCE.  IT SETS A PRECEDENT. 
 
MOON 
 
                       CONFIDENTIAL 
 
> 
 

 2003ZAGREB0