VZCZCXRO9236
RR RUEHAG RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN RUEHLZ
RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHVB #0203/01 0470905
ZNR UUUUU ZZH
R 160905Z FEB 06
FM AMEMBASSY ZAGREB
TO RUEHC/SECSTATE WASHDC 5707
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 02 ZAGREB 000203 
 
SIPDIS 
 
SENSITIVE BUT UNCLASSIFIED 
SIPDIS 
 
EUR FOR EUR/SCE 
 
E.O. 12958: N/A 
TAGS: ECON ETRD ECIN EU HR
SUBJECT: CROATIA SPINS VICTORY ON BALKAN FREE 
TRADE PROPOSAL 
 
REF: ZAGREB 135 
 
¶1.  (SBU) Summary and Comment:  Croatian PM Ivo 
Sanader scored domestic political points over the 
past two weeks in the controversy surrounding 
proposals for a Western Balkans Free Trade 
Agreement.  Although the concept of a regional 
free trade agreement is one that Croatia has 
nominally supported within the framework of the 
Stability Pact, a poorly-informed press inflamed 
public opinion with suggestions that Croatia 
could be coerced into a new Yugoslav federation 
and that its EU accession would be slowed. 
Sanader, taking full advantage of this deficit of 
facts, used the opportunity to push a long- 
standing Croatian position that any free trade 
agreement in the region be based on an enlarged 
Central European Free Trade Agreement (CEFTA). 
Although the GOC is still awaiting official 
reaction from Brussels, the Croatian public and 
press have praised the Prime Minister's "defense" 
of Croatia's national interests. End Summary. 
 
Press Defines the Story 
----------------------- 
¶2.  (SBU) News that the EU reiterated its long- 
standing call for a Western Balkans Free Trade 
Agreement in late January fell on fertile ground 
in the fiercely competitive Croatian market for 
sensationalist headlines.  Unburdened by the fact 
that work on a free trade agreement has been on- 
going within the Stability Pact, much less that 
these countries represent Croatia's best export 
markets, the press seized only on imagined 
similarities with the former Yugoslavia. 
Headlines proclaimed that the EU had called for 
the creation of a new Yugoslavia.  Beneath this 
was speculation about unspoken political motives, 
appeasement of Serbia and even a "Balkan EU." 
The chattering class in Zagreb largely concurred 
that such a proposal would surely stall Croatia's 
advance to the EU. 
 
Government Lets the Pot Boil 
---------------------------- 
¶3.  (SBU) The government did little to set the 
record straight.  Politicians of various stripes 
seized the opportunity for posturing, vowing 
never to countenance the creation of a new 
Yugoslavia.  By and large, there was little 
discussion of the merits of a free trade 
agreement, of the benefits of a new agreement 
versus modification of existing ones, or of 
whether or not a new agreement would benefit 
Croatia as the strongest economy among the likely 
members. 
 
CEFTA as Compromise 
------------------- 
¶4.  (SBU) Sanader used this controversy artfully, 
vowing that he would never permit the creation of 
another Yugoslavia and making his own 
"counterproposal."  Sanader actually proposed 
nothing new, but following a meeting with 
Stability Pact Coordinator Busek in Zagreb on 
February 2, announced that he had advocated an 
enlargement of CEFTA as an alternative to a new 
free trade agreement.  Enlarging CEFTA has been a 
long-standing Croatian position, partially as a 
means of pushing back on pressure to create a new 
"Western Balkan" structure.  The Croatian fear of 
being shackled to the other former Yugoslav 
republics is deep-seated, as are suspicions that 
its EU accession could be stalled.  CEFTA, by 
this logic is more palatable, mostly by virtue of 
the fact that it is not "Balkan" and that most of 
its previous members have or are about to find 
their place within the EU. 
 
Defender of the National Interest 
--------------------------------- 
¶5.  (SBU) The press has remained interested in 
this story over the past two weeks and has been 
largely complimentary of the government and its 
handling of the issue.  Several stories have 
praised Sanader for pushing back on the EU's 
proposal and defending Croatia's national 
interest - a particularly strong compliment, as 
the government is generally criticized for being 
 
ZAGREB 00000203  002 OF 002 
 
 
too compliant toward Brussels.  In the meantime, 
the government has used every opportunity to 
reiterate its proposal for CEFTA enlargement, all 
the while waiting for a reaction from the EU. 
Sanader is expected to raise the issue again 
during the February 15 visit of EU Commissioner 
Barroso. 
 
 
FRANK