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R 201337Z MAR 06
FM AMEMBASSY BELGRADE
TO RUEHC/SECSTATE WASHDC 8221
RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 02 BELGRADE 000434 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EUR/SCE 
DEPT FOR H - PLEASE PASS TO OFFICES OF SENATOR VOINOVICH 
 
E.O. 12958: N/A 
TAGS: OREP PREL PGOV SR
SUBJECT: SCENESETTER FOR MARCH 23-24 VISIT OF CODEL 
VOINOVICH 
 
 
¶1. (SBU) Your visit comes at a critical moment for Serbia 
in this difficult year of big decisions on Kosovo, the 
future of the State Union and European integration.  The 
death and burial of Slobodan Milosevic last week provided 
insights into a country that is exhausted and frustrated 
with the political system and its leaders.  It is less 
rage than indifference and hopelessness.  While the 
nationalists are clearly the only ones who can muster the 
80,000 people we saw in the streets of Belgrade on 
Saturday, we would venture that none of the parties were 
able to focus the emotions of last week on a convincing 
future for this numbed electorate.  In the difficult 
months ahead, we will continue to stress Serbia's future 
as a part of a free, democratic and modern Europe.  Your 
visit can help reinforce that message. 
 
¶2. (SBU) There were contradicting signs in the week 
following Milosevic's death about Serbia's readiness to 
put the difficult years of the 90's behind it.  The 
government stood firm against pressure from the 
nationalists on any suggestion of a state funeral or 
manipulation of the courts to allow Milosevic's family to 
return.  They did make certain allowances, however, that 
permitted some of the political exploitation of the 
deposed dictator's passing.  But there was quite a bit of 
open commentary, in various newspapers and from different 
sources, about Milosevic's negative role in bringing war, 
chaos and decline to Serbia, and anecdotal reports that 
suggested most people simply did not want to return to the 
Milosevic story.  The military and the Church for the most 
part stayed away and those state institutions that were 
forced to participate, e.g., the museum where his coffin 
finally was placed for two days for final respects, 
protested in a public and prominent way.  More significant 
than the staged event in front of the parliament, was the 
fact that the government and the DS did not find a way to 
use Milosevic's end as a way to rally support for the 
future. 
 
Continued Pressure on ICTY Cooperation 
 
¶3. (SBU) In fact, we fear the government may focus on the 
wrong lessons from last week's events.  There are already 
signs in the press and in private discussions with the 
Ambassador and business leaders that the government will 
seek an extension of the EU's hard April 5 "deadline" for 
Mladic's turnover to The Hague.  The EU has already 
bureaucratically frozen the stabilization and association 
talks on the ground here but promise to make that 
suspension more formal in early April.  The government is 
feeling the pressure even more as Milosevic's death and 
the recent suicide death of another Serb inmate at The 
Hague have only deepened popular distrust and antipathy 
towards the ICTY.  We should not let up on Mladic at this 
point.  The Ambassador is stressing in his public 
statements the "moral compact" part of Serbia's ongoing 
reconciliation with the past as a key to building Serbia's 
future.  He is seeing Kostunica on March 20 to press him 
to seize the moment and transfer Mladic before the EU 
closes the door on April 5. 
 
¶4. (SBU) Popular discontent with The Hague 
notwithstanding, there are ample signs that the government 
has less to fear from the unreconstructed nationalists 
than Saturday's numbers in the street might indicate.  The 
Socialist Party (SPS) has backed down from its threats 
last week to bring the government down (its votes keep the 
coalition in power) and it is almost certain that given 
their fading support and divided leadership, early 
elections would be their death knell.  While recent polls 
show that the radicals and the socialists would win the 
majority of votes if the elections were held tomorrow, 
most observers here agree that the Radical Party (SRS) is 
simply not ready to go to elections now.  A more 
significant conclusion from the polling data is the 
increasing drop out rate of voters across the board, but 
particularly in the democratic block.  Mladic and an 
opening to Europe will have a dramatic impact in bringing 
those disaffected democrats back.  We need to continue to 
press Kostunica and Tadic to seize this opportunity. 
 
¶5. (SBU) On Kosovo, the government continues to engage 
responsibly on decentralization talks, while it insists 
that it will never accept Kosovo independence.  You should 
welcome the progress in the latest round of 
decentralization talks in Vienna (March 17) and encourage 
both Tadic and Kostunica to continue their constructive 
engagement.  US Special Envoy Wisner as well as Ahtisaari 
 
BELGRADE 00000434  002 OF 002 
 
 
and senior British officials have delivered "private 
messages" to both Tadic and Kostunica about status.  It 
would be helpful for you to acknowledge those discussions 
without getting into details, stressing the need for 
Serbia to support an outcome that will balance the will of 
the Albanian majority in Kosovo and their own aspirations, 
which we share, for a leadership role in a stable south 
central Europe that is fully integrated in Euro-Atlantic 
institutions. 
 
¶6. (SBU) While Mladic conditionality continues to block 
Serbian participation in Partnership for Peace, there are 
numerous opportunities for promoting Euro-Atlantic 
integration that remain untapped.  This includes the State 
Partnership Program, which continues to drift because of 
delays in the government's consideration of a pending 
bilateral Status of Forces Agreement (SOFA).  In addition 
to the SOFA, there are two other key agreements waiting 
for implementation or further government consideration, 
including a Ground Lines of Communication (GLOC) Agreement 
with NATO (ratified but not yet entered into force); and a 
bilateral Security Cooperation Agreement with us, with our 
required Article 98 guarantees.  We have recently gotten 
assurances from senior officials in Kostunica's cabinet 
that the government may be ready to move forward on these 
agreements.  You should encourage both Kostunica and 
Minister of Defense Stankovic to complete these agreements 
quickly and to look for creative ways to use 
implementation to promote Serbia's interest in closer 
security ties with both the United States and NATO.  On 
the non-proliferation front, Serbia continues to cooperate 
with us closely and we are looking to build further on 
recent GoS progress in destroying unneeded manpads. 
 
STATE UNION 
 
¶7. (SBU) While Montenegro is proceeding with plans to hold 
a referendum May 21 on the future of the State Union, the 
Serbian government appears to be all but in denial on the 
issue.  The government refuses to discuss the possibility 
of Montenegrin independence and its implications until 
after the referendum, although it has said it would 
respect the outcome of the referendum either way.  The 
prospect of the State Union's dissolution is not as 
emotionally charged an issue for the Serbian public as 
Kosovo's future status is.  There is speculation that a 
"gray zone" result (the pro-independence side receiving 
more than 50 percent but less than the 55 percent required 
by the EU to recognize Montenegro's independence) would 
cause a degree of instability and backlash among the pro- 
independence voters, but most agree that the State Union 
as it exists now is dysfunctional, and the Serbian public 
seems resigned to its possible dissolution. 
 
ECONOMIC OUTLOOK 
 
¶8. (SBU) In addition to the political and strategic 
challenges the shaky coalition government faces, it must 
also grapple with the challenge of building sustained 
prosperity to deliver rising incomes to a long-deprived 
population.  Per capita income is USD 3,226, compared to 
USD 8,416 in Croatia, and unemployment hovers around 19 
percent.    The minister of labor and social policy 
reported in October that some 20 percent of Serbians live 
with incomes below the poverty line of USD 2.90 a day. 
The Government has made significant progress, with the 
banking sector now largely privatized and the economy 
producing strong growth. However, Serbia still is not 
receiving significant levels of foreign direct investment 
(FDI), which is the key to increasing exports and 
employment.  Investors face numerous structural barriers, 
including extreme difficulty in land transactions, but the 
political uncertainty surrounding Kosovo status 
negotiations plays a role, as well. 
 
¶9. (SBU) Your visit here is a great opportunity for a 
friend of Serbia to relay an encouraging but tough message 
to Serbia's democratic leadership.  They need to hear that 
we are convinced that Milosevic's era is over and that we 
are focused on the future.  But that will require Serbia 
to continue the difficult and wrenching process of 
reconciliation.  Mladic and the ICTY are only a small part 
of that process, but a critical element for building a 
Euro-Atlantic future. 
 
POLT