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OO RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHVJ #0829/01 1041649
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O 141649Z APR 06
FM AMEMBASSY SARAJEVO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3261
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEKJCS/JCS WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUFOAOA/USNIC SARAJEVO PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 SARAJEVO 000829 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR D (SMITH), P (BAME), EUR (DICARLO), EUR/SCE 
(ENGLISH, SAINZ, FOOKS), NSC FOR BRAUN, USNIC FOR WEBER, 
GREGORIAN 
 
E.O. 12958: DECL: 04/14/2016 
TAGS: PREL PGOV BK
SUBJECT: BOSNIA:  SCENESETTER FOR HIGH REP VISIT TO 
WASHINGTON APRIL 19-21 
 
Classified By: AMBASSADOR DOUGLAS MCELHANEY.  REASON:  1.4 (B) AND (D). 
 
¶1. (C) SUMMARY:  High Representative Christian 
Schwarz-Schilling's April 19-21 visit to Washington will be 
an  opportunity to review his first three months in office. 
CSS (his staff's abbreviation, not used in speech) sees 
himseslf as the antidote to former High Rep Ashdown's 
activist intervention in BiH's political development.  But 
his hands-off approach has drawbacks, as described in some 
detail below.  On a major U.S. priority, constittional 
reform, CSS has been more engaged -- but ithin clearly 
defined limits.  We will want to psh him to be constructive 
in the end-game, and t work with us to craft "phase two." 
Schwarz-Schiling will look for strong U.S. support for 
transiion from High Representative to EU Special 
Representative by next March.  We should remind CSS that we 
have policy objectives in Bosnia, and that we believe that 
the international presence must be used to move this new 
state forward.  That sometimes must include pressure on 
politicians and others alike if we are to remain on the same 
wavelength.  END SUMMARY. 
 
SCHWARZ-SCHILLING:  THE OPPOSITE OF ASHDOWN 
 
¶2. (C)   With his slow manner and deliberate speech, 
Schwarz-Schilling is the polar opposite of the activist, 
energetic former High Rep Ashdown.  CSS believes Bosnians 
need to take increased responsibility for their own political 
decision-making; under his leadership, OHR has adopted a 
distinctly "hands-off" approach.  While there are many areas 
where Bosnians can and should gradually take on more 
responsibility, the abrupt shift has left many Bosnian 
officials dazed and confused.  His staff has also had 
difficulty re-orienting itself.  In the two key decisions 
which have defined his tenure to date, CSS's strong 
disinclination to intervene (and Eurocentric orientation) 
have caused significant problems -- and kicked bigger ones 
down the road. 
 
TWO DECISIONS DEFINE HIS TENURE 
 
¶3. (U)  The High Rep's first major decision was whether or 
not to extend the mandate of Indirect Taxation Authority 
(ITA) Governing Board (GB) Chairman Joly Dixon (reftel). 
Dixon's mandate originally expired in January 2006.  Former 
High Rep Ashdown, keenly aware of the increasing criticism of 
Dixon's performance, did not want to saddle his successor 
with a long-term problem.  But nor did he want CSS to face a 
crisis immediately upon arrival.  As one of his last acts, 
Ashdown opted to extend Dixon's mandate until the end of 
March.  As the new deadline drew near, the new team at OHR 
was paralyzed between its desire for "local ownership" of 
decisionmaking and the European Commission's insistence that 
Dixon be reappointed.  Repeated attempts to get the Bosnians 
to voluntarily accept Dixon failed.  The Council of 
Ministers, which has the authority to appoint the GB 
Chairman, refused to extend Dixon or even ask the High Rep to 
take action.  The state-level Finance Minister declined to 
request Dixon's reappointment.  The RS government explicitly 
demanded Dixon's removal.  Despite this, the High Rep bowed 
to EC pressure and extended Dixon for another three months, 
with an "option" for an additional four.  The result: 
gridlock as both the RS and the state-level government refuse 
to work with Dixon and neither entity has received any 
revenues from the single account in April. 
 
¶4. (U) In areas where EC equities are not on the line, the 
High Rep's insistence on non-intervention has been taken to 
extremes.  Not by coincidence, the non-intervention came in a 
case where an important U.S. program to rationalize one of 
Bosnia's many governmental bottlenecks was at stake.  That 
challenge was legal issues arising from amendments to the 
Federation Constitution imposed by OHR in 2002.  The 
amendments are confusing, contradictory and dangerous in that 
one possible interpretation would give each ethnic group in 
the Federation a veto over all legislation.  The issue came 
to light when the Croat-led HDZ party filed a Vital National 
Interest (VNI) challenge (the first since the 2002 
imposition) to a U.S.-backed law creating a system for the 
non-political, transparent and stable distribution of 
revenues.  Unable to understand the imposed amendments, the 
Federation Constitutional Court asked for guidance from 
Federation Parliament's Constitutional Committee.  But since 
the amendments were imposed by OHR, the Committee could 
provide little help.  Both turned to OHR with explicit 
 
SARAJEVO 00000829  002 OF 002 
 
 
requests for an interpretation of the OHR-imposed amendments. 
 However, the High Rep maintained that providing an 
interpretation would be "undue interference" in an ongoing 
case.  Strong requests from the USG failed to sway the new 
High Rep.  In the end, the Court ruled against VNI but left 
the procedural issues unaddressed. 
 
¶5. (U) CSS is likely to regret this approach when faced 
(soon) with the next crisis:  the Federation-level law on 
public broadcasting services (PBS), an EC requirement for a 
Stabilization and Association Agreement (SAA).  Passed on the 
heels of the revenue allocation law, it is also the subject 
of a VNI challenge by the Croats.  It is highly likely that 
this law will fail if the Court is forced to rule under the 
current procedures.  OHR will likely again face the a choice 
between its desire for local ownership (even, paradoxically, 
of laws OHR had to impose) and an SAA requirement.  OHR's 
failure to act risks not only significant delays in the SAA 
process, but the entire reform agenda. 
 
MORE ACTIVE ON CONSTIUTIONAL REFORM 
 
¶6.  (C)  Even under Ashdown, OHR held back from the 
U.S.-orchestrated constitutional reform negotiations.  Once 
the package was completed, OHR offered assistance; we are now 
working cooperatively with OHR and the Europeans on lobbying. 
 CSS has been particularly useful with the Croat community, 
and is unafraid to pull strings in Berlin.  However, as the 
end-game approaches, CSS has once again argued that less is 
more -- saying we need to "convince" rather than "pressure." 
We will want to emphasize that, on this issue, we will need a 
full court press and OHR is a key player. 
 
¶7.  (C)  CSS has assured skeptical Croat politicians that he 
will be personally involved in "phase two."  We should 
underscore that U.S. support for "phase two" is conditioned 
on successful completion of "phase one."  CSS will look for 
our thoughts on the process; we should indicate we are still 
exploring the options, which include utilizing lessons 
learned from the successful defense reform model.  We should 
assure CSS that we will work with OHR as planning progresses, 
but we strongly believe that a central place for the High Rep 
in this process would only bureaucratize a process requiring 
political muscle. 
 
THE FUTURE OF OHR 
 
¶8.  (C)  CSS's major goal is to transform OHR into an EU 
Special Representative office by next March.  In his view, 
that means relinquishing the Bonn Powers which allow the High 
Rep to impose legislation and remove relacitrant political 
officials.  Many of our European PIC colleagues are concerned 
about implications for Balkan stability, especially with a 
Kosovo decision on the horizon.  We should underscore that, 
on this issue, the U.S. is one of CSS's strongest supporters. 
 Effective planning for a phase out is essential, but we 
should not begin now to pull back from doing everything we 
can to, yes, "pressure" Bosnians to make the reforms that 
will bring them into the EU and NATO.   At its last meeting, 
the Peace Implementation Council asked OHR to present a 
detailed transition plan at its June session.  We should tell 
CSS frankly that we will give it careful scrutiny; our 
continued backing for early transition depends on it. 
 
MCELHANEY