VZCZCXRO0132
RR RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHBW #0088/01 0231155
ZNR UUUUU ZZH
R 231155Z JAN 08 ZDK
FM AMEMBASSY BELGRADE
TO RUEHC/SECSTATE WASHDC 2094
INFO RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 02 BELGRADE 000088 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
USDOC FOR 4232/ITA/MAC/EUR/OEERIS/SSAVICH 
 
E.O. 12958: N/A 
TAGS: ECON EINV ENRG SR
SUBJECT: Serbia: DPM Djelic Outlines a European Economic Future 
 
 
BELGRADE 00000088  001.2 OF 002 
 
 
Summary 
------- 
 
¶1.  (SBU) During a January 22 meeting with the Ambassador, Deputy 
Prime Minister Djelic (DS) outlined the government's vision of a 
European economic future for Serbia.  Djelic focused on Serbia's 
preparations for EU negotiations and hopes to sign an SAA as soon as 
January 28.  Djelic admitted that the energy agreement with Russia 
just approved by the government was politically driven.  After the 
elections the Serbian government plans to move on a number of high 
proile privatizations that they hope will attract signficant 
interest from Western firms.  End Summary 
 
Preparing for EU Candidate Status 
-------------------------------- 
 
¶2.  (SBU) Djelic told th Ambassador in a January 22 meeting that 
the Serian Government is working to complete by this summe a 
national plan for EU accession that will outlne all of the steps 
required to bring the countr into compliance with the EU's aquis 
communitaire.  Djelic highlighted Serbia's readiness to sign an SAA 
as soon as possibl, hopefully on January 28, in order to solidify 
erbia's European path ahead of the second round ofthe presidential 
elections on February 3. 
 
Enery Deal a Necessary Compromise 
--------------------------------- 
 
¶3.  (SBU) Turning to the energydeal with Russia, Djelic confirmed 
that the govenment had approved earlier in that morning an enery 
framework agreement with Russia including sale f the state oil 
company NIS, operation of the naural gas storage facility at 
Banatski Dvor, and onstruction of a branch of the South Stream 
pipeine across Serbia.  Djelic said that the deal was he price of 
being in a coalition government.  He tried to minimize the 
significance of selling NISwithout a tender by pointing to other 
untendereddeals with Russia by Serbia's neighbors, including Greek 
purchases of military equipment, and Bulgaria's agreement on 
construction of a nuclear power plant. 
 
¶4.  (SBU) Djelic said that while he held his nose when he voted to 
support the framework agreement, there had been improvements in the 
document, and there were still many things to be negotiated with the 
Russians.  He claimed that the agreement adopted by the government 
took out references to NIS's monopoly on production of refined 
products in Serbia, and included mention of EU environmental 
standards.  The price paid for NIS was still the subject of 
negotiations along with other details and many of these would be 
sorted out later, once some of the political pressure of the 
Presidential elections had passed. 
 
Friday Signing in Moscow with Former Rival Candidate 
--------------------------------------------- ------- 
 
¶5.  (SBU) According to Djelic, the energy framework will be signed 
on Friday in Moscow with President Tadic and Prime Minister 
Kostunica present, but with Infrastructure Minister and third place 
presidential candidate Ilic signing the agreement.   While Djelic 
did not offer a reason why Ilic, not the Energy Minister, would sign 
the agreement, he made clear that DS projections showed the second 
round of the Presidential elections could be decided by as little as 
50,000 votes.  The implication of Djelic's comments was that the 
photos of President Tadic alongside the PM and Ilic with Russian 
leaders on Friday would demonstrate support and unity among Tadic, 
Ilic and Kostunica. 
 
Privatization Will Accelerate 
----------------------------- 
 
¶6.  (SBU) Looking beyond the presidential elections, Djelic said the 
government would accelerate the privatization of larger companies, 
including the airline JAT, tour bus operator Lasta, car manufacturer 
Zastava, trading conglomerate Genex, and bus manufacturer Ikarbus. 
Djelic hoped that all these companies would attract Western firms. 
In addition, the initial public offerings for several state firms 
would happen later this year with a tender for advisors to the 
government on this process coming soon.  Djelic added that despite 
the energy deal with Russia on oil and gas, the government was 
seeking Western participation in energy and would now be targeting 
the electricity sector for partnerships with major European firms. 
 
 
Comment 
------- 
 
¶7.  (SBU) Djelic was clear in his commitment to move Serbia toward 
the EU in the wake of a planned election win by President Tadic. 
His was not a false bravado -- it was clear that he believed Tadic 
 
BELGRADE 00000088  002.2 OF 002 
 
 
would prevail in a tight contest.  He was also frank in admitting 
that the Russian energy deal was politically motivated, pointing to 
the economic cost of a Tadic loss in the Presidential elections as 
the potential price of not agreeing to the deal.  Djelic tried to 
downplay the damage of selling NIS without a tender, suggesting that 
the details are not yet final and so Serbia can still negotiate a 
better deal once the political pressure of the elections is over. 
On energy, the DS is acting tactically to shore up President Tadic's 
support, but Djelic is thinking strategically about the EU and 
international investment.   End Comment. 
 
MUNTER