VZCZCXRO3546
RR RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHBW #1270/01 3451450
ZNR UUUUU ZZH
R 101450Z DEC 08
FM AMEMBASSY BELGRADE
TO RUEHC/SECSTATE WASHDC 0729
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RHEHNS/NSC WASHDC
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHMFISS/HQ USEUCOM VAIHINGEN GE

UNCLAS SECTION 01 OF 03 BELGRADE 001270 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV ECON MARR SR
SUBJECT: SERBIA: SCENESETTER FOR THE DECEMBER 19-20 VISIT OF 
CONGRESSMAN TED POE 
 
BELGRADE 00001270  001.2 OF 003 
 
 
Summary 
------- 
 
¶1.  (SBU) Your visit to Serbia comes as we are rebuilding high-level 
contacts with a new, pro-European Serbian government in the wake of 
Kosovo's declaration of independence.  The recent agreement in the 
UN Security Council on the deployment of the European Union's Rule 
of Law mission was a crucial step forward which we hope will permit 
Serbia to shift its focus from Kosovo to the range of economic and 
political reforms necessary for membership in the EU, and to play a 
more constructive role in the region.  Reforms to date have been 
uneven, with significant progress in the defense sector but many 
challenges ahead in the economic sphere, particularly in light of 
the global financial crisis.  End Summary. 
 
 
Domestic Politics 
----------------- 
 
¶2.  (SBU) After several years of ineffective governance due to 
tension within its ruling coalitions, Serbia elected a democratic, 
pro-European president in February and formed a government based on 
the same principles in July.  President Boris Tadic's Democratic 
Party (DS) is the main party in the ruling coalition, and also 
controls Serbia's largest city governments.  Tadic and his ministers 
have laid out an ambitious program of economic and political reform 
designed to speed the path to European Union membership.  An 
inefficient bureaucracy and legislature, combined with internal 
political turmoil over Kosovo and a fractious opposition, have thus 
far limited progress on Tadic's agenda, however.  In addition, 
political rivalries among the governing parties - which include the 
Socialist Party of former dictator Slobodan Milosevic - have led to 
counterproductive infighting and rumors of early elections. 
 
 
Kosovo 
------ 
 
¶3.  (SBU) Serbia's recent agreement to the deployment of the 
European Union's Rule of Law Mission, or EULEX, throughout Kosovo 
was a watershed event.  With the deployment of EULEX on December 9, 
the United Nations ceased responsibility - after nine years - for 
police and judicial oversight in Kosovo, transferring many of its 
authorities to EULEX and the Kosovo authorities.  Serbia agreed to 
EULEX's deployment only after receiving assurances from the UN 
Secretary General's Special Representative for Kosovo that a 
reconfigured UN presence would remain in Kosovo and would continue 
to engage with Serbia on specific issues of concern, including 
policing, customs enforcement infrastructure, and cultural heritage. 
 EULEX, to which the U.S. is contributing personnel, has said it 
will coordinate with the Serbian government as it carries out its 
mission. 
 
¶4.  (SBU) Resolution of the EULEX issue followed Serbia's success in 
obtaining the agreement of the UN General Assembly in October to 
request an advisory opinion from the International Court of Justice 
on the legality of Kosovo's February 2008 unilateral declaration of 
independence.  The Serbian government has assured us that with these 
two issues put aside, it will now work constructively with the 
United States and other international partners to promote regional 
stability.  The next few months will be a crucial test of the 
Serbian government's commitment to stop putting Kosovo above other 
crucial issues.  In particular, we expect Serbia to continue to 
advocate respect for the Dayton Accords in Bosnia-Herzegovina and to 
improve relations with Croatia by addressing issues related to the 
wars of the 1990s, such as refugees. 
 
 
Euro-Atlantic Integration 
------------------------- 
 
¶5.  (SBU) The top priority of the government of Prime Minister Mirko 
Cvetkovic is to pursue membership in the European Union.  Serbia 
signed a Stabilization and Association Agreement (SAA) with the 
European Union in April 2008, and hopes that the EU will soon 
implement the associated Interim Trade Agreement (ITA) and grant 
Serbia candidate status.  Both steps are contingent on Serbia 
completely fulfilling its obligations to cooperate with the 
International Criminal Tribunal for the Former Yugoslavia (ICTY), 
however; most notably, Serbia must still capture and extradite 
former Bosnian Serb General Ratko Mladic to face war crimes 
charges. 
 
¶6.  (SBU) While Serbia cooperates actively with NATO via the 
Partnership for Peace program, it does not intend to pursue NATO 
membership in the foreseeable future.  This is partly due to lasting 
public anger over the 1999 NATO bombing campaign which forced 
then-President Slobodan Milosevic to halt his ethnic cleansing 
 
BELGRADE 00001270  002.2 OF 003 
 
 
campaign in Kosovo.  It also reflects both Serbia's interest in 
walking a fine line between Russia and the West, and its limited 
institutional and financial capacity to undertake numerous 
simultaneous international commitments. 
 
 
Security Issues 
--------------- 
 
¶7.  (SBU) Defense reform is nevertheless a priority of the Serbian 
government, and an area where significant progress has been made. 
The Serbian Armed Forces have been right-sized to about 28,000 
troops, with further cuts on hold for the time being, pending a 
reevaluation of the security environment.  Minister of Defense 
Dragan Sutanovac (DS) has overseen significant soldier pay 
increases, training improvements, and legislation to codify defense 
reform, as well as improvements in strategic planning and 
procurement.  The Ministry has also made progress on disposing of 
some excess materiel such as MANPADS, which we are funding.  Further 
reforms, including a reduction in civilian staff, are needed. 
Serbia is an active participant in the National Guard's State 
Partnership Program with Ohio, which has been publicly well received 
and touted as an example of successful bilateral cooperation. 
 
 
Economic Issues 
--------------- 
 
¶8.  (SBU) Serbia has yet to feel the full impact of the global 
financial crisis, but some consequences are already apparent: 
tightening credit conditions have made it more difficult to obtain a 
mortgage, and several major employers have laid off personnel due to 
declining demand.  The government is nevertheless optimistic that 
due to measures they have taken to stabilize the banking system and 
protect the national currency (the dinar), Serbia will not be as 
severely affected as some other countries. 
 
¶9.  (SBU) Serbia's recent growth has been fueled by large fiscal 
expansion and a growing trade deficit.  Serbia needs to address 
lingering economic issues, including reform of the commercial and 
enterprise sectors and privatization of large state-owned 
enterprises, in order to become a viable destination for investment 
and further integrate into the European market.  Serbia's GDP grew 
by 7% through the third quarter of 2008, fueled by increased 
government spending and a boom in services (transportation, 
financial services, and retail trade).  The government estimates 
2009 growth at 3% to 3.5%.  In 2008 the Serbian government signed a 
lucrative agreement with car maker Fiat to invest in Zastava, a 
state-owned car manufacturer. 
 
 
Bilateral Issues 
---------------- 
 
¶10.  (SBU) Relations between the United States and Serbia were 
severely strained after Kosovo's declaration of independence, which 
the Serbian government continues to view as U.S.-driven and a 
violation of its sovereignty and of international law.  On February 
21, rioters attacked and set fire to the U.S. Embassy after riot 
police left their duty stations.  (The Serbian government reimbursed 
us for the full amount of the damages in December.)  Serbia recalled 
its ambassador from Washington and restricted the ability of U.S. 
mission personnel to meet with high-ranking Serbian officials until 
October.  These restrictions resulted in an almost complete 
cessation of high-level bilateral contacts for most of 2008. 
 
¶11.  (SBU) The bilateral relationship has also been strained by the 
case of the fugitive Miladin Kovacevic, a former SUNY Binghamton 
basketball player charged with assaulting fellow student Bryan 
Steinhauer in a May 2008 bar brawl.  Steinhauer was in a coma for 
several months due to the severity of the beating.  With the help of 
a Serbian vice consul who issued a new travel document under 
suspicious circumstances, Kovacevic fled the U.S. and remains in 
Serbia.  He is in pre-trial detention on Serbian charges of assault, 
use of a false travel document, and aiding and abetting the misuse 
of authority.  The Serbian government is trying to persuade 
Kovacevic to return to the United States to face justice; 
unfortunately, Serbian law forbids the extradition of its citizens, 
except to international war crimes tribunals.  Senators Schumer and 
Clinton have followed the case closely. 
 
 
Comment 
------- 
 
¶12.  (SBU) This is a time of great opportunity for Serbia:  its new 
democratic, pro-European government is in position to break out of 
the self-imposed prison that was its Kosovo policy and begin to take 
 
BELGRADE 00001270  003.2 OF 003 
 
 
the many difficult and unpopular steps necessary to reform the 
country's economy and political system.  Our consistent message to 
our Serbian interlocutors is the importance of overcoming domestic 
political rivalries and grievances with neighboring countries in 
order to demonstrate the political maturity and responsibility 
necessary for EU membership.   End Comment. 
 
MUNTER