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RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSL RUEHSR RUEHVK
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DE RUEHBW #1258/01 3011049
ZNR UUUUU ZZH
R 281048Z OCT 09
FM AMEMBASSY BELGRADE
TO RUEHC/SECSTATE WASHDC 0326
INFO EUROPEAN POLITICAL COLLECTIVE
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RHMFISS/HQ USEUCOM VAIHINGEN GE
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK

UNCLAS SECTION 01 OF 04 BELGRADE 001258 
 
SENSITIVE 
SIPDIS 
DEPT FOR EUR/SCE (P. PETERSON), EUR/RUS 
 
E.O. 12958: N/A 
TAGS: PREL ENRG ECON SR RS
SUBJECT: SERBIA SURVIVES MEDVEDEV VISIT, BUT MUST DEAL WITH 
CONSEQUENCES 
 
REF: A) BELGRADE 841; B) BELGRADE 851 
 
Summary 
 
------- 
 
 
 
  (SBU) During a 12-hour visit to Belgrade on October 20, Russian 
President Dmitriy Medvedev: 
 
 
 
-- signed agreements on a gas storage facility and the South Stream 
pipeline, 
 
 
 
--  promised a $1 billion loan to the Serbian government, 
 
 
 
-- reaffirmed Russia's support for Serbia's stance on Kosovo, 
 
 
 
-- tepidly endorsed Serbia's European Union aspirations, 
 
 
 
-- pitched his proposal for a new European security architecture, 
and 
 
 
 
-- secured agreement on a joint regional disaster response center 
to be located in Nis. 
 
 
 
The visit, planned to coincide with the 65th anniversary of the 
liberation of Belgrade by Soviet and "Yugoslav" forces, was heavily 
focused on the historical, cultural, and religious ties allegedly 
binding Russia and Serbia.  While the Serbian government attempted 
to balance its praise for Medvedev and Russia with emphasis on 
attaining European Union membership, that message was largely 
obscured by public speculation over what Russia's security plans 
mean for Serbia.  End Summary. 
 
 
 
Substance: Gas, Loan, Security, Disaster Response 
 
--------------------------------------------- ---- 
 
 
 
¶2.  (U) The most concrete deliverables of Russian President Dmitriy 
Medvedev's October 20 visit to Belgrade, accompanied by a large 
delegation of Russian businessmen, were not surprisingly in the 
economic arena (Ref A).  The Serbian and Russian governments signed 
two energy-related agreements between Gazprom and Srbijagas.  The 
first created a joint venture firm to develop Serbia's Banatski 
Dvor gas storage facility in Vojvodina.  Gazprom is to provide 51% 
($38 million) and Srbijagas 49% ($36 million) of the JV's total 
capital of $75 million. 
 
 
 
¶3. (SBU) The second agreement was a protocol to create within 30 
days a Switzerland-based joint venture company to coordinate the 
development of the proposed 450 km Serbian portion of the future 
South Stream gas pipeline.  Gazprom will hold a 49% stake and 
Srbijagas 51%.  The company will be responsible for conducting a 
feasibility study on the pipeline route through Serbia.  Energy 
Minister Petar Skundric told us on October 22 that Serbia was the 
first country along the proposed South Stream route to create a 
joint venture with Gazprom.  Russia, he said, had promised that the 
pipeline would be operational by 2015.  He voluntarily added that 
Serbia would welcome a Nabucco alternative as well, but Serbia was 
hoping to collect transit fees. 
 
BELGRADE 00001258  002.2 OF 004 
 
 
¶4.  (SBU) Serbia and Russia initialed an agreement for a $1 billion 
loan -- noticeably minus an agreement on interest rates -- which 
will provide support for the Serbian state budget and  funds for 
infrastructure projects, as long as Russian firms participate.  The 
Finance Ministry announced that the details will be finalized in 
discussions in Moscow the week of October 26.  According to press 
reports, $200 million is earmarked for budget support while the 
rest would go to infrastructure projects still to be determined; 
railways and a Belgrade metro were rumored to be likely projects. 
Belgrade Mayor Dragan Djilas, however, told us on October 23, the 
metro offer was not on the table.  He had rejected the proposal and 
instead was pursuing light rail options elsewhere in Europe.  MP 
Nenad Popovic, a member of former PM Vojislav Kostunica's 
Democratic Party of Serbia (DSS) who has extensive business 
interests in Russia through his firm ABS Holdings and whose family 
lives in Moscow, harshly criticized the loan agreement to us on 
October 22.  He claimed the Serbian government had not even asked 
about the interest rate, repayment term, or grace period; he 
predicted that at least 75% of the money for infrastructure 
projects would go to Russian firms.  The Serbian government would 
be better served by obtaining commercial loans for open tender 
projects such as railways or the "Chinese" bridge across the Danube 
(Ref B) rather than taking tied financing, Popovic emphasized. 
 
 
 
¶5.  (U) In his public comments, President Medvedev repeatedly 
reaffirmed Russia's support for Serbia's territorial integrity and 
its diplomatic  battle to defend Kosovo.  In much milder terms, he 
expressed "respect" for Serbia's European integration goals and 
commented that "for a very long time there will be countries in 
Europe that do not belong to NATO or other organizations."  During 
his joint press conference with President Tadic after their meeting 
and in a subsequent address to the National Assembly, Medvedev 
elaborated on Russia's proposal for a new European security 
architecture.  Russia proposes to "sign a new treaty and create a 
new, modern, effective system of European security," Medvedev said, 
and enshrine the principle that "we cannot address security issues 
in a way that threatens the security of others."  Such a European 
Security Treaty could be a starting point for a common security 
zone in the Euro-Atlantic region, he said, emphasizing that the 
arrangement would be open to all states "regardless of whatever 
military or other alliances [they] belong to." 
 
 
 
¶6.  (SBU) In his remarks to the press, Tadic said that Serbia had 
examined the Russian proposals "very attentively...and we are very 
happy with them.  Serbia's policy is that we are open to all future 
initiatives in this area."  In an apparent effort to reassure the 
West that Tadic had not crossed any red lines with Medvedev, an 
unnamed government source with knowledge of the talks told daily 
"Blic" on October 21 that Tadic had told Medvedev that Serbia was 
ready to participate in discussions of the idea but that such a 
move would require the agreement of all.  FM Jeremic muddied the 
waters, however, by saying that Serbia wanted to be an "active 
partner" in forming a new concept of European security in October 
22 Vecernje Novosti and RTS interviews that generated headlines 
saying "We Are Stronger than Yesterday." 
 
 
 
¶7.  (U) The two countries also signed an agreement for the Serbian 
Ministry of Interior and the Russian Ministry of Emergency 
Situations to establish a regional disaster response center in the 
city of Nis to respond to forest fires, floods, or earthquakes.  In 
an October 21 press conference, Interior Minister Ivica Dacic and 
Minister for Emergency Situations Sergey Shoigu announced that the 
logistics base would be in Nis because it was served by an airport 
and good infrastructure.  Shoigu said that representatives of other 
countries to be served by the center -- Greece, Bulgaria, 
Macedonia, Montenegro, and Croatia, along with Serbia and Russia -- 
would meet in February 2010 to discuss the plan.  Shoigu added that 
the center would be created in 2012 and would handle mine clearance 
in addition to natural disasters. 
 
 
 
Pomp: Patriots, Parliament, Patriarch, Pageant 
 
--------------------------------------------- - 
 
BELGRADE 00001258  003 OF 004 
 
 
¶8.  (SBU) President Medvedev's schedule was heavy on symbolism 
lauding the two countries' mythical deep connections, given its 
timing on the 65th anniversary of the liberation of Belgrade from 
the Nazis by the Soviet Army and the Yugoslav People's Liberation 
Army, aka the "Partizans."  It was also the first time in history 
that the presidents of Serbia and Russia had met on Serbian soil. 
To commemorate the liberation, Medvedev and Tadic laid wreaths at 
the Monument to the Liberators of Belgrade in the New Cemetery and 
saluted a group of WWII veterans.  Medvedev was invited to address 
the National Assembly, the first such address by a head of state. 
The Kremlin has posted the full text of Medvedev's speech at 
 
http://eng.kremlin.ru/speeches/2009/10/20/130 1_222271.shtml. 
 
 
 
¶9. (SBU) Medvedev finished off the afternoon with a visit to the 
Serbian Orthodox Patriarchate, where Metropolitan Amfilohije 
presented him with the Order of St. Sava of the First Class.  The 
final event of the day was a gala presentation at the Sava Center 
commemorating the liberation attended by government officials, 
Republika Srpska Prime Minister Milorad Dodik, the diplomatic 
corps, uniformed military, veterans, and hundreds of students 
bussed in to fill seats at the last moment.  The  mixed symbol 
event, consisting of anthems, speeches, historical films, and 
dancing children, generated grumbling among many of the more 
European-oriented members of the audience; Serbian Renewal Movement 
(SPO) leader Vuk Draskovic commented to us "all that was missing 
was a picture of Stalin."  Israeli Ambassador Koll told Charge the 
event was "pathetic."  If you're going to put on an event like 
this, either do it right, or don't do it at all," he commented, 
noting the event's blurred images, lack of coherent messaging, and 
brief duration. 
 
 
 
Domestic Impact Mixed 
 
--------------------- 
 
 
 
¶10.  (SBU) Predictably, those close to Russia within the Serbian 
government were buoyed by the Medvedev visit, as illustrated by FM 
Jeremic's comments on Serbia being "stronger today than yesterday." 
Others were quite concerned by the concessions the government 
appeared to have made in return for Russian credits, as well as the 
linkage made by some media and commentators between the Russian 
proposal for a new European security architecture and the agreement 
to establish the disaster response center. 
 
 
 
¶11.  (SBU) The Italian ambassador warned us that the disaster 
response center was a "slippery slope" to establishing a Russian 
military base in Serbia.  Three parliamentarians from the Liberal 
Democratic Party (LDP), including party leader Cedomir Jovanovic, 
asked to meet with us on October 23 to express their concerns about 
FM Jeremic's statements in favor of a new European security 
architecture, Medvedev's comments on NATO and other alliances, and 
the lack of clarity on terms for the Russian loan. 
 
 
 
¶12.  (SBU) Despite the Serbian government's many statements before 
and during the visit that European Union membership remained the 
country's central strategic goal, it appears that some local 
leaders may have interpreted the Medvedev visit as license to 
deploy anti-Western propaganda.  During the annual commemoration of 
the killing of students in Kragujevac during WWII on October 21, a 
theatrical presentation by the Belgrade National Theater gave an 
alarming Russian-authored alternative version of WWII history in 
which  Americans began bombing Belgrade and other cities in Serbia 
to show the world "who its new master" was.  The interpretative 
reader then went on to talk of blood-letting, savagery, and 
atrocities in Iraq and Afghanistan, as well as "massacres during 
the illegal NATO bombings."  (The Charge and other embassy 
representatives walked out at that point.) 
 
BELGRADE 00001258  004 OF 004 
 
 
Comment 
 
------- 
 
 
 
¶13.  (SBU) The Serbian government struggled for months to strike 
the appropriate balance for Medvedev's visit by displaying 
sufficient respect and gratitude for Russia's political and 
economic support without alienating Serbia's European partners. 
Overall we would give them a C- for their efforts:  while President 
Tadic resisted pressure to take extravagant steps such as 
organizing a military parade or declaring a national holiday, made 
no irreversible gaffes in his public comments, and made progress on 
budgetary support, the policy outcomes of the Medvedev visit are 
likely to complicate Serbia's relations with its Euro-Atlantic 
partners in the near term.  The message the Serbian public is 
likely to take away from Medvedev's visit is that partnership with 
Russia competes with, rather than complements, Euro-Atlantic 
integration.   End Comment. 
BRUSH