VZCZCXYZ0015
RR RUEHWEB

DE RUEHBW #0188/01 0390735
ZNR UUUUU ZZH (CCY-ADX1CE238-TOQ6365-413)
R 051321Z FEB 10
FM AMEMBASSY BELGRADE
TO RUEHC/SECSTATE WASHDC 0702
INFO EUROPEAN POLITICAL COLLECTIVE
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC

UNCLAS BELGRADE 000188 
 
SENSITIVE 
 
C O R R E C T E D C O P Y (SENSITIVE CAPTION ADDED) 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV ECON MARR SR
SUBJECT: SERBIA: SCENESETTER FOR THE FEBRUARY 17-19 VISIT OF CODEL 
VOINOVICH 
 
Summary 
 
----------- 
 
 
 
¶1.    (SBU) Your visit to Belgrade comes at a time when Serbia's 
pro-European government is stable and recently achieved key 
milestones in its path to EU membership.  To keep making progress, 
however, Serbia must stop allowing the Kosovo issue to undermine 
its broader foreign policy approach and shift its focus to the 
economic and political reforms necessary for membership in the EU. 
Reforms to date have been uneven, with significant progress in the 
defense sector and many challenges ahead in the economic sphere, 
particularly as the economic crisis threatens to lead to sustained 
labor and social unrest.  End Summary. 
 
 
 
Domestic Politics 
 
-------------------- 
 
 
 
¶2.    (SBU) Serbia's democratic, pro-European government has 
remained intact since its installation in July 2008 despite its 
razor thin parliamentary majority.  President Boris Tadic's 
Democratic Party (DS) is the main party in the ruling coalition, 
and also controls Serbia's largest city governments.  Tadic's 
ultranationalist nemesis, the Serbian Radical Party (SRS), 
splintered in autumn 2008 when top SRS officials split to form the 
Serbian Progressive Party (SNS).  Claiming a pro-European 
orientation while cultivating its nationalist electoral base, the 
SNS is now Serbia's largest opposition party; it polls roughly even 
(at around 30%) with Tadic's DS.  However, despite recent local 
electoral victories and a nationwide petition effort, the 
opposition is unable to provoke early elections.  The main threat 
to the governing coalition's stability continues to be political 
infighting among the governing parties. 
 
 
 
Euro-Atlantic Integration 
 
------------------------------ 
 
 
 
¶3.    (SBU) Top Serbian officials have repeatedly emphasized that 
Serbia's top foreign policy objective is to gain EU membership. 
Over the past several months Serbia has achieved significant 
milestones including gaining visa liberalization with Schengen 
countries on December 19, formally submitting an application for EU 
membership of December 22, and "unfreezing" and implementing the 
Interim Trade Agreement with the EU on February 1.  (EU 
ratification of Serbia's Stabilization and Association Agreement 
remains conditioned on Serbia's full cooperation with the 
International Criminal Tribunal for the Former Yugoslavia (ICTY); 
most notably, Serbia must capture and extradite ICTY indictees 
Ratko Mladic and Goran Hadzic.)  Over the past year, however, 
Serbia's pro-European foreign policy focus has been blurred by 
Belgrade's efforts to cultivate closer relations with the 
Non-Aligned Movement (NAM), China, and Russia. - The NAM has been a 
particular focus as part of Serbia's efforts to slow down Kosovo 
recognitions, and China and Russia as appreciation for their 
support on the UN Security Council in regard to Kosovo. 
 
 
 
¶4.    (SBU) While Serbia cooperates 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 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.  Public debate on NATO has increased in recent months 
as nationalist figures attempt to use the issue to gain political 
traction and some in the governing coalition make increasingly 
forward-leaning statements in favor of the Alliance. 
 
 
 
Kosovo and Regional Relations 
 
 
------------------------------------- 
 
 
 
¶5.    (SBU) Despite the recognition of Kosovo's independence by 65 
countries and its membership in international organizations such as 
the IMF and World Bank, Belgrade continues to claim that Kosovo is 
part of Serbia.  Since Kosovo's independence in February 2008, 
Serbia has launched a diplomatic offensive in the UN and around the 
globe to prevent additional states from recognizing Kosovo.  During 
his May 2009 trip to Belgrade, Vice President Biden clearly stated 
that the United States and Serbia have "agreed to disagree" over 
Kosovo's status.  This spring the International Court of Justice is 
expected to issue an advisory opinion to the UN General Assembly on 
the legality of Kosovo's unilateral declaration of independence, as 
Serbia requested.  Regardless of the opinion, Belgrade may attempt 
to force a reopening of status talks on Kosovo.  While we do not 
expect Serbia to recognize Kosovo, we continue to encourage the 
Government to find a modus vivendi with its neighbor so it can 
address the necessary quality of life issues for Serbs in Kosovo. 
Failure to do so will complicate Serbia's path to the EU. 
 
 
 
¶6.    (SBU) Serbia has defined regional cooperation as one of its 
top three foreign policy priorities and has sought to repair 
relations with its neighbors with mixed results.  While improving 
relations with Hungary and Slovenia, Serbia has yet to make amends 
with Macedonia and Montenegro, particularly after the two countries 
recognized Kosovo in October 2008.  Serbia has generally played a 
constructive role in the Butmir process in Bosnia-Herzegovina.  We 
expect Belgrade to take advantage of the opportunity to improve 
troubled political relations with Croatia after incoming Croatian 
president Ivo Josipovic assumes office in mid-February. 
 
 
 
Security Issues 
 
------------------ 
 
 
 
¶7.    (SBU) Defense reform is 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 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's economy is still shaped by the wars, sanctions 
and economic neglect of the 1990's.  The country is trying to make 
up for lost time, but the economic liberalization process has been 
drawn out, with limited tangible benefits for average Serbians. 
When the global financial crisis hit, Serbia was quick to reach out 
to the IMF and in May 2009 signed a $4 billion Stand-By 
Arrangement.  Since then, the Serbian dinar has been relatively 
stable; however, in recent weeks, the dinar has come under 
pressure.  The IMF agreement constrains the Serbian government 
budget deficit to 4.5% for 2009 resulting in a freeze on pensions 
and public sector wages.  With limited new foreign and domestic 
investment over the last two years the economy is struggling to 
create jobs and labor pressure is building.  Strikes and acts of 
civil disobedience have increased as more companies fall behind on 
payments and face bankruptcy.  Because unions do not have strong 
central leadership, local pressures have not become national. 
 
 
Bilateral Issues 
 
------------------ 
 
 
 
¶9.    (SBU) Vice President Biden's May 2009 visit to Belgrade added 
a new impetus to our bilateral relationship, which had been 
strained following Kosovo's declaration of independence in February 
¶2008.  Our diplomatic relations have now returned to normal and we 
are working to reinforce the Vice President's message that we can 
agree to disagree on Kosovo's status while building on other areas 
of our bilateral relationship.  Our main priorities include 
assisting Serbia on its path to Europe, building on our positive 
mil-mil relationship, and expanding economic and business ties.  In 
the coming months we will also be seeking to update a woefully 
outdated extradition treaty with Serbia. 
 
 
 
Comment 
 
------------ 
 
 
 
¶10.    (SBU) Now is an important time for Serbia to decide whether 
it wishes to spend the year in a quixotic quest to reopen Kosovo 
status or devote full attention to winning EU candidacy status. 
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. 
With nearly all key political figures viewing you as a favorite 
son, you will be well positioned to deliver the messages Belgrade 
needs to hear.  End Comment. 
WARLICK