Cablegate: Scenesetter for Codel Voinovich

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1. (SBU) Your visit to Zagreb on February 15 comes in the
final week of President Stipe Mesic's second and final term
in office, and just three days before the inauguration of Ivo
Josipovic, an opposition Social Democrat and legal scholar,
who will become Croatia's third president since independence.
Just as significantly, your visit will provide an
opportunity to engage with the relatively new HDZ government
of Prime Minister Jadranka Kosor, who assumed office only in
July 2009, upon the entirely unexpected (and still somewhat
inexplicable) resignation of Ivo Sanader, who had been Prime
Minister since 2003. Kosor has surprised many with her
forthright stand against corruption and willingness to make
tough decisions on both foreign and domestic issues, and
notably defeated an effort by Sanader to stage a political
comeback in early January.

2. (SBU) Despite these political transitions, the
U.S.-Croatian relationship is as good and strong as it has
ever been, reflecting the remarkable transformation that has
been underway in Croatia over the last decade or more.
Having achieved NATO membership in April 2009, and nearing
the final lap of its EU accession process, Croatia has nearly
completed the tasks of putting the 1990s war and all of its
negative legacies behind it, and of effecting its political
metamorphosis into a stable and fully democratic member of
the Euro-Atlantic community. While work still remains in
both politics and economics to cement these changes, our
assessment is that Croatia is irreversibly on a positive path.


3. (SBU) Our goals with Croatia center on three key
objectives: bolstering Croatia as a global partner,
promoting regional stability, and supporting the completion
of badly-needed domestic political and economic reforms.

4. (SBU) Croatia has approximately 300 troops deployed to
Afghanistan as part of ISAF. The GoC has been particularly
responsive to our encouragements to focus their deployment as
much as possible on supporting our policy of training Afghan
forces to assume increasing responsibility for security in
their own country. The Croatian military at present has
three Operational Mentoring and Liaison Teams (OMLTs) on the
ground, including one combined OMLT with the Minnesota
National Guard. During 2010, the Croatians intend to add two
Police OMLTs to that total. In 2009, the Croatian Air Force
also deployed to a multilateral PKO for the first time,
contributing two helicopters and 20 crew to KFOR which remain
based at US Camp Bondsteel in Kosovo. Supporting these
deployments is a key focus of our assistance programs (IMET,
FMF, 1206, GPOI) with Croatia. Among our mid-term goals is
to support Croatia's nascent niche capability in helicopters,
capitalizing on their recent acquisition of several MI-171sh
helicopters from Russia as payment on old Soviet debts. On
our broader global agenda, Croatia has proven a reliable
ally, and just concluded a term as a non-permanent UNSC
member in which it was consistently supportive of U.S.
positions, with a particular emphasis on maintaining
international attention to counter-terrorism efforts.

5. (SBU) Within the region of Southeast Europe, Croatia's
success has promoted stability in two ways. First, through
the power of example. Croatia's NATO membership, and its
progress toward the EU has communicated as clearly as
anything could to its neighbors that if they make the
necessary reforms, they can aspire to a better future.
Second, the process of integrating into Euro-Atlantic
institutions has been a solid incentive to Croatia to improve
its policies toward its neighbors. The bad old days of
Croatian interference in Bosnia-Herzegovina are long gone.
Throughout the recent Butmir talks Zagreb endeavored to
support the process and urged BiH Croat leaders to assume
more constructive stances on the issues under discussion. In
its other relations as well, Croatia has had to address
difficult issues ranging from the border dispute with
Slovenia, to assisting the return of ethnic Serbs who fled
during the war, to taking a principled position on Kosovo's
independence despite the strains that would create with
Belgrade. None of these decisions have been simple, and none
of the issues can yet be considered completely resolved, but
the movement is in a positive direction.

6. (SBU) Implementing critical domestic reforms has also been
a complicated challenge. The Croatian economy is much less
productive than it could be given the human capital

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available, and despite several years of solid growth early in
the last decade it remains too weighed down by inefficient
taxes and regulation. The financial crisis has helped to
highlight the need for economic reform if Croatia hopes to
reverse the estimated 6% decline in GDP in 2009, but it has
also made some desperately needed reforms such as shrinking
the bloated government payroll more difficult. Overall,
Croatia needs to create a much more business-friendly
environment, one that will be attractive to foreign investors
and Croatian entrepreneurs alike. (Last year the World Bank
ranked Croatia 107 out of 180 countries in this regard.)

7. (SBU) On the rule of law and fighting corruption, the
Croatians have spent a great deal of effort, and US and EU
assistance, into reforming the judiciary and developing more
effective legislation and law enforcement institutions.
Significantly, since Prime Minister Kosor assumed office
seven months ago, the government has been able to capitalize
on these institutional reforms in its invigorated and more
courageous efforts to weed out and prosecute corruption.
Corruption investigations have already ensnared two former
ministers, and reportedly could even reach higher in the
period ahead. Croatian officials need to sustain these
efforts, prosecute them thoroughly, and produce results that
justify recent assertions that no one in Croatia is any
longer "untouchable."


8. (SBU) Two factors will be central to the sustainability of
the positive developments noted above. First, the EU needs
to deliver on the promise that if Croatia makes the tough
reforms, then the EU is ready to welcome it. The goalposts
should stay where they are. There has been a temptation for
some to see EU accession as the last chance for leverage over
Croatia on a variety of issues, and to squeeze as hard as
they can. One example, but not the only one, has been the
dispute with Slovenia. The U.S. has been very careful not to
take any position on the relative merits of either country's
maritime and border claims. But we have been clear in our
disagreement with Slovenia's decision to link this dispute to
the EU negotiations. (Resolution now hinges on Slovenia's
ratification of the arbitration agreement reached by the two
sides, which was ratified by the Croatian parliament in
November.) The U.S. position is that bilateral disputes
should not be injected into the agendas of NATO or the EU.
This principle will be just as important when it comes time
for Croatia's eastern neighbors to negotiate their accession.

9. (SBU) The second key factor will be whether the Kosor
government has the courage to take some risks and continue
making tough decisions. On foreign policy, she has a
reasonable record over the past months, willing to make the
hard calls needed on issues such as the ad hoc arbitration
deal with Slovenia, sending tough messages to the Croats in
Bosnia, or supporting the US position on Kosovo at the
International Court of Justice. Domestically, as well, she
is off to a good start by dealing more forthrightly with such
issues as the pervasiveness of corruption or the weakness of
Croatia's earlier cooperation on war crimes. It is only on
economic issues where one can see signs of a lack of
direction, or perhaps even a lack of nerve. We intend to
increasingly focus our efforts on encouraging the Croatians
to make these tough but necessary decisions as well.


10. (SBU) Croatian officials view the U.S. very favorably.
We have been a reliable supporter for the country; clear
about our interests, but realistic in our demands, and
trustworthy in delivering on our commitments. The Croatians
know that we are one of their strongest, but also most
candid, supporters, and therefore they listen to our advice

11. (SBU) Your visit, which will include a planned quick
survey of Croatian helicopter forces, meetings with PM Kosor
and President Mesic, a combined lunch with the FM and DefMin,
and a concluding dinner at the Residence with President-elect
Josipovic, will provide excellent opportunities to advance
all of the objectives outlined above. We are providing
specific talking points for each event on your planned
schedule, but with all of these officials, you can stress the
same themes:

- Congratulate Croatia on the impressive transition that has

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taken place over the past ten to fifteen years in Croatia.
The smooth conduct of the recent presidential elections has
once again confirmed Croatia's democratic credentials.

- Welcome Croatia as a new NATO Ally, and express
appreciation for Croatia's willingness to contribute to
important missions from KFOR to ISAF, as well as our hope
that they will be able to strengthen those contributions in
the year ahead.

- Note our understanding that relations with some neighbors,
particularly where there are issues remaining from the
collapse of Yugoslavia, are difficult and sensitive. Urge
them to continue constructive efforts to resolve all
outstanding issues, in particular with Serbia, which could
form the basis of an improved relationship as Croatia
prepares to enter the EU. Probe Croatian views on future
evolution of the situation in Bosnia-Herzegovina.

- Praise the recent improvements in the government's efforts
to fight corruption, and to cooperate with the ICTY. Stress
that both efforts are vital to EU accession and to the
consolidation of the rule of law in Croatia. Urge a similar
commitment to economic reforms and improvement in the
business and investment climates.

12. (U) I look forward to welcoming you to Zagreb on February

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