US embassy cable - 04ZAGREB382

UNCLAS ZAGREB 000382 
 
SIPDIS 
 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: PREL, PGOV, ECON, EFIN, HR, Regional Issues 
SUBJECT: AGREEMENT ON SUCCESSION ISSUES RATIFIED 
 
SENSITIVE BUT UNCLASSIFIED - PLS PROTECT ACCORDINGLY 
 
1.  (U) SUMMARY:  LATE ON MARCH 3, THE CROATIAN 
PARLIAMENT RATIFIED THE AGREEMENT ON SUCCESSION ISSUES 
AND ADOPTED A CONCLUSION COMMITTING THE GOVERNMENT TO 
CONTINUE THE INVESTIGATION INTO $589 MILLION WHICH ARE 
"MISSING" FROM JOINT VENTURE BANK ACCOUNTS.  CROATIA IS 
    THE LAST COUNTRY OF THE FORMER YUGOSLAVIA SUCCESSOR 
STATES TO RATIFY THE AGREEMENT FIRST REACHED IN VIENNA 
IN 2001.  END SUMMARY. 
 
2.  (U) LAST MONTH THE NEW HDZ-LED CROATIAN GOVERNMENT 
PROPOSED TO PARLIAMENT THAT RATIFICATION MOVE FORWARD ON 
THE SUCCESSION AGREEMENT OF THE FORMER YUGOSLAVIA, WHICH 
ONLY CROATIA HAD NOT RATIFIED.  PRIME MINISTER IVO 
SANADER POINTED OUT THAT IT WAS THE COUNTRY'S OBLIGATION 
TO RATIFY THIS AGREEMENT.  FOREIGN MINISTER MIOMIR ZUZUL 
SAID THAT PROLONGING THE RATIFICATION OF THE AGREEMENT 
WAS DAMAGING FOR POLITICAL REASONS AND ALSO BECAUSE 
PROPERTY VALUES SUBJECT TO THE SUCCESSION AGREEMENT WERE 
DETERIORATING.  THE PREVIOUS GOVERNMENT, NERVOUS ABOUT 
WHAT SORT OF CRITICISM THE DEAL WOULD FACE, HAD REFUSED 
TO SEND IT TO PARLIAMENT FOR A VOTE. 
 
3.  (SBU) AT THE EXPERT LEVEL, ZDRAVKO ROGIC, A TOP 
ADVISOR ON SUCCESSION ISSUES, WHO UNDER THE PREVIOUS 
GOVERNMENT HAD VIGOROUSLY OPPOSED THE DEAL WITHOUT A 
FULL ACCOUNTING OF THE MISSING MONEY, TOLD US LAST MONTH 
THAT IT WAS TIME TO MOVE AHEAD.  HE INDICATED THAT THE 
GOVERNMENT WOULD STILL WORK WITHIN THE FINANCIAL 
COMMITTEE OF THE SFRY STATES TO GET AN ACCOUNTING OF THE 
MISSING MONEY.  HE PRAISED THE NEW LEADERSHIP AT THE 
SERBIAN CENTRAL BANK AS BEING WILLING TO COOPERATE, BUT 
NOTED THAT POLITICAL UNCERTAINTIES IN BELGRADE RENDERED 
PROGRESS SLOW. 
 
4.  (SBU) RECENT PRESS REPORTS CLAIMED THE EU AND U.S. 
WERE PUTTING PRESSURE ON THE NEW GOVERNMENT TO RATIFY 
    THE SUCCESSION AGREEMENT EVEN THOUGH CROATIA STILL 
CLAIMED $589 MILLION HAD GONE MISSING FROM JOINT VENTURE 
BANKS (SOME 90 PERCENT OF THE AMOUNT "VALUED ON 21 MARCH 
2001" IN THE AGREEMENT).  WHILE WE HAD NOT MADE THIS A 
TOP PRIORITY IN OUR DISCUSSIONS WITH THE GOC, WE HAVE 
CONSISTENTLY MADE CLEAR THAT THE GOVERNMENT NEEDED TO 
MOVE AHEAD ON THIS ISSUE.  IN REGARD TO THE MISSING 
MONEY, WE HAVE URGED ROGIC TO FIND A WAY TO RESOLVE 
DIFFERENCES WITH BELGRADE.  THE U.S. DE-BLOCKED USD 225 
MILLION IN U.S. BANKS A YEAR AGO USING THE VIENNA 
AGREEMENT ON DIVISION OF ASSETS OF THE FORMER SFRY. 
CROATIA BECAME ENTITLED TO USD 56 MILLION AS OF MAY 
2003. 
 
5.  (SBU) ACCORDING TO ZAGREB'S EC MISSION, THE 
EUROPEANS HAVE TAKEN A SIMILAR TACK.  THEY HAVE WANTED 
TO SEE THE AGREEMENT RATIFIED, BUT HAD NOT BEEN APPLYING 
PARTICULAR PRESSURE ON CROATIAN AUTHORITIES IN RECENT 
MONTHS. 
 
6.  (SBU) ACCORDING TO A PRESS COMMENTARY ON MARCH 3 IN 
ZAGREB DAILY DNEVNIK, RATIFICATION OF THE SUCCESSION 
AGREEMENT COULD TRIGGER RESISTANCE TO THE RETURN OF 
PROPERTY AND TENANCY RIGHTS GUARANTEED BY THE AGREEMENT. 
ASKED IF TENANCY RIGHTS WERE COVERED IN THE AGREEMENT, 
BOZO MARANDIC, THE GOVERNMENT'S POINT PERSON ON THE 
SUCCESSION TALKS, SAID ONLY, "YES AND NO."  IN FACT, 
PRIVATE PROPERTY AND "ACQUIRED" RIGHTS ARE COVERED IN 
ANNEX G OF THE VIENNA AGREEMENT.  ACCORDING TO 
BELGRADE'S AMBASSADOR IN ZAGREB, ANNEX G, NOT MISSING 
MONEY FROM THE JOINT VENTURE BANKS, WAS THE REAL SOURCE 
    OF CONSTERNATION PREVENTING THE PREVIOUS GOVERNMENT FROM 
TAKING THE SUCCESSION AGREEMENT TO THE PARLIAMENT FOR 
RATIFICATION. 
 
FRANK 
 
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