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| Identifier: | 03ZAGREB450 |
|---|---|
| Wikileaks: | View 03ZAGREB450 at Wikileaks.org |
| Origin: | Embassy Zagreb |
| Created: | 2003-02-28 09:36:00 |
| Classification: | CONFIDENTIAL |
| Tags: | PREL PGOV ECON EFIN MK SR HR BK SI PGOV ECON EFIN MK SR HR BK SI PGOV ECON EFIN MK SR HR BK SI PGOV ECON EFIN MK SR HR BK SI MW MWPREL |
| Redacted: | This cable was not redacted by Wikileaks. |
This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L SECTION 01 OF 02 ZAGREB 000450
SIPDIS
C O R R E C T E D COPY (TEXT CHANGE)
E.O. 12958: DECL: 02/27/2013
TAGS: PREL, PGOV, ECON, EFIN, MK, SR, HR, BK, SI, PGOV, ECON, EFIN, MK, SR, HR, BK, SI, PGOV, ECON, EFIN, MK, SR, HR, BK, SI, PGOV, ECON, EFIN, MK, SR, HR, BK, SI, MW, MWPREL
SUBJECT: UNBLOCKING SFRY ASSETS: GETTING HOLD HARMLESS
LOOKS REMOTE
REF: A. (A) STATE 50887
B. (B) ZAGREB 275
CLASSIFIED BY: NICHOLAS HILL, POLECON COUNSELOR, FOR REASONS
1.5 (D) AND (D).
SUMMARY
-------
1. (C) THE RACAN GOVERNMENT IS DIGGING IN ITS HEELS ON THE
SUCCESSION AGREEMENT, AND MAY WELL IGNORE OUR REQUEST FOR A
HOLD HARMLESS BEFORE THE USG UNBLOCKS DISPUTED NBY ASSETS
THIS SPRING. THAT IS THE INDICATION WE RECEIVED IN SEPARATE
MEETINGS WITH THE GOC'S REPRESENTATIVE ON THE FINANCIAL
COMMITTEE OF THE SUCCESSOR STATES AND THE TOP LEGAL ADVISOR
AT THE MFA. THE AMBASSADOR PLANS TO DELIVER DEMARCHE (REF A)
TO THE FOREIGN MINISTER EARLY NEXT WEEK. THE CROATIANS
TOLD US THAT THE MEETING OF THE SUCCESSOR STATES' FINANCIAL
EXPERTS ON FEBRUARY 13 UNDERSCORED THAT THE GOC'S HARD LINE HAD
WIDE SUPPORT. THEY CLAIMED OTHER SUCCESSOR STATES NOW WISH THEY
HAD NOT RATIFIED THE SUCCESSION AGREEMENT (ASI) SIGNED IN
VIENNA IN JUNE 2001. END SUMMARY.
2. (C) WE SPOKE TO ZDRAVKO ROGIC, DEPUTY GOVERNOR AT
CROATIA'S NATIONAL BANK, ON FEBRUARY 25 AND ANDREJA
METELKO-ZGOMBIC, HEAD OF THE MFA'S LEGAL AFFAIRS OFFICE, ON
FEBRUARY 26 CONCERNING USG PLANS TO UNBLOCK DISPUTED SFRY
ASSETS. THEY BOTH INDICATED THAT THE GOVERNMENT HAD
CONFIDENTIAL
PAGE 03 ZAGREB 00450 01 OF 02 281911Z
CONSIDERED OUR REQUEST FOR A HOLD HARMLESS PRIOR TO THE
UNBLOCKING OF NBY ASSETS IN THE SPRING AND HAD CONCLUDED THAT
IT WAS IMPOSSIBLE, EVEN IF THIS MEANS CROATIA COULD LOSE OVER
$50 MILLION. BOTH INDICATED THAT IT WAS A MATTER OF
"PRINCIPLE." ROGIC, WHO REPRESENTS CROATIA ON THE JOINT
FINANCIAL COMMITTEE OF THE SUCCESSOR STATES, SAID A HOLD
HARMLESS AGREEMENT ABSENT RATIFICATION OF THE SUCCESSION
AGREEMENT WOULD REPRESENT A "USURPATION OF LEGISLATIVE
PREROGATIVE." METELKO-ZGOMBIC ECHOED HIM LATER.
BAD FAITH IN VIENNA
-------------------
3. (C) BOTH REPEATED THEIR WELL KNOWN VIEW OF WHAT HAPPENED
IN VIENNA. IT COMES DOWN TO BAD FAITH BEING SHOWN BY
BELGRADE AUTHORITIES AT THE TALKS. FOR THE GOC TO SECURE
PARLIAMENTARY APPROVAL OF THE AGREEMENT NOW THE AGREEMENT
WOULD HAVE TO BE REVISED. ROGIC SAID AT THE VERY LEAST THIS
WOULD INVOLVE AMENDING THE INCORRECT INFORMATION ABOUT THE
DEPOSITS IN THE NBY JOINT VENTURE BANKS BEFORE THE CROATIAN
PARLIAMENT TAKES UP THE MATTER. HE CONCEDED THAT ANY EFFORT
TO OBTAIN COMPENSATION FOR THE "MISSING" MONEY WAS PROBABLY
"OUT OF THE QUESTION." WHILE UPSET WITH THE FRY NEGOTIATORS
IN VIENNA, HE WAS ALSO QUICK TO CRITICIZE THE CROATIAN TEAM.
HE ALL BUT CALLED THE GOC'S TOP NEGOTIATOR, BOZO MARENDIC,
INCOMPETENT. HE SAID THE OTHER NEGOTIATORS IN VIENNA, EXCEPT
POSSIBLY THE SLOVENES, HAD LITTLE BANKING EXPERTISE AND WERE
PROBABLY HOODWINKED TOO.
4. (C) ROGIC ACKNOWLEDGED THAT "DEPOSITS" DID NOT EQUAL
RECOVERABLE ASSETS. WHEN ASKED IF THE GOC WAS INDULGING IN
CONFIDENTIAL
PAGE 04 ZAGREB 00450 01 OF 02 281911Z
SEMANTICS, HE SAID NO. "IT'S POLITICS." UNLIKE ASSETS WHICH
CAN BE ERODED BY BAD MANAGEMENT, HE CONTINUED, DEPOSITS CAN
ONLY BE DECREASED BY TRANSFERS. THE NBY, HE STRESSED, SHOULD
HAVE RECORDS OF THOSE TRANSFERS AND PRODUCE THEM. WHEN WE
TOLD HIM THAT OFAC DECIDED NOT TO CONDUCT AN INVESTIGATION OF
THE NBY ACCOUNTS, ROGIC EXPRESSED DISAPPOINTMENT. HE NOTED
THAT THE U.S. PARTICIPANTS PLAYED AN IMPORTANT ROLE IN VIENNA
AND SHOULD PLAY A ROLE IN UNRAVELING THE MYSTERY IN THE NBY
ACCOUNTS NOW. HE IMPLIED THAT THE ONLY PARTICIPANTS WHO KNEW
WHAT WAS GOING ON IN VIENNA WERE THE AMERICANS, THE SERBS,
AND POSSIBLY THE SLOVENES.
UNFAIR KEY?
-----------
5. (C) AT THE MFA, METELKO-ZGOMBIC TOOK AN EVEN TOUGHER
LINE. FIRST, SHE SAID THE ASI NEEDED TO BE RATIFIED. THE
DEAL STRUCK IN VIENNA WAS BASED ON A LIE -- THAT THERE WAS
OVER $600 MILLION IN JOINT VENTURE BANK ACCOUNTS TO BE
DISPERSED TO THE SUCCESSORS WHEN NO SUCH MONEY EXISTED.
BASED ON THE FALSE INFORMATION -- AND THE FALSE PROSPECT THAT
CROATIA STOOD TO GAIN OVER $200 MILLION WHEN THE MONEY WAS
DISTRIBUTED -- CROATIA HAD ACCEPTED A PROBLEMATIC KEY.
CROATIA WOULD RECEIVE ONLY 23 PERCENT OF THE SFRY'S ASSETS,
CONFIDENTIAL
CONFIDENTIAL PTQ0036
PAGE 01 ZAGREB 00450 02 OF 02 281912Z
ACTION EUR-00
INFO LOG-00 COR-01 NP-00 AF-00 AID-00 CIAE-00 COME-00
INL-00 DODE-00 DOTE-00 SRPP-00 DS-00 EAP-00 EB-00
FAAE-00 FBIE-00 VC-00 TEDE-00 INR-00 IO-00 LAB-01
L-00 VCE-00 M-00 NSAE-00 NSCE-00 P-00 IRM-00
SS-00 DSCC-00 PRM-00 DRL-01 NFAT-00 SAS-00 SWCI-00
/003W
------------------3D3606 281912Z /07
O 280936Z FEB 03
FM AMEMBASSY ZAGREB
TO SECSTATE WASHDC IMMEDIATE 9564
INFO AMEMBASSY BELGRADE PRIORITY
AMEMBASSY BRUSSELS PRIORITY
AMEMBASSY LJUBLJANA PRIORITY
AMEMBASSY LONDON PRIORITY
AMEMBASSY NICOSIA PRIORITY
AMEMBASSY ROME PRIORITY
AMEMBASSY SARAJEVO PRIORITY
AMEMBASSY SKOPJE PRIORITY
AMEMBASSY VIENNA PRIORITY
DEPT OF TREASURY WASHDC PRIORITY
C O N F I D E N T I A L SECTION 02 OF 02 ZAGREB 000450
SIPDIS
C O R R E C T E D COPY (TEXT)
E.O. 12958: DECL: 02/27/2013
TAGS: PREL, PGOV, ECON, EFIN, MK, SR, HR, BK, SI, MW
CONFIDENTIAL
PAGE 02 ZAGREB 00450 02 OF 02 281912Z
SUBJECT: UNBLOCKING SFRY ASSETS: GETTING HOLD HARMLESS
LOOKS REMOTE
WHILE IT ASSUMED 28.5 PERCENT OF THE SFRY'S DEBT.
METELKO-ZGOMBIC SAID THAT THIS ASYMMETRY WAS UNFAIR WHEN THE
DEAL WAS STRUCK, BUT COULD BE SWALLOWED GIVEN THE MONEY
CROATIA STOOD TO GAIN. AFTER ALMOST $545 MILLION TURNED UP
MISSING, SHE ARGUED, THIS RENDERED THE ASYMMETRY IN THE KEY
UNACCEPTABLE.
LEGAL ROAD
----------
6. (C) THE LEGAL ADVISOR, WHOSE POSITION HAS REMAINED
BASICALLY UNCHANGED IN THE ALMOST SIX MONTHS SINCE WE HAVE
BEEN DISCUSSING THE ISSUE, OUTLINED WHAT LEGAL COURSE THE
GOVERNMENT WAS TAKING. SHE EMPHASIZED THAT THE GOVERNMENT
WAS PREPARED TO FIGHT THE OFAC UNBLOCKING INITIATIVES IN U.S.
COURTS. ON THE PROPERTY AND INTERESTS IN PROPERTY THAT WERE
UNBLOCKED ON FEBRUARY 25, IT WAS TRUE THAT THE GOVERNMENT HAD
NOT SOUGHT AN INJUNCTION IN COURT, BUT THIS SHOULD NOT BE
TAKEN AS INDICATION THAT THE GOC WAS ROLLING OVER. THE GOC
STILL ASSERTS THAT $40 MILLION OF THE $102 MILLION THAT WAS
UNBLOCKED BELONGED TO THE SFRY AND SHOULD BE DISPERSED TO ALL
THE SUCCESSORS. TOGETHER WITH OTHER SUCCESSOR STATES AND
THEIR U.S. LAWYERS, THE INSTITUTIONS HOLDING THESE ASSETS
HAVE BEEN APPROACHED. THE INSTITUTIONS -- J.P. MORGAN, BANK
OF NEW YORK, AND AMERICAN EXPRESS BANK -- PROMISED TO INFORM
THE SUCCESSOR STATES IF BELGRADE AUTHORITIES SOUGHT TO
WITHDRAW THE MONEY. BASED ON THESE ASSURANCES, THE GOC
DECIDED NOT TO FILE AN INJUNCTION NOW, BUT WILL WHEN REQUIRED.
CONFIDENTIAL
PAGE 03 ZAGREB 00450 02 OF 02 281912Z
7. (C) ON THE NBY ASSETS, METELKO-ZGOMBIC SAID THE USG
DECISION TO UNBLOCK THEM THIS SPRING CONTINUED TO BE
INEXPLICABLE TO HER. MANY COUNTRIES HAD FROZEN SFRY ASSETS
AND WERE NOT IN SUCH A HURRY TO UNBLOCK THEM NOW. THESE
COUNTRIES -- SHE WOULD NOT IDENTIFY WHICH -- WERE NOT
PRESSING THE SUCCESSOR STATES, CONTENT INSTEAD TO WAIT FOR A
SUCCESSION AGREEMENT TO COME IN TO FORCE. WHY WERE THE
AMERICANS IN SUCH A RUSH? IF FREEZING THE ASSETS WAS SUCH A
HEADACHE FOR U.S. AUTHORITIES, SHE ASKED, WOULD IT BE
POSSIBLE FOR THE BANK OF INTERNATIONAL SETTLEMENTS (BIS) TO
ARRANGE TO HOLD THE MONEY PENDING A SUCCESSION AGREEMENT?
SHE STRESSED AGAIN THAT ONLY BELGRADE AGREED WITH THE U.S.
DECISION ON THE PHASED UNBLOCKING.
COMMENT
-------
8. (C) TO HEAR IT FROM THE CROATIANS, THIS UNBLOCKING COULD
TURN INTO A FOOD FIGHT -- OR AT LEAST A VERY LUCRATIVE
PROPOSITION FOR CROATIA'S, AND POSSIBLY OTHER SUCCESSOR
STATES', AMERICAN LAWYERS. PRESS REPORTS HERE INDICATE THAT
THE GOC IS PAYING UP TO $500 AN HOUR FOR LEGAL COUNSEL. BOTH
TECHNICAL EXPERTS RATHER THAN POLITICAL PLAYERS, ROGIC AND
METELKO-ZGOMBIC WERE NOT IN VIENNA, BUT THEY CONTINUE TO COME
ACROSS AS COMPLETELY CONVINCED OF THE RIGHTEOUSNESS OF THEIR
CAUSE -- THAT THE NEGOTIATIONS UNFOLDED UNFAIRLY. THEY
STRESSED THAT ALL THE OTHER SUCCESSORS, MINUS BELGRADE, ARE
ANGRY TOO -- AND URGED US TO TALK TO THEM DIRECTLY,
PARTICULARLY THE BIH AND MACEDONIAN REPRESENTATIVES ON THE
JOINT FINANCIAL COMMITTEE.
CONFIDENTIAL
PAGE 04 ZAGREB 00450 02 OF 02 281912Z
9. (C) ANOTHER POSSIBILITY RAISED BY THE SERBIAN AND
MONTENEGRIN AMBASSADOR HERE IS THAT THE GOC LOOKED AT ANNEX G
OF THE SUCCESSION AGREEMENT -- WHICH CALLS FOR COMPENSATION
FOR THOSE WHO LOST PRIVATE PROPERTY AND ACQUIRED RIGHTS,
INCLUDING DISPLACED ETHNIC SERB REFUGEES -- AND REALIZED THE
FINANCIAL IMPLICATIONS: THIS GOVERNMENT COULD BE TAKING ON
FINANCIAL OBLIGATIONS FAR IN EXCESS OF THE $50 MILLION IT
STANDS TO GAIN FROM RATIFYING THE ASI AND RECEIVING CROATIA'S
SHARE OF THE NBY ASSETS. INDEED, ANNEX G, JUXTAPOSED AGAINST
WHAT THE GOC HAS BEEN TELLING US OVER MANY MONTHS ABOUT ITS
FINANCIAL CONSTRAINTS IN COMPENSATING ETHNIC SERBS FOR LOST
PROPERTY AND TENANCY RIGHTS, LOOKS LIKE IT WAS AGREED TO BY
SOMEBODY NOT WORKING ON INSTRUCTIONS FROM ZAGREB. WE ASKED
METELKO-ZGOMBIC IF THE GOC HAD OTHER CONCERNS IN THE ASI --
APART FROM THE MONEY MISSING IN THE JOINT VENTURE BANKS --
AND EVEN MENTIONED ANNEX G. SHE SAID NO. WE DO NOT QUESTION
HER PERSONAL EARNESTNESS, BUT MORE BROADLY REMAIN SKEPTICAL
ABOUT THE GOC'S APPROACH TO THE ASI.
10. (U) BELGRADE MINIMIZE CONSIDERED.
ROSSIN
CONFIDENTIAL
>
@@@OASYS@@@
CONFIDENTIAL PTQ7806
PAGE 01 ZAGREB 00450 01 OF 02 280957Z
ACTION EUR-00
INFO LOG-00 NP-00 AF-00 AID-00 CIAE-00 COME-00 INL-00
DODE-00 DOTE-00 SRPP-00 DS-00 EAP-00 EB-00 FAAE-00
FBIE-00 VC-00 TEDE-00 INR-00 IO-00 LAB-01 L-00
VCE-00 M-00 NSAE-00 NSCE-00 P-00 IRM-00 SS-00
DSCC-00 PRM-00 DRL-01 NFAT-00 SAS-00 SWCI-00 /002W
------------------3CE1A1 280957Z /75
O 280936Z FEB 03
FM AMEMBASSY ZAGREB
TO SECSTATE WASHDC IMMEDIATE 9563
INFO AMEMBASSY BELGRADE PRIORITY
AMEMBASSY BRUSSELS PRIORITY
AMEMBASSY LJUBLJANA PRIORITY
AMEMBASSY LONDON PRIORITY
AMEMBASSY NICOSIA PRIORITY
AMEMBASSY ROME PRIORITY
AMEMBASSY SARAJEVO PRIORITY
AMEMBASSY SKOPJE PRIORITY
AMEMBASSY VIENNA PRIORITY
DEPT OF TREASURY WASHDC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 02 ZAGREB 000450
SIPDIS
E.O. 12958: DECL: 02/27/2013
TAGS: PREL, PGOV, ECON, EFIN, MK, SR, HR, BK, SI, MW
SUBJECT: UNBLOCKING SFRY ASSETS: GETTING HOLD HARMLESS
LOOKS REMOTE
CONFIDENTIAL
PAGE 02 ZAGREB 00450 01 OF 02 280957Z
REF: A. (A) STATE 50887
B. (B) ZAGREB 275
CLASSIFIED BY: NICHOLAS HILL, POLECON COUNSELOR, FOR
REASONS 1.5 (D) AND (D).
SUMMARY
-------
1. (C) THE RACAN GOVERNMENT IS DIGGING IN ITS HEELS ON THE
SUCCESSION AGREEMENT, AND MAY WELL IGNORE OUR REQUEST FOR A
HOLD HARMLESS BEFORE THE USG UNBLOCKS DISPUTED NBY ASSETS
THIS SPRING. THAT IS THE INDICATION WE RECEIVED IN SEPARATE
MEETINGS WITH THE GOC'S REPRESENTATIVE ON THE FINANCIAL
COMMITTEE OF THE SUCCESSOR STATES AND THE TOP LEGAL ADVISOR
AT THE MFA. THE AMBASSADOR PLANS TO DELIVER DEMARCHE (REF A)
TO THE FOREIGN MINISTER EARLY NEXT WEEK., WHO IS OUT OF
ZAGREB FOR MUCH OF THIS WEEK. THE CROATIANS TOLD US THAT THE
MEETING OF THE SUCCESSOR STATES' FINANCIAL EXPERTS ON
FEBRUARY 13 UNDERSCORED THAT THE GOC'S HARD LINE HAD WIDE
SUPPORT. THEY CLAIMED OTHER SUCCESSOR STATES NOW WISH THEY
HAD NOT RATIFIED THE SUCCESSION AGREEMENT (ASI) SIGNED IN
VIENNA IN JUNE 2001. END SUMMARY.
2. (C) WE SPOKE TO ZDRAVKO ROGIC, DEPUTY GOVERNOR AT
CROATIA'S NATIONAL BANK, ON FEBRUARY 25 AND ANDREJA
METELKO-ZGOMBIC, HEAD OF THE MFA'S LEGAL AFFAIRS OFFICE, ON
FEBRUARY 26 CONCERNING USG PLANS TO UNBLOCK DISPUTED SFRY
ASSETS. THEY BOTH INDICATED THAT THE GOVERNMENT HAD
CONSIDERED OUR REQUEST FOR A HOLD HARMLESS PRIOR TO THE
UNBLOCKING OF NBY ASSETS IN THE SPRING AND HAD CONCLUDED THAT
CONFIDENTIAL
PAGE 03 ZAGREB 00450 01 OF 02 280957Z
IT WAS IMPOSSIBLE, EVEN IF THIS MEANS CROATIA COULD LOSE OVER
$50 MILLION. BOTH INDICATED THAT IT WAS A MATTER OF
"PRINCIPLE." ROGIC, WHO REPRESENTS CROATIA ON THE JOINT
FINANCIAL COMMITTEE OF THE SUCCESSOR STATES, SAID A HOLD
HARMLESS AGREEMENT ABSENT RATIFICATION OF THE SUCCESSION
AGREEMENT WOULD REPRESENT A "USURPATION OF LEGISLATIVE
PREROGATIVE." METELKO-ZGOMBIC ECHOED HIM LATER.
BAD FAITH IN VIENNA
-------------------
3. (C) BOTH REPEATED THEIR WELL KNOWN VIEW OF WHAT HAPPENED
IN VIENNA. IT COMES DOWN TO BAD FAITH BEING SHOWN BY
BELGRADE AUTHORITIES AT THE TALKS. FOR THE GOC TO SECURE
PARLIAMENTARY APPROVAL OF THE AGREEMENT NOW THE AGREEMENT
WOULD HAVE TO BE REVISED. ROGIC SAID AT THE VERY LEAST THIS
WOULD INVOLVE AMENDING THE INCORRECT INFORMATION ABOUT THE
DEPOSITS IN THE NBY JOINT VENTURE BANKS BEFORE THE CROATIAN
PARLIAMENT TAKES UP THE MATTER. HE CONCEDED THAT ANY EFFORT
TO OBTAIN COMPENSATION FOR THE "MISSING" MONEY WAS PROBABLY
"OUT OF THE QUESTION." WHILE UPSET WITH THE FRY NEGOTIATORS
IN VIENNA, HE WAS ALSO QUICK TO CRITICIZE THE CROATIAN TEAM.
HE ALL BUT CALLED THE GOC'S TOP NEGOTIATOR, BOZO MARENDIC,
INCOMPETENT. HE SAID THE OTHER NEGOTIATORS IN VIENNA, EXCEPT
POSSIBLY THE SLOVENES, HAD LITTLE BANKING EXPERTISE AND WERE
PROBABLY HOODWINKED TOO.
4. (C) ROGIC ACKNOWLEDGED THAT "DEPOSITS" DID NOT EQUAL
RECOVERABLE ASSETS. WHEN ASKED IF THE GOC WAS INDULGING IN
SEMANTICS, HE SAID NO. "IT'S POLITICS." UNLIKE ASSETS WHICH
CAN BE ERODED BY BAD MANAGEMENT, HE CONTINUED, DEPOSITS CAN
CONFIDENTIAL
PAGE 04 ZAGREB 00450 01 OF 02 280957Z
ONLY BE DECREASED BY TRANSFERS. THE NBY, HE STRESSED, SHOULD
HAVE RECORDS OF THOSE TRANSFERS AND PRODUCE THEM. WHEN WE
TOLD HIM THAT OFAC DECIDED NOT TO CONDUCT AN INVESTIGATION OF
THE NBY ACCOUNTS, ROGIC EXPRESSED DISAPPOINTMENT. HE NOTED
THAT THE U.S. PARTICIPANTS PLAYED AN IMPORTANT ROLE IN VIENNA
AND SHOULD PLAY A ROLE IN UNRAVELING THE MYSTERY IN THE NBY
ACCOUNTS NOW. HE IMPLIED THAT THE ONLY PARTICIPANTS WHO KNEW
WHAT WAS GOING ON IN VIENNA WERE THE AMERICANS, THE SERBS,
AND POSSIBLY THE SLOVENES.
UNFAIR KEY?
-----------
5. (C) AT THE MFA, METELKO-ZGOMBIC TOOK AN EVEN TOUGHER
LINE. FIRST, SHE SAID THE ASI NEEDED TO BE RATIFIED. THE
DEAL STRUCK IN VIENNA WAS BASED ON A LIE -- THAT THERE WAS
OVER $600 MILLION IN JOINT VENTURE BANK ACCOUNTS TO BE
DISPERSED TO THE SUCCESSORS WHEN NO SUCH MONEY EXISTED.
BASED ON THE FALSE INFORMATION -- AND THE FALSE PROSPECT THAT
CROATIA STOOD TO GAIN OVER $200 MILLION WHEN THE MONEY WAS
DISTRIBUTED -- CROATIA HAD ACCEPTED A PROBLEMATIC KEY.
CROATIA WOULD RECEIVE ONLY 23 PERCENT OF THE SFRY'S ASSETS,
CONFIDENTIAL
CONFIDENTIAL PTQ7809
PAGE 01 ZAGREB 00450 02 OF 02 280958Z
ACTION EUR-00
INFO LOG-00 NP-00 AF-00 AID-00 CIAE-00 COME-00 INL-00
DODE-00 DOTE-00 SRPP-00 DS-00 EAP-00 EB-00 FAAE-00
FBIE-00 VC-00 TEDE-00 INR-00 IO-00 LAB-01 L-00
VCE-00 M-00 NSAE-00 NSCE-00 P-00 IRM-00 SS-00
DSCC-00 PRM-00 DRL-01 NFAT-00 SAS-00 SWCI-00 /002W
------------------3CE1B2 280958Z /75
O 280936Z FEB 03
FM AMEMBASSY ZAGREB
TO SECSTATE WASHDC IMMEDIATE 9564
INFO AMEMBASSY BELGRADE PRIORITY
AMEMBASSY BRUSSELS PRIORITY
AMEMBASSY LJUBLJANA PRIORITY
AMEMBASSY LONDON PRIORITY
AMEMBASSY NICOSIA PRIORITY
AMEMBASSY ROME PRIORITY
AMEMBASSY SARAJEVO PRIORITY
AMEMBASSY SKOPJE PRIORITY
AMEMBASSY VIENNA PRIORITY
DEPT OF TREASURY WASHDC PRIORITY
C O N F I D E N T I A L SECTION 02 OF 02 ZAGREB 000450
SIPDIS
E.O. 12958: DECL: 02/27/2013
TAGS: PREL, PGOV, ECON, EFIN, MK, SR, HR, BK, SI, MW
SUBJECT: UNBLOCKING SFRY ASSETS: GETTING HOLD HARMLESS
LOOKS REMOTE
CONFIDENTIAL
PAGE 02 ZAGREB 00450 02 OF 02 280958Z
WHILE IT ASSUMED 28.5 PERCENT OF THE SFRY'S DEBT.
METELKO-ZGOMBIC SAID THAT THIS ASYMMETRY WAS UNFAIR WHEN THE
DEAL WAS STRUCK, BUT COULD BE SWALLOWED GIVEN THE MONEY
CROATIA STOOD TO GAIN. AFTER ALMOST $545 MILLION TURNED UP
MISSING, SHE ARGUED, THIS RENDERED THE ASYMMETRY IN THE KEY
UNACCEPTABLE.
LEGAL ROAD
----------
6. (C) THE LEGAL ADVISOR, WHOSE POSITION HAS REMAINED
BASICALLY UNCHANGED IN THE ALMOST SIX MONTHS SINCE WE HAVE
BEEN DISCUSSING THE ISSUE, OUTLINED WHAT LEGAL COURSE THE
GOVERNMENT WAS TAKING. SHE EMPHASIZED THAT THE GOVERNMENT
WAS PREPARED TO FIGHT THE OFAC UNBLOCKING INITIATIVES IN U.S.
COURTS. ON THE PROPERTY AND INTERESTS IN PROPERTY THAT WERE
UNBLOCKED ON FEBRUARY 25, IT WAS TRUE THAT THE GOVERNMENT HAD
NOT SOUGHT AN INJUNCTION IN COURT, BUT THIS SHOULD NOT BE
TAKEN AS INDICATION THAT THE GOC WAS ROLLING OVER. THE GOC
STILL ASSERTS THAT $40 MILLION OF THE $102 MILLION THAT WAS
UNBLOCKED BELONGED TO THE SFRY AND SHOULD BE DISPERSED TO ALL
THE SUCCESSORS. TOGETHER WITH OTHER SUCCESSOR STATES AND
THEIR U.S. LAWYERS, THE INSTITUTIONS HOLDING THESE ASSETS
HAVE BEEN APPROACHED. THE INSTITUTIONS -- J.P. MORGAN, BANK
OF NEW YORK, AND AMERICAN EXPRESS BANK -- PROMISED TO INFORM
THE SUCCESSOR STATES IF BELGRADE AUTHORITIES SOUGHT TO
WITHDRAW THE MONEY. BASED ON THESE ASSURANCES, THE GOC
DECIDED NOT TO FILE AN INJUNCTION NOW, BUT WILL WHEN REQUIRED.
7. (C) ON THE NBY ASSETS, METELKO-ZGOMBIC SAID THE USG
DECISION TO UNBLOCK THEM THIS SPRING CONTINUED TO BE
CONFIDENTIAL
PAGE 03 ZAGREB 00450 02 OF 02 280958Z
INEXPLICABLE TO HER. MANY COUNTRIES HAD FROZEN SFRY ASSETS
AND WERE NOT IN SUCH A HURRY TO UNBLOCK THEM NOW. THESE
COUNTRIES -- SHE WOULD NOT IDENTIFY WHICH -- WERE NOT
PRESSING THE SUCCESSOR STATES, CONTENT INSTEAD TO WAIT FOR A
SUCCESSION AGREEMENT TO COME IN TO FORCE. WHY WERE THE
AMERICANS IN SUCH A RUSH? IF FREEZING THE ASSETS WAS SUCH A
HEADACHE FOR U.S. AUTHORITIES, SHE ASKED, WOULD IT BE
POSSIBLE FOR THE BANK OF INTERNATIONAL SETTLEMENTS (BIS) TO
ARRANGE TO HOLD THE MONEY PENDING A SUCCESSION AGREEMENT?
SHE STRESSED AGAIN THAT ONLY BELGRADE AGREED WITH THE U.S.
DECISION ON THE PHASED UNBLOCKING.
COMMENT
-------
8. (C) TO HEAR IT FROM THE CROATIANS, THIS UNBLOCKING COULD
TURN INTO A FOOD FIGHT -- OR AT LEAST A VERY LUCRATIVE
PROPOSITION FOR CROATIA'S, AND POSSIBLY OTHER SUCCESSOR
STATES', AMERICAN LAWYERS. PRESS REPORTS HERE INDICATE THAT
THE GOC IS PAYING UP TO $500 AN HOUR FOR LEGAL COUNSEL. BOTH
TECHNICAL EXPERTS RATHER THAN POLITICAL PLAYERS, ROGIC AND
METELKO-ZGOMBIC WERE NOT IN VIENNA, BUT THEY CONTINUE TO COME
ACROSS AS COMPLETELY CONVINCED OF THE RIGHTEOUSNESS OF THEIR
CAUSE -- THAT THE NEGOTIATIONS UNFOLDED UNFAIRLY. THEY
STRESSED THAT ALL THE OTHER SUCCESSORS, MINUS BELGRADE, ARE
ANGRY TOO -- AND URGED US TO TALK TO THEM DIRECTLY,
PARTICULARLY THE BIH AND MACEDONIAN REPRESENTATIVES ON THE
JOINT FINANCIAL COMMITTEE.
9. (C) ANOTHER POSSIBILITY RAISED BY THE SERBIAN AND
MONTENEGRIN AMBASSADOR HERE IS THAT THE GOC LOOKED AT ANNEX G
CONFIDENTIAL
PAGE 04 ZAGREB 00450 02 OF 02 280958Z
OF THE SUCCESSION AGREEMENT -- WHICH CALLS FOR COMPENSATION
FOR THOSE WHO LOST PRIVATE PROPERTY AND ACQUIRED RIGHTS,
INCLUDING DISPLACED ETHNIC SERB REFUGEES -- AND REALIZED THE
FINANCIAL IMPLICATIONS: THIS GOVERNMENT COULD BE TAKING ON
FINANCIAL OBLIGATIONS FAR IN EXCESS OF THE $50 MILLION IT
STANDS TO GAIN FROM RATIFYING THE ASI AND RECEIVING CROATIA'S
SHARE OF THE NBY ASSETS. INDEED, ANNEX G, JUXTAPOSED AGAINST
WHAT THE GOC HAS BEEN TELLING US OVER MANY MONTHS ABOUT ITS
FINANCIAL CONSTRAINTS IN COMPENSATING ETHNIC SERBS FOR LOST
PROPERTY AND TENANCY RIGHTS, LOOKS LIKE IT WAS AGREED TO BY
SOMEBODY NOT WORKING ON INSTRUCTIONS FROM ZAGREB. WE ASKED
METELKO-ZGOMBIC IF THE GOC HAD OTHER CONCERNS IN THE ASI --
APART FROM THE MONEY MISSING IN THE JOINT VENTURE BANKS --
AND EVEN MENTIONED ANNEX G. SHE SAID NO. WE DO NOT QUESTION
HER PERSONAL EARNESTNESS, BUT MORE BROADLY REMAIN SKEPTICAL
ABOUT THE GOC'S APPROACH TO THE ASI.
10. (U) BELGRADE MINIMIZE CONSIDERED.
ROSSIN
CONFIDENTIAL
>
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