US embassy cable - 03ZAGREB755

C O N F I D E N T I A L SECTION 01 OF 02 ZAGREB 000755 
 
SIPDIS 
 
E.O. 12958: DECL: 03/12/2008 
TAGS: PREL, PGOV, ECON, EFIN, MK, SR, BK, SI, MW, HR, PGOV, ECON, EFIN, MK, SR, BK, SI, MW, HR, RUPREL, RU 
SUBJECT: UNBLOCKING SFRY ASSETS: CROATIA MAINTAINS HARD 
LINE, INCLUDING ON RUSSIAN DEBT 
                       CONFIDENTIAL 
 
 
PAGE 02        ZAGREB  00755  01 OF 02  042043Z 
 
REF: A. BELGRADE 740 
     B. LJUBLJANA 344 
     C. SKOPJE 423 
 
CLASSIFIED BY: NICHOLAS HILL, POLITICAL ECONOMIC COUNSELOR, FOR REASONS 
 1.5 (B) AND (D) 
 
1.   (C) SUMMARY: FOR CROATIA, UNRAVELING THE LIABILITIES AND 
ASSETS OF THE SUCCESSOR STATES OF THE FORMER YUGOSLAVIA 
CONTINUES TO HINGE ON SECURING A RATIFIED AGREEMENT ON 
SUCCESSION ISSUES (ASI).  ON APRIL 4, ZDRAVKO ROGIC, SENIOR 
CROATIAN REPRESENTATIVE ON THE SUCCESSOR STATES' FINANCE 
COMMITTEE, REPEATED WHAT HE AND OTHERS IN THE GOC HAVE SAID 
TO US ON SEVERAL OCCASIONS ALREADY: EVEN IF THE GOVERNMENT 
WANTED TO, IT COULD NOT PROVIDE A HOLD HARMLESS TO ENABLE 
DISPERSAL OF NBY ASSETS TO SUCCESSOR STATES BY THE APRIL 15 
U.S.-IMPOSED DEADLINE BEFORE OFAC PROCEEDS WITH A GENERAL 
UNBLOCKING.  CROATIA WOULD LIKE TO SEE THE BLOCKED NBY ASSETS 
DISPERSED AS SOON AS POSSIBLE AFTER AN ASI IS RATIFIED, ROGIC 
CONTINUED, BUT A HOLD HARMLESS WOULD BE A LEGAL 
"IMPOSSIBILITY."  MOREOVER, HE SAID, DEALS WORKED OUT WITH 
THIRD COUNTRIES, INCLUDING ONE SIGNED WITH RUSSIA LAST WEEK, 
ARE PREDICATED ON HAVING A RATIFIED SUCCESSION AGREEMENT.  NO 
DISPURSEMENTS COULD BE MADE BY MOSCOW UNTIL CROATIA RATIFIES 
THE ASI. END SUMMARY 
 
HOLD HARMLESS IMPOSSIBLE 
------------------------ 
 
2.   (C) ZDRAVKO ROGIC, DEPUTY GOVERNOR OF THE CROATIAN 
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PAGE 03        ZAGREB  00755  01 OF 02  042043Z 
CENTRAL BANK AND THE GOC'S REPRESENTATIVE ON THE SUCCESSOR 
STATES' FINANCIAL COMMITTEE, WAS IN FAMILIAR FORM DURING A 
MEETING APRIL 4.  HE HAD JUST RETURNED FROM SKOPJE, WHERE THE 
FINANCIAL COMMITTEE HAD JUST CONCLUDED A TOUGH SESSION. 
ROGIC SAID CROATIA'S STAND WITH RESPECT TO THE U.S. REQUEST 
FOR A HOLD HARMLESS TO ENABLE RELEASE OF FROZEN NBY ASSETS 
REMAINED ABSOLUTELY UNCHANGED.  HE REPEATED ALL THE ARGUMENTS 
HE HAS MADE BEFORE, AND CLAIMED OTHER SUCCESSOR STATES 
REMAINED UPSET ABOUT THE U.S. DECISION TO GO FORWARD WITH A 
GENERAL UNBLOCKING ON APRIL 15 ABSENT A HOLD HARMLESS.  THE 
U.S., PERHAPS THE WORLD'S "MOST LEGALISTIC STATE," HE SAID, 
WANTS TO PUSH FORWARD HERE IN A NON-LEGAL FASHION TO UNBLOCK 
EVEN THOUGH CROATIA HAS NOT RATIFIED THE ASI.  THE U.S. WANTS 
THE GOC TO PROVIDE A HOLD HARMLESS EVEN THOUGH, BY PROVIDING 
IT, THE CROATIAN GOVERNMENT WOULD BE USURPING THE AUTHORITY 
OF THE CROATIAN PARLIAMENT. 
 
3.   (C) ROGIC REPEATED POINTS HE AND COLLEAGUES HAVE MADE ON 
MANY OCCASIONS TO US, IN PARTICULAR THAT AUTHORITIES IN 
BELGRADE CONTINUE TO REFUSE THE CROATIANS AND OTHER SUCCESSOR 
STATES THE OPPORTUNITY TO LOOK AT THE BOOKS OF THE NBY TO 
FIND OUT WHAT HAPPENED TO $589 MILLION THAT HAD GONE MISSING 
FROM JOINT VENTURE BANKS.  "WE NEED YOUR HELP IN TRACKING 
DOWN THIS MONEY," HE REPEATED.  WHY DO AUTHORITIES IN 
BELGRADE REFUSE TO COOPERATE WITH US?  "IT'S IN THEIR 
INTEREST TO GET TO THE BOTTOM OF THIS" BECAUSE THE MONEY MOST 
LIKELY WAS STOLEN BY MILOSEVIC'S PEOPLE.  ROGIC SAID AGAIN 
THAT CROATIA DOES NOT WANT COMPENSATION FOR THE MISSING MONEY 
-- IN THE FORM OF AN ALTERED KEY OR ANY OTHER WAY -- BUT 
MERELY WANTED A FULL ACCOUNTING THAT WOULD ENABLE THE 
GOVERNMENT TO SUBMIT THE ASI TO THE PARLIAMENT. 
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RUSSIAN DEBT: NOT SO FAST 
------------------------- 
 
4.   (C) WE ASKED ROGIC ABOUT THE DEAL WORKED OUT IN MOSCOW 
OVER THE RUSSIAN DEBT (REF A), AND IN PARTICULAR WHETHER IN 
USING THE ASI KEY THE CROATIANS HAD ADOPTED A DOUBLE 
STANDARD.  THE KEY, UNDER WHICH CROATIA GETS 23 PERCENT OF 
ANY PAYOFF TO SFRY SUCCESSOR STATES, WAS GOOD ENOUGH TO BE 
USED FOR DISBURSING RUSSIAN DEBTS BUT NOT FOR DISBURSING 
BLOCKED NBY MONEY.  ROGIC POINTED OUT RATHER EMPHATICALLY 
THAT THE DEAL BROKERED IN MOSCOW IS PREDICATED ON THE VIENNA 
ASI COMING INTO FULL FORCE.  BEFORE ANY MONEY COULD BE 
DISBURSED, HE STRESSED, ALL SUCCESSOR STATES WOULD HAVE TO 
RATIFY THE VIENNA AGREEMENT.  ASKED IF HE EXPECTED MOSCOW, A 
HISTORICAL FRIEND OF BELGRADE'S, TO HOLD UP DISBURSING MONEY 
TO SERBIA UNTIL CROATIA RATIFIED THE ASI, ROGIC SAID 
"ABSOLUTELY."  AND IF RUSSIA DISBURSES THE MONEY BEFORE THE 
ASI COMES INTO EFFECT, ROGIC SAID HE EXPECTED THE U.S., AS A 
STATE RESPECTING THE RULE OF LAW, TO SUPPORT THE CROATIAN 
POSITION -- ALTHOUGH HE DID NOT SAY HOW. 
 
COMMENT 
 
                       CONFIDENTIAL 
 
                           CONFIDENTIAL     PTQ8080 
 
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ACTION EUR-00 
 
INFO  LOG-00   AID-00   CIAE-00  CTME-00  DODE-00  SRPP-00  EB-00 
      EXIM-01  E-00     VC-00    FRB-00   TEDE-00  INR-00   IO-00 
      ITC-01   L-00     VCE-00   AC-01    NSAE-00  NSCE-00  OIC-02 
      OMB-01   OPIC-01  PA-00    PM-00    PRS-00   ACE-00   P-00 
      SP-00    SSO-00   SS-00    STR-00   T-00     USIE-00  PMB-00 
      DRL-01   G-00     SAS-00     /008W 
                  ------------------50BE84  042044Z /45 
O 041555Z APR 03 
FM AMEMBASSY ZAGREB 
TO SECSTATE WASHDC IMMEDIATE 9886 
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 000755 
 
SIPDIS 
 
E.O. 12958: DECL: 03/12/2008 
TAGS: PREL, PGOV, ECON, EFIN, MK, SR, BK, SI, MW, HR, RU 
SUBJECT: UNBLOCKING SFRY ASSETS: CROATIA MAINTAINS HARD 
LINE, INCLUDING ON RUSSIAN DEBT 
                       CONFIDENTIAL 
 
PAGE 02        ZAGREB  00755  02 OF 02  042044Z 
 
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5.   (C) ROGIC CAME ACROSS AS CLEARLY FRUSTRATED.  HE 
CONTINUES TO SAY (OVER AND OVER AGAIN) THAT HE CANNOT 
UNDERSTAND WHY THE U.S. IS PUSHING SO HARD TO DISBURSE THE 
MONEY FROZEN UNDER THE SERBIA SANCTIONS PROGRAM -- ALTHOUGH 
HE RETURNED TO AN ACCUSATION MADE MONTHS AGO THAT THIS 
INITIATIVE IS ALL ABOUT A PROMISE THE SECRETARY MADE TO 
BELGRADE AUTHORITIES LAST YEAR TO RETURN FROZEN ASSETS TO 
THEIR RIGHTFUL OWNERS.  EVEN IF ROGIC'S RESPONSE ABOUT THE 
HOLD HARMLESS REMAINS UNCHANGED, HE SOUNDED MORE CONCILIATORY 
CONCERNING COMPENSATION.  HE KNOWS THAT THE $589 MILLION THAT 
WENT MISSING AFTER THE ASI WAS SIGNED WAS PROBABLY STOLEN BY 
MILOSEVIC AND HIS CRONIES YEARS AGO.  AS SUCH, CROATIA IS NOT 
ASKING FOR COMPENSATION IN THE FORM OF A HIGHER PERCENTAGE IN 
THE KEY OR ANYTHING ELSE.  BUT THE GOVERNMENT NEEDS TO SEND 
AN ASI TO THE PARLIAMENT THAT REFLECTS REALITY -- OR SO HE 
ASSERTED TO US. 
 
6.   (C) WHEN ROGIC INSISTS THAT NONE OF THE RUSSIAN DEBT 
COULD BE DISBURSED UNTIL THE ASI ENTERED INTO EFFECT, WE 
PRESUME HE IS REFERRING TO LANGUAGE IN ARTICLE 8 OF THE 
MEMORANDUM BETWEEN THE RUSSIAN FEDERATION AND THE SFRY 
SUCCESSOR STATES.  THAT SAYS THAT THE DEAL SHALL COME INTO 
FORCE AFTER "ALL THE REQUIRED INTRA-STATE AND INTER-STATE 
PROCEDURES" HAVE BEEN UNDERTAKEN.  IT IS UNCLEAR IF ROGIC 
REALLY BELIEVES THAT RUSSIA -- WHICH HE COMPLAINED SHOWED 
BIAS IN MOSCOW TOWARD THE BELGRADE REPRESENTATIVE IN THE 
NEGOTIATIONS -- WILL DUTIFULLY WAIT FOR THE CROATIAN 
PARLIAMENT TO RATIFY THE ASI BEFORE DISBURSING ANY OF ITS 
                       CONFIDENTIAL 
 
PAGE 03        ZAGREB  00755  02 OF 02  042044Z 
DEBTS.  ON THE OTHER HAND, ROGIC'S COMMENTS INDICATED THAT AN 
ENORMOUS AMOUNT OF BILATERAL NEGOTIATIONS BETWEEN MOSCOW AND 
THE SUCCESSOR STATES REMAINS OVER SETTLING ACCOUNTS, AND 
MOSCOW MAY NOT BE IN SUCH A RUSH TO HONOR DEBTS IF IT HAS A 
GOOD EXCUSE TO SIT ON ITS HANDS. 
 
ROSSIN 
 
                       CONFIDENTIAL 
 
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