Select Committee on Foreign Affairs Minutes of Evidence

Written evidence submitted by the Foreign and Commonwealth Office

  1.  The Foreign and Commonwealth Office responds to a request from the House of Commons Foreign Affairs Select Committee for a memorandum in connection with the Committee's inquiry into the United Kingdom's policy towards the Western Balkans, with a particular focus on Bosnia and Herzegovina, Serbia and Montenegro (including Kosovo) and Macedonia. For the purpose of the Memorandum, "Western Balkans" is defined as Serbia and Montenegro including Kosovo, Croatia, Bosnia and Herzegovina, Macedonia and Albania.

  2.  The memorandum begins with an overview of the economic and political situation in the region and our overall objectives. It then summarises UK policy in relation to the International Criminal Tribunal for the Former Yugoslavia, the role of the European Union and NATO, tackling organised crime in the region and UK policy towards improving the economy and good governance in the Western Balkans. UK policy in the Western Balkans is characterised by a "joined up" approach across Government and other Departments, aside from the FCO, have the lead on some policy issues. The memorandum then sets out the key challenges for the future. There are three annexes: details on policy towards Serbia and Montenegro, Bosnia and Herzegovina and Macedonia; and summaries of UK bilateral and UK multilateral assistance towards the region. We have not included further details on Albania and Croatia since these countries are outside the focus of the inquiry.


  3.  The Western Balkans continues to occupy a prominent place on the international agenda, following the conflicts that marked the 1990s. Since the Foreign Affairs Committee's last inquiry into the region in 2001, the Western Balkans has made good progress through political, institutional and economic reform and is moving in the right direction, if not always at great speed. A return to large-scale conflict is now unlikely, although it cannot be ruled out. The problems of extremism and ethnic tensions are receding, but they remain under the surface: the outbreak of violence in March 2004 in Kosovo was a poignant reminder that progress is fragile.

  4.  The major ramifications of the conflicts (1992-95, 1999, 2001) have been largely overcome, with the exception of Kosovo, whose fledgling self-governing institutions remain fragile. And there are also a number of high profile war crimes indictees still at large. The majority of political extremists are no longer in positions of authority, although they continue to play a distorting role in politics, for example, the Serbian Radical Party. There are largely moderate (if sometimes nationalist), democratically orientated governments in office who are committed to reform. But the quality of local leadership and immature political and economic systems frustrates progress. Governments remain vulnerable to coalition pressures and frequent elections, and complex constitutional arrangements in Bosnia and Herzegovina (BiH) and Serbia and Montenegro (SaM) present their own challenges.

  5.  Legacies of the past continue to impact, particularly in BiH where the issue of co-operation with the International Criminal Tribunal for the Former Yugoslavia (ICTY) further complicates the inter-ethnic governmental structures, and in SaM where policies towards the ICTY and Kosovo dominate politics. A start has been made in redressing population movements from the last decade, particularly in relation to the large number of Internally Displaced Persons (IDPs), but significant problems remain across the region. Human and minority rights have vastly improved in the Western Balkans: there is no longer the systematic discrimination that characterised the Milosevic era. However, there is still much that needs to be done to create tolerant, multi-ethnic societies and institutions, above all in Kosovo. (The FCO Annual Report on Human Rights 2003 provides more details on the human rights situation in the Western Balkans and can be found at The 2004 Report will be published in the autumn).

  6.  Reform of military and security structures in the region has, perhaps surprisingly, been a major achievement. The armed forces of the former Federal Republic of Yugoslavia (FRY), now SaM, have been reduced and brought under civilian control and many of the security structures from the Milosevic era have been dismantled. The establishment of a state level defence structure in BiH was also an important step towards our objective of a self-sustaining state capable, over time, of integration into NATO and the European Union (EU).

  7.  However, some organised criminals and extremists continue to exert undue influence over government structures and institutions, frustrate the reformers, and undermine legitimate economic activity. Accountable law enforcement structures and independent, effective judicial systems are now a priority in order to bolster national capacities to tackle organised crime and corruption.

  8.  The Western Balkans economies are largely stable, if weak, but the region is now between post conflict and 1990s Central European style transition. Poverty and high unemployment remains a problem (as with many countries in transition). There will need to be major improvements in the economies of the region if the problems of poverty are to be addressed. Improvements in the standard of living in the Western Balkans will be important to help maintain public support for difficult reforms and to get the countries to a level where membership of the EU is at all realistic. The countries need to ensure that political as well as economic conditions are in place to attract more foreign direct investment to stimulate development. International partners are playing a key, supporting role in this.

  9.  UK policy aims to support the establishment of security and stability in the region and make it irreversible, bring prosperity and help the countries move towards integration into Euro-Atlantic structures, in particular, eventual accession to the EU. This should be underpinned with democratic and accountable government structures, prosperous free market economies, and socially cohesive societies. The UK is working to achieve this by promoting the rule of law, social and economic development, democracy, security sector reform, justice and human rights, co-operation with the ICTY, and refugee return. We work through direct engagement and careful co-ordination and co-operation with the EU, NATO, United Nations, World Bank and other international organisations.

  10.  The Western Balkan states' aspiration to join the EU forms the bedrock of our policy. The EU Thessaloniki Summit in June 2003 confirmed that the Western Balkans states are potential EU members. Croatia achieved candidate status in June 2004 as a result of her successful reforms and improved co-operation with the ICTY. We want to see other states make tangible progress towards the EU and we support their EU aspirations. Integration is conditional on the consolidation of states based on the rule of law and democratic principles, and the implementation of responsible, reformist policies that will help them achieve economic and social convergence towards EU levels. Further Euro-Atlantic integration is also conditional on full co-operation with the ICTY.

  11.  It will be important to maintain international engagement in the region for some time to come, although the nature of this engagement is changing. There is likely to be a need for an international military presence in the Balkans for some years, including British armed forces, although this will become smaller scale with more limited mandates. The Western Balkans will continue to be important to the UK: they will ultimately integrate into Euro-Atlantic structures, becoming strategically important partners and allies. And their stability and economic prosperity has a domestic impact in the UK. The whole of the EU is a target market for Balkan organised crime and economic migrants and we must continue to work to maintain stability and security on the borders of Europe. On a more positive note, a prosperous Western Balkans could also provide a market and opportunity for UK business. Given the improvements on the ground since 2001, over the next few years the UK and her international partners will now focus on resolving some key strategic challenges: Kosovo Final Status, the future of the SaM state union and the implementation of peace settlements in Bosnia and Herzegovina (Dayton) and Macedonia (Ohrid Framework Agreement, OFA). But even if we are successful, the very process of dealing with these issues is likely to re-inject turbulence into the region.


International Criminal Tribunal for the Former Yugoslavia (ICTY)

  12.  The UK attaches particular importance to all the countries of the region meeting their international obligation of full co-operation with the ICTY. The UK was central to securing United Nations Security Council resolution (UNSCR) 1503 in August 2003 that formalised the expectation that all states "intensify co-operation and render all necessary assistance to the Tribunal". The Resolution highlighted in particular the detention and trial of fugitive indictees: Bosnian Serb leaders, Radovan Karadzic, Ratko Mladic and Croatian general, Ante Gotovina (the "Big Three").

  13.  The Office of the Chief Prosecutor has issued 125 indictments to date, of which 103 indictees have been apprehended or are deceased. Of the 103, 46 indictees were detained by NATO troops. UK forces were involved in 21 of these operations. There are presently 58 accused in detention at the ICTY. A further five have been released pending trial. 15 others have been indicted over the last year and there still 21 at large in the region, including Mladic, Karadzic and Gotovina. We continue to put pressure on the respective Governments, in particular in Zagreb, Belgrade and the Republika Srpska authorities in Banja Luka, Bosnia and Herzegovina, to apprehend and transfer them to The Hague.

  14.  A further UNSCR (1534) of March 2004 called on the ICTY to meet the deadlines within its Completion Strategy (while emphasising the UN's commitment to ensure that the Big Three are tried in The Hague), and to ensure that any future indictments concentrated on those considered most senior and responsible. A further amendment to the Tribunal's Rules of Procedure gives the judges a greater role in reviewing whether indictments meet this requirement.

  15.  The UK is committed to helping countries build domestic capacity for war crimes trials, particularly in BiH, where the UK has pledged £2.6 million over five years to help set up a Bosnian War Crimes Chamber, which should be operational by mid 2005. This should facilitate the transfer of lower level cases to domestic jurisdiction and help the ICTY to achieve the objectives in its Completion Strategy.

  16.  The ICTY's most high-profile (and longest running) case is that of former Yugoslav president, Slobodan Milosevic. The trial has now entered its third year and the case for the prosecution closed on 25 February 2004. Lord Bonomy was appointed to the Trial Chamber in June, succeeding the late Judge Richard May, who sadly had to resign due to illness. Milosevic was due to start his defence in early July but concerns about his health (and the Court's summer recess) have caused further hearings to be postponed. The trial re-started on 31 August. On 2 September the Trial Chamber assigned a defence counsel to ensure the trial is not unduly disrupted by Milosevic's poor health.

  17.  We continue to support the ICTY Outreach Unit, and have funded projects to address some of the mis-perceptions about the ICTY in the region and contribute towards a greater willingness to face up to the past and understand the need for reconciliation. We have also maintained our financial and practical support for the ICTY's Witness Protection Programme and for the Rules of the Road project in BiH, advising the courts on domestic prosecutions of war crimes cases and monitoring the quality and fairness of the prosecutions. In March 2004 we became the tenth state to sign a Sentence Enforcement Agreement with the ICTY, which means convicted ICTY indictees may now serve their sentences in UK prisons. The UK remains the second largest contributor to the ICTY's extra-budgetary projects.



  18.  The EU's fundamental aim for the countries of the Western Balkans is EU accession, extending to the region the area of peace, stability, freedom and growing prosperity enjoyed by its existing Member States. The prospect of EU membership has proved to be the single most effective motivator of reform in the region, including the establishment of rule of law, stable democratic institutions and a free market economy. It is also a driver behind increased regional co-operation, a key building block of increased stability. In keeping with its support for EU Enlargement, the UK supports the Western Balkans' EU aspirations.

  19.  The Feira Council of June 2000 agreed that all countries of the Western Balkans (as defined in paragraph 1) were potential candidates for membership. The Council also launched the Stabilisation and Association process (SAp), a framework for the EU's relationship with the region designed to encourage and support the domestic reform agenda. The process is a step-by-step approach based on aid, trade preferences, political dialogue, technical advice and, ultimately, contractual relations in the form of Stabilisation and Association Agreements (SAAs). The SAp aims to guide all these countries through to eventual full integration. When the new European Commission takes office on 1 November 2004, the Western Balkans portfolio will be transferred from the Directorate General for External Relations (DG RELEX) to the Directorate General for Enlargement (DG ELARG). This could have implications for the way the countries of the Western Balkans progress towards EU integration, in terms of financial and technical assistance.

  20.  The EU is by far the single largest donor to the countries of the Western Balkans primarily through its regional aid programme called CARDS (Community Assistance for Reconstruction, Development and Stabilisation), which is designed to support the objectives of the SAp. The programme's mid-term review of June this year showed it be well-targeted with acceptable delivery rates for a program of its size. Since 1991, the EU has provided a total of more than

6 billion to the region through its various aid programmes. By 2006, that figure will have risen to around

10 billion. The UK has long supported these commitments and contributes about 19% of total CARDS funding. The European Investment Bank (EIB) is planning to increase significantly its credit to the region and will become a major source of external finance. The FCO also supports SAp objectives through its various programme budgets, including the Global Conflict Prevention Pool (GCPP) and the Global Opportunities Fund (GOF).

  21.  The EU also runs two European Security and Defence Policy operations in the Western Balkans. There are EU Police Missions in both Macedonia (Proxima) and in BiH (EU Police Mission, EUPM). The EU is in the latter stages of planning another operation to provide an EU Force (EUFOR) to replace the Stabilisation Force (SFOR) in BiH in December 2004.

Progress update

  22.  The region's integration into EU structures depends upon compliance with the same criteria it has applied elsewhere. This ensures the credibility of the SAp and wider enlargement process. Ultimately successful progress along the membership track depends on the willingness of the countries themselves to put in place the necessary reforms.

  23.  In March 2004, the European Commission published its third Annual Progress Report on the Western Balkans' progress through the SAp. Overall, while there has been some progress in certain areas, the European Commission gave a sober assessment of the outstanding challenges. The report recommended that higher priority be given to creating fully functioning democratic institutions based on the rule of law; administrative capacity should be strengthened and structural economic reforms continued. It also found that the work of the ICTY is being systematically obstructed and organised crime and corruption remain prevalent. The position of each country is:

    —  Croatia concluded an SAA in 2001. However, the UK suspended Parliamentary ratification of the SAA because of concerns about Croatia's co-operation with the ICTY. Following a statement in April 2004 from the ICTY Chief Prosecutor that there had been a significant improvement in Croatia's co-operation with the Tribunal, the UK restarted its ratification process, which was completed in September. Also in the wake of the ICTY Chief Prosecutor's statement, the European Commission issued a positive opinion on Croatia's application for membership. In June 2004, the European Council declared Croatia an official candidate, recommending that negotiations start in early 2005 on the basis that full co-operation with the ICTY continues.

    —  Macedonia was the first country to sign an SAA, which has been in force since 2004. Macedonia submitted its official EU membership application on 22 March 2004. The European Commission has now been tasked by the Council to give its Opinion on the application. We expect this to issue some time next year.

    —  Albania began negotiations for an SAA in January 2003. However, negotiations continue and the overall pace of reform in the country has so far been disappointing.

    —  In November 2003, the European Commission completed a feasibility study on Bosnia and Herzegovina's readiness to open negotiations on an SAA with the EU. It identified 16 priority areas where "significant progress" is required—including co-operation with the ICTY—before SAA negotiations can begin. There are some signs of progress and the European Commission will assess later this year.

    —  Serbia and Montenegro's integration into the EU is currently on hold due in part to lack of co-operation with the ICTY and failure to complete an Action Plan to harmonise the two republics' economic systems. The European Commission is considering ways to overcome this. There is a parallel Stabilisation and Association process tracking mechanism in place to ensure that Kosovo does not fall behind the rest of the region in EU terms, while its final status remains unresolved.

  24.  Intra-regional co-operation in the Western Balkans requires further development. For example, the countries could work together to create a genuinely free trade area. Currently the Western Balkans, an area of less than a quarter of million square kilometres, has 6 bilateral free trade agreements, with another 14 in the pipeline, but no regional agreement. The impact of a single free trade area on the lives of individual citizens would be immense, as would visa free travel. Currently, the countries of the Western Balkans place restrictions on the movement of people. The FCO aims to encourage intra-regional co-operation by funding regional projects from our various programme budgets.

  25.  The Stability Pact for South Eastern Europe was adopted, at the EU's initiative, at the Cologne European Council in June 1999. The Stability Pact is a mechanism for co-ordinating political reforms and reconstruction in the countries of South East Europe. It complements the SAp and the work of regional bodies such as the South East Europe Co-operation Process (SEECP).

  26.  The European Commission's third SAp Annual Progress Report was accompanied for the first time by European Partnerships in March 2004. These documents identify and prioritise the immediate reform agenda for each country and will be used to programme EU assistance. The UK played a key role in promoting this initiative and shaping its development. The UK is working to ensure that European Partnerships are used to help to integrate governments' own development priorities, external assistance and the requirements of the SAp. We are encouraging the SAp countries to draw up Action Plans to implement the European Commission's recommendations.

Looking forward

  27.  EU membership remains the main driver of reform in the region. Since this is a distant prospect for most Western Balkan countries, the EU and its member states need to ensure they deliver tangible benefits throughout the integration process and that these are conditional on political and other reform. This should include supporting economic and social development and nurturing a more democratic and European outlook. To avoid disappointment, the EU also needs to help manage the gap between political leaders' ambitions, the expectations of the public and the likely pace of integration. They should draw on existing national reform strategies and incorporate commitments made with other donors, effectively bringing together the EU accession processes and wider development priorities and opportunities. By the end of the decade we hope all the countries might be in a position to make a credible application for EU membership.


  28.  Since Dayton, NATO has regularly downsized its military commitment in Bosnia on the basis of six-monthly Periodic Mission Reviews. This has meant a reduction in troops from the original 60,000 of Implementation Force, IFOR, in 1995 down to 32,000 the following year with the launch of Stabilisation Force, SFOR, to some 10,000 at the beginning of 2004. Kosovo Force (KFOR) was launched in June 1999 with an initial strength of 50,000 troops, and is now at 17,500.

  29.  NATO plans to downsize SFOR in Bosnia from 10,000 to 7,000 troops during 2004 in advance of the deployment of EUFOR. In Kosovo, the plan was to downsize from 17,500 to 10,000 throughout 2004, but following the March violence this will be reviewed after the October elections in Kosovo, and is unlikely to occur this year. We must ensure that our military engagement is sufficient to continue to protect our investment in the region, not least in the run up to possible future events such as Kosovo Final Status discussions, and is based upon requirements on the ground. But our ultimate aim remains to enable the region to ensure its own security whilst keeping partners and allies (particularly the US) engaged on the ground.

  30.  The March violence highlighted a number of areas where the Kosovo Force (KFOR) could improve. NATO conducted a comprehensive lessons learned exercise. We continue to push for implementation of the findings such as improving contingents' crowd and riot control capacity and removing national caveats which limit or prohibit involvement in certain circumstances.

  31.  We need to manage carefully further reductions in military commitments in the region. Refugee returns in BiH are largely complete and there is no longer the same requirement for a large scale and highly visible force. However, the maintenance of a safe and secure environment in BiH and Kosovo still requires an international military presence, and the international community's ability to keep the reform agenda on track is still underwritten by those troops.

  32.  We are currently working towards a successful transition to an EU force in Bosnia at the end of 2004. This will operate under Berlin Plus arrangements (having access to NATO assets and planning). The UK will provide the first Force Commander of this robust 7,000 strong force. A continuing but limited NATO presence will focus on defence reform as well as certain operational tasks such as counter terrorism and supporting the ICTY with regard to the detention of indicted war criminals.

  33.  All Western Balkans countries aspire to join NATO (although the current SaM government has been more circumspect). The Membership Action Plan (MAP) process includes scrutiny of political reforms, democratic development and the rule of law, as well as defence and security sector reforms. Croatia, Albania and Macedonia are all members of PfP and participants in the MAP process, although the pace of reform is variable. However, while the NATO Summit in Istanbul kept open the prospect of membership, it made clear that this was unlikely in the near future. SaM and BiH have yet to obtain PfP membership, largely due to their lack of co-operation with ICTY. The UK Government looks forward to welcoming SaM and BiH into PfP once they have met the established conditions.


  34.  Criminals exploited the vacuum created by the conflicts of the 1990s to establish lucrative networks, which reach far into government and retard social and economic development. Organised crime and corruption are obstacles to the rule of law, democratic stability, and sound and accountable institutions. Organised crime now controls enormous resources. It is well armed and financed. It funds political parties, including political extremists. It often works across ethnic divides. It is a regional phenomenon, unconstrained by geography or the new national borders and is able to adapt to overcome market and security obstacles. In addition to its de-stabilising impact within the region, organised crime in the Western Balkans has a direct impact on UK streets. The Western Balkans is a major source and transit route for organised immigration crime (people smuggling and trafficking in human beings) and drugs smuggling. It is estimated that 80% of heroin seized in Western Europe has been smuggled through the Western Balkans.

International Strategy

  35.  The November 2002 London Conference on Organised Crime placed the problem of organised crime in the Western Balkans firmly on the international agenda. An international strategy was adopted (the London Statement) and countries of the region committed themselves to individual Areas for Priority Action (APAs). The EU-Western Balkans Ministerial Summit on 21 June 2003 took stock of countries' progress against their APAs, with some making positive advances. In order to maintain momentum, at the inaugural EU-Western Balkan JHA Ministerial on 28 November 2003, each country presented implementation strategies for Specific Action Oriented Measures (SAOMs) to fight organised crime. Progress in implementing the SAOMs is being monitored by the European Commission and the next progress report will take place at this year's EU-Western Balkan JHA Ministerial in December. The EU has the most significant resources available to assist the Western Balkans in tackling organised crime through assistance programmes and it also has considerable leverage to encourage reform due to the EU membership ambitions of all the governments throughout the region. From the

2 billion CARDS funding committed in 2001-03 for the Western Balkans, over

300 million went to the broad area of Justice and Home Affairs (JHA).

UK Strategy and Assistance

  36.  A UK Strategy for tackling organised crime in the Western Balkans was agreed by all relevant Government departments and agencies in July 2003. The main focus is on encouraging and supporting governments in the region to develop their own responses to organised crime and includes building popular and political support for action against organised crime; improving institutional capacity through more effective law enforcement and judicial systems; disrupting organised crime structures; and enhancing regional co-operation.

  37.  As well as supporting EU programmes, the UK provides significant bilateral assistance to the region. From the Western Balkans strand of the Global Conflict Prevention Pool (GCPP) over £2 million has been spent on initiatives in the region. Examples include:

    —  £0.5 million to provide the Kosovo Organised Crime Unit Bureau with surveillance and intercept equipment, which has played a key part in a number of significant drugs seizures. It has also funded the successful Crimewatch television series in Kosovo.

    —  The recently established Special Chamber of Economic and Organised Crime in BiH has completed its first major case. FCO funded British experts helped the State Level Prosecutor to investigate and pursue the case against a prominent criminal for charges relating to human trafficking and prostitution. He received a nine year sentence.

  38.  There are also a number of other project funds for work in related fields which contribute to the Strategy's objectives:

    —  The FCO-administered Small Arms and Light Weapons Fund.

    —  The Department for International Development's (DFID) work to improve JHA policy-making in the region.

    —  Ministry of Defence (MoD) Security Sector Reform programmes.

    —  The FCO's Drugs and Crime Fund.

    —  Project Reflex, a UK multi-agency initiative chaired by the National Crime Squad, was set up in 2000 to tackle organised immigration crime and has run a number of initiatives in the Western Balkans. Individual agencies make substantial contributions: eg Her Majesty's Customs and Excise has 25 officers seconded to EU customs assistance programmes, and the UK has an extensive network of drugs and immigration liaison officers working in the region.

    —  Project "IMMPACT II", which concluded in SaM in 2003, was a major capacity building and training project for the SaM border services to help them fight cross-border crime. Project IMMPACT II followed on from the highly successful "Project IMMPACT I" in BiH (2001-02) and aims to ensure a consistent regional approach to tackling illegal migration.


  39.  Although the macro-economic position of the Western Balkans region has stabilised, overcoming the impact of conflict and the unfinished transition will take some time. Falling levels of international aid will place further serious stress on both public finance and employment. Department for International Development (DFID), together with the FCO, is working with the international community to maximise the efficiency and speed of the transition process, encourage the formation and growth of new enterprises, discourage the emigration of vital skills, attract foreign investment and address the social consequences of transition. But the expectation is that the dividend from these efforts will not come quickly and it will take some time for the current levels of income growth to bring back the relative prosperity of the 1980s. The economic situation in Kosovo is particularly serious, with declining external financial transfers, unsustainable levels of public expenditure and extremely high and increasing levels of unemployment. We are working to ensure that adequate aid resources are devoted to economic development. This is central not just to the alleviation of extreme poverty but also to achieving other key objectives, in areas such as security and political stability, immigration, organised crime, and Euro-Atlantic integration.

  40.  DFID is working towards ensuring sustainable and broad based economic growth in all countries of the region. European Partnerships and Poverty Reduction Strategies now form an integral part of the Western Balkans governments' policy making. DFID is supporting national governments in ensuring that the Action Plans, designed in response to both strategies, are compatible and well coordinated to maximise effectiveness. DFID is also working to improve the effectiveness of international assistance to the region by promoting better harmonisation and coordination of assistance from the international donor community.

  41.  The UK and international partners recognised the importance of economic stability in the Western Balkans as essential to underpinning political stabilisation in the region. In 1999, the High Level Steering Group on the Western Balkans was established to provide a forum for donors (International Financial Institutions, IFIs, and bilateral donors) to work together to understand and help resolve economic problems in the region. The IFIs are active in promoting economic stability and building the foundations of sustained growth and poverty reduction throughout the region. Since 1998, the UK has supported International Monetary Fund (IMF) loans to Western Balkans countries totalling around £950 million, through eight programmes, including Poverty Reduction and Growth Facility programmes, in which finance is made available at below market interest rates. In addition, the IMF is active in providing technical assistance and policy advice to these countries. The World Bank has also committed over $2.3 billion. International agencies and donors also recognised the need for sustainable solutions to debt problems in the region. As part of a debt treatment by the Paris Club, the UK has rescheduled £5.3 million of debt in BiH, of which £2.95 million was written off; rescheduled £620 million of debt in SaM, of which £315 million was written off; and rescheduled £8.4 million of debt in Macedonia. Other members of the Paris Club have done similarly.

  42.  UK commercial relations with the Western Balkans are minimal. The recent conflicts continue to affect perceptions of the region by businesses and investors. Interest from UK companies is limited to "one-off" trade deals or specific niche market opportunities, such as in the tourism or agriculture sectors. Larger UK investments in the region tend to be set up through overseas subsidiaries of UK companies. The UK's main trade partners in the region are Croatia and SaM. Between 2002-03, UK exports to Croatia increased by 48% to £139.9 million with the main exports being medicinal and pharmaceutical goods, office equipment and specialised industrial machinery. UK exports to SaM in the same period increased by 6.5% to £65.6 million with the main exports being specialised industrial machinery, office machinery and chemical products. There was a downturn in UK exports to other Western Balkans markets of between 20-48%, although imports (except from Croatia) are on the rise and are predominantly foodstuffs and raw materials.



  43.  The single biggest issue facing the Balkans is Kosovo's future status. The UK's objective is to work with the UN and other international partners, bilaterally and within the Contact Group (UK, France, Italy, Germany, Russia and the USA), to establish a multi-ethnic, democratic, stable and tolerant Kosovo and to ensure that international partners get the process and the conditions right for determining Kosovo's future status. There has been growing recognition by the countries involved in the region and international organisations that the uncertainty over the province's future status is a source of instability in the region and an obstacle to regional development. In December 2003, the UN Security Council endorsed a strategy, supported by the Contact Group, to measure Kosovo's progress in raising democratic standards, thereby establishing the conditions in which its final status might be addressed. Under this "review mechanism" there will be a formal review by the UN of Kosovo's progress in mid-2005. A negative assessment would lead to a refining of targets and the setting of a fresh review date. A positive assessment would trigger a status process as laid down in UNSCR 1244.

  44.  The violence of 17-19 March 2004 highlighted the growing frustrations of the citizens of Kosovo with the current situation, notably poor economic opportunities and lack of certainty about the future. The UN and the Contact Group concluded that while international policy remained right for Kosovo, and that it should not be deterred by extremists, there were lessons it could learn from the March violence to make international agencies' work more effective in Kosovo and address its underlying causes. The UN Secretary-General (UNSG) commissioned a report into the UN's policy on Kosovo by Ambassador Kai Eide, the Norwegian Permanent Representative to NATO, and its recommendations are currently under consideration by the UNSG. NATO also conducted a comprehensive lessons learned exercise which highlighted that while reinforcements arrived with commendable speed (particularly the UK-led NATO Operational Reserve), there were a number of areas where KFOR needed to improve its capabilities and that original plans for KFOR to downsize throughout 2004 should be reviewed.

  45.  UNMIK has responsibility for law and order in Kosovo and works through an international police mission. UNMIK's International Police Officers work closely with local officers from the Kosovo Police Service (KPS) to support KFOR in providing security. The UNMIK Police mission consists of 3,524 international officers, to which the UK currently contributes 102 police officers. The March violence has stretched resources and UNMIK Department of Justice have requested a further 100 international police investigators to assist them; 73 have arrived so far. Over 350 cases have been filed by local and international prosecutors in relation to the March violence, and more than 270 people have been arrested.

  46.  On 16 August, Mr Soren Jessen-Petersen (Danish) arrived in Kosovo as the UNSG's new Special Representative for Kosovo. Petersen has reaffirmed the overall goal of creating the conditions to enable a process to determine Kosovo's future status. He has stated that his immediate priorities are to establish a safe and multi-ethnic Kosovo, enhance local capacity across the board, reform local government; address economic development and improve international leadership.


  47.  Following the Belgrade Agreement in March 2002, the former Federal Republic of Yugoslavia adopted a new, looser federal arrangement between the two republics of Serbia and Montenegro under the SaM Constitutional Charter of 4 February 2003. The EU, particularly Secretary General and High Representative Dr Javier Solana, was instrumental in brokering the new "state union" arrangement. A fully functioning state union is a key condition for SaM's progress towards EU integration (which is currently on hold).

  48.  However, progress on implementing the provisions in the Constitutional Charter has been slow, particularly in economic harmonisation of the two republics, whose economies have diverged over the last decade. Domestic support for the state union remains divided, with some political forces within both republics pushing for independence (in particular, the ruling coalition in Montenegro). The Charter allows either republic to determine by referendum whether to withdraw from the state union three years after its adoption. It is possible, therefore, that after March 2006, two independent states will emerge. The EU believes that it is in the interests of both republics to preserve the union and we and EU Partners are actively encouraging the SaM authorities to ensure the union functions. But ultimately this is a matter for the SaM people and it will be important for any separation not to undermine stability in the region.


  49.  BiH has come a long way since the conflict of the early 1990s, albeit with enormous assistance from international partners, institutions and agencies. The UK objective is to ensure progress made to date is irreversible, and that BiH continues on the path to closer Euro-Atlantic integration. The challenge is to balance the need to allow BiH's institutions the freedom to grow, exposing them to normal democratic pressures, whilst maintaining the role of international organisations and partners in guaranteeing BiH's future and ensuring there is no return to conflict and division.

  50.  The role of the Office of the High Representative (OHR) has been central to progress achieved over the last year. In particular, the use of the "Bonn Powers" (which enables the High Representative (HR) to impose legislation and remove obstructionist politicians and officials) has enabled the UN to keep extremists in check and ensure BiH has the basic legislative framework required for Euro-Atlantic integration. The current HR, Lord Ashdown, is also the EU's Special Representative in BiH. As BiH moves closer to the EU, the EU's role in BiH will become increasingly important.


  51.  The international community brokered Ohrid Framework Agreement (OFA) set Macedonia back on a peaceful track following the inter-ethnic conflict of 2001. The challenge is to keep all parties committed to moving forward despite the sensitivities involved. The current difficult debate over decentralisation and the referendum package are testimony to the continuing inter-ethnic tensions and risk delaying Macedonia's progress towards Euro-Atlantic structures. The UK continues to believe that the OFA and the multi-ethnic future it guarantees is the best model for Macedonia's future.

Foreign and Commonwealth Office

13 September 2004

Annex A


Current Situation

  1.  Bosnia and Herzegovina (BiH) is gradually normalising as a state. But nationalist politics, economic malaise, and the restrictive constitutional structures of the Dayton agreement make reform a difficult and painful process. Continued distrust between the ethnic communities, combined with political corruption and infighting, make the process of creating a viable, multi-ethnic state all the more complicated.

  2.  Since general elections in 2002, nationalist parties have been in power at both the state and entity level in BiH. Despite this, the last two years have seen significant progress in delivering some of key the reforms required for Bosnia's integration into the Euro-Atlantic structures. The development of a state-level defence structure, and agreement on single intelligence and indirect taxation structures are particularly important examples. But much more remains to be done, and progress still tends to depend on the ability of the UN and international organisations to exert concerted pressure on the parties involved.

  3.  The Office of the High Representative (OHR)—headed by the current High Representative, Lord Ashdown—is the main focus of international efforts in BiH. The UK provides significant financial and practical support to OHR, and works closely with Lord Ashdown to help deliver the OHR Mission Implementation Plan (MIP). The Plan focuses on institutional reform, entrenching the rule of law, strengthening state-level structures, and encouraging good governance. The High Representative's overall objective—which we back—is to put BiH irreversibly on the road to Euro-Atlantic integration. Our shared aim is that Lord Ashdown should leave his post with the Bosnian Government in a position to take greater ownership and responsibility for the reform process. We are working with the OHR and other Peace Implementation Council Steering Board partners to develop an effective exit strategy—reflecting the need to gradually reduce the UN and international organisations' roles whilst maintaining the capacity to intervene if necessary.

  4.  The EU Police Mission to Bosnia (EUPM) took over from the UN's International Police Task Force at the beginning of 2003. It consists of around 474 police officers and 66 international civilians from EU member states and third country contributors. The UK currently contributes 56 police officers and 11 civilians. The mission's aim is to establish sustainable policing arrangements under BiH ownership in accordance with best European and international practice. It focuses on police reform through mentoring and monitoring of mid to senior officers in the BiH police. It has four strategic objectives: police independence and accountability; the fight against organised crime and corruption; financial viability and sustainability, and institution and capacity building at management level.

International Criminal Tribunal for the Former Yugoslavia

  5.  Lack of co-operation with the ICTY remains one of the biggest obstacles to Bosnia's successful integration into the EU and NATO. Two key milestones of that integration process—membership of NATO's Partnership for Peace (PfP); and the opening of negotiations on a Stabilisation and Association Agreement (SAA) with the EU—are within sight, but are likely to remain out of reach until the ICTY issue is resolved. Full co-operation with ICTY is a pre-requisite for integration into both NATO and the EU. The main problem lies with Republika Srpska (RS—the predominantly Bosnian Serb entity), which has failed to arrest a single ICTY indictee since the end of the conflict.

  6.  The UK continues to be at the forefront of political, diplomatic and operational—through NATO's SFOR and in due course through the EU-led successor—efforts to ensure that fugitive indictees Radovan Karadzic and Ratko Mladic are transferred to The Hague to face justice. We are also helping the BiH authorities to develop the capacity to try their own, lower-level war crimes cases. The UK is providing £2.6 million of funding over five years towards the establishment of a BiH State War Crimes Chamber. We hope the first trials will begin in mid-2005.

Euro-Atlantic Integration

  7.  The EU has confirmed that BiH is a potential member, provided it meets the necessary political and technical criteria. The key milestone in the process of further integration is an SAA with the EU. In November 2003, the European Commission concluded that BiH must make significant progress in 16 priority areas before it could recommend the opening of SAA negotiations. The Commission will review progress later this year. The UK fully supports BiH's EU aspirations. But it is clear that BiH must move from adopting legislation to a greater focus on implementation if it is to fulfil its ambition of opening negotiations in 2005. Full co-operation with ICTY is one of the 16 areas where BiH must make significant progress.

  8.  BiH also aims to join NATO's Partnership for Peace, after meeting the established NATO conditions. Despite significant progress made on defence reform in the last 18 months, NATO's Istanbul Summit declined to invite BiH to join PfP due to concerns about ICTY co-operation. NATO identified obstructionist elements in Republika Srpska (RS) as the main problem.

Bilateral relations and assistance

  9.  Bilaterally, and through our work with international organisations and NGOs, we continue to provide support for reform that delivers economic, social and institutional development and enhances stability and security. This is in addition to the UK contribution to multilateral funding—in particular through the EU assistance programme—for BiH. The UK has provided over £82m of bilateral assistance to BiH since 1996. Recent examples of projects funded by the UK include retraining for demobilised soldiers, and assistance to NGOs involved in the location and identification of people missing as a result of the conflict. The UK is also a long-standing contributor to de-mining activity in BiH.

  10.  The UK also maintains a high-level of bilateral contacts with the BiH authorities. Both the Bosnian Defence Minister, Foreign Minister and Prime Minister have all recently visited the UK, and both the UK Minister for Europe and the Minister for the Armed Forces have been to Sarajevo this year.


Current Situation

  11.  Serbia has yet to recover fully from the assassination of Prime Minister Djindjic, in March 2003. The pro-reform Democratic Opposition of Serbia (DOS) coalition continued in power until December 2003, before being brought down by scandals and unpopularity. Early parliamentary elections in December 2003 left the ultra nationalist Serbian Radical Party with the highest vote (27%) but unable to form a government. This left the second largest party, Kostunica's conservative Democratic Party of Serbia (DSS), to lead negotiations. After months of wrangling, on 3 March 2004, a minority coalition government, led by Kostunica and with outside support from Milosevic's Socialist Party of Serbia, was formed.

  12.  This Government is faced with a daunting set of challenges, a small parliamentary majority, lack of public support (the last poll recorded a total of only 20% support for the government), divergent views held by the various parties and little experience. Many analysts predict that the new government may last only a year or less. However, the election of the reformist Boris Tadic in June as Serbian President has created a more positive political atmosphere in Serbia. Despite leading the pro-reform Democratic Party (DS) (Djindjic's former party) in the opposition, Tadic has pledged to promote stability and to work with the government in constructive co-habitation. The next hurdles are local and provincial elections in September.

  13.  The Government in Montenegro has been in power since October 2002 and is likely to remain in power at least until the 2006 Montenegrin Parliamentary elections. This continuity may be due more to a fractious opposition (who have been boycotting parliament since May 2003), than wide public support for the Government. A British Office opened in Podgorica in 2003 and HMA Belgrade makes regular visits.

  14.  Despite significant progress, especially in terms of legislation and macro-economic reform, both republics need to continue with in-depth reforms on rule of law and institution building as well as to deal with a large and unsustainable state-owned sector. This will help them tackle the problems of organised crime along with corruption and unemployment. SaM's relationship with her neighbours is improving, but there continues to be the threat of internal instability in South Serbia where an armed revolt by local Albanian extremists in the Presevo Valley in 2001 was peacefully resolved by the Serbian Government working in close co-operation with international partners and organisations.

International Criminal Tribunal for the Former Yugoslavia

  15.  The ICTY continues to be the most difficult issue for SaM. There was some, albeit insufficient, co-operation from the previous DOS government, including a number of arrests and extraditions (most famously Milosevic), but co-operation largely came to a halt in autumn 2003. Despite SaM's progress towards the EU and NATO being conditional on her co-operation with the ICTY, in May 2004 SaM's co-operation with the ICTY was described by the ICTY Chief Prosecutor, Carla Del Ponte, as "virtually non-existent". She has reported to the Security Council that General Mladic and other indictees are spending at least part of their time in SaM, including three army and police generals who are still living openly in Belgrade despite having been indicted last September. The recent reconstitution of SaM's Council for Co-operation with ICTY is a late but encouraging development and, along with positive statements from the new Serbian President and SaM Foreign Minister, has generated hope for some concrete progress in the near future. We continue to urge SaM to meet her international obligations and to promote public awareness of war crimes committed in the region.

  16.  The EU responded to SaM's poor ICTY co-operation by holding back SaM's EU integration (see below). Meanwhile on the 31 March this year, the US suspended the outstanding financial aid due to SaM. Around a quarter of the annual allocation of $100 million was held back due to SaM's lack of co-operation with the ICTY (the suspension did not apply to that used for humanitarian aid, aid for democratisation and aid for Kosovo and Montenegro).

  17.  Serbia is working to increase its capacity to carry out domestic war crimes trials. In March 2004 the first trial began in the new special war crimes court, of six Serbians accused of involvement in the 1991 Vukovar massacre in Croatia. We support these efforts. However, according to the Organisation for Security and Co-operation in Europe's assessment, the Serbian judiciary lacks the capacity to conduct fair war crimes trials in accordance with international standards. We are urging the Serbian authorities to reform the judiciary and to implement witness protection programmes to ensure the trials are effective and meet international standards and have offered assistance in this regard.

Euro-Atlantic Integration

  18.  A Stabilisation and Association Agreement with the EU, as a first step towards joining the EU, is the key foreign policy priority for SaM and its constituent republics. But SaM's progress towards the EU is currently stalled. The key stumbling block is non-co-operation with ICTY and the failure of the Serbian and Montenegrin republics to complete the process of harmonising customs tariffs as part of creating a single market.

  19.  Under the Belgrade Agreement (signed in February 2002) and the Constitutional Charter of March 2003, the Serbian and Montenegrin republics agreed to form a State Union and not to call a referendum on independence for at least three years. The State Union is headed by President Marovic, from Montenegro, and contains five Ministers, for Foreign Affairs, Defence, Human Rights and Internal and External Economic Affairs. However, the pro-independence ruling coalition in Montenegro continues to suggest that the State Union is not working and that Montenegro may call a referendum before 2006 (some prominent Serbian politicians also argue for dissolution of the union).

  20.  SaM is seeking membership of PfP but will need to meet the established NATO conditions: full co-operation with ICTY (in particular the arrest and transfer of Mladic and Karadzic), the case dropped against eight NATO allies at the International Court of Justice (ICJ), and continued improvements in international and regional relations. At the NATO Summit in Istanbul June 2004, NATO Allies pledged to assist SaM by including her in selected PfP activities. But only action against remaining ICTY indictees and dropping the ICJ case will pave the way for rapid movement on PfP. The UK has a significant bilateral defence reform programme with SaM (including a 2 star General advising SaM's Ministry of Defence).

Bilateral relations and assistance

  21.  The UK values good bilateral links with SaM, characterised by rich bilateral exchanges and developing economic/trade relations. Among others, the following have visited SaM in recent years: Minister for Europe, Dr Denis MacShane, as part of a regional tour in April 2004; the Attorney General, Lord Peter Goldsmith, in November 2003; the Foreign Secretary, Jack Straw, in November 2002. We have also hosted visits to the UK by SaM Defence Minister, Boris Tadic, in November 2003; SaM Deputy Foreign Minister, Igor Luksic, in June 2003; FRY Foreign Minister, Goran Svilanovic in October 2002; Serbian Prime Minister, Zoran Djindjic, in April 2002; and FRY President, Vojislav Kostunica, in November 2001.

  22.  The UK continues to provide support for reform that delivers economic, social and institutional development, and look to maximise the effectiveness of economic and other assistance. We support the Government's poverty reduction strategies and also encourage donor harmonisation related to nationally owned reform strategies. We provide assistance both bilaterally (£8 million annually for SaM) and multilaterally.

  23.  The EU provides technical assistance through its CARDS programme. The CARDS Management Committee approved the 2004 action programme for SaM, amounting to around

230 million (as an EU member state, the UK provides 19% of the overall funding for CARDS). CARDS regulation supports: good governance and institution building; economic recovery; and social development and civil society (including recognition of the need to tackle poverty). The EU has also provided macro financial assistance in 2002 and 2003 (

40 million and

65 million respectively). A further

25 million is likely in 2005.


  24.  Policy and progress on Kosovo will be covered in more detail in a later memorandum following key international meetings in September, as agreed with the FAC.


Current Situation

  25.  Macedonia has made significant progress since the inter-ethnic conflict of 2001. Much of the legislation linked to the Ohrid Framework Agreement (OFA), which brought to an end the 2001 violence, has now been passed. However, decentralisation, one of the OFA's key components, has been highly contentious, particularly in July and August 2004. It sparked demonstrations and the collection of the 150,000 signatures necessary to force a referendum against the parliament approved decentralisation package. The referendum has further delayed the municipal elections planned for autumn 2004. This issue highlights that tensions remain between the ethnic groups. Whether the OFA is perceived to deliver much needed change (for ethnic Albanians) or deliver too much (for the ethnic Macedonians) will continue to affect stability in Macedonia. Work on equitable representation in the public sector and on language use rights continues.

  26.  The current government coalition was led by Prime Minister Branko Crvenkovski until he was elected President, following the untimely death of former President Boris Trajkovski in a plane crash in February 2004. Former Minister of Interior Hari Kostov became the new Prime Minister. The coalition is multi-ethnic—the ethnic Albanian contingent DUI is made up of the former insurgents from 2001.

  27.  Although inter-ethnic politics dominate the agenda, the principal challenge in Macedonia is the economy. Inflation, government expenditure and external debt are increasingly under control, helped by an IMF programme, but official unemployment stands at more than 35%. Although this is mitigated by the large grey economy, urgent action is required to create jobs. Attracting foreign direct investment (FDI) will be key to boosting Macedonia's economic prospects. A properly functioning judicial system is necessary to stimulate the economy, especially for FDI. It should also help to confront organised crime, which, as elsewhere in the region, is a major problem in Macedonia. But further high-level political commitment is required to make progress. This applies equally to tackling the commonplace allegations of corruption. To this end, the UK funds a small project enabling a team of five experts to monitor the judicial process in corruption related cases in order to develop recommendations for legal and institutional reforms.

  28.  With the withdrawal of the EU's first military mission, Operation Concordia on 15 December 2003 there are now no international peacekeeping troops in Macedonia. Neither the end of Operation Concordia, nor the publication of the contentious census results in December 2003, nor the March violence in Kosovo triggered significant security incidents. However, the security situation remains fragile. We continue to monitor the situation closely through working in concert with other international actors.

  29.  The EU Police Mission (EUPOL Proxima) was launched on 15 December 2003 with a one year mandate. This followed a request from the late President Trajkovski for EU help in bringing the Macedonian police up to European standards. Proxima's key role is to mentor, monitor and advise the Macedonian police. Its presence also acts as reassurance for the local population. The UK currently provides seven of the mission's 200 or so personnel.

International Criminal Tribunal for the Former Yugoslavia

  30.  The ICTY asserted primacy over five cases in Macedonia relating to the 2001 inter-ethnic conflict. Nobody has yet been indicted by the ICTY for any of these cases.

Euro-Atlantic Integration

  31.  The Macedonian Government is committed to a future within the EU, demonstrated by Macedonia's application to join the EU, submitted on 22 March 2004. Macedonia signed a Stabilisation and Association Agreement (SAA) in April 2001, which entered into force on 1 April 2004. The first EU-Macedonia Stabilisation and Association Council is scheduled for 14 September 2004. Macedonia also seeks to become a member of NATO joining Partnership for Peace in 1995 and the Membership Action Plan (MAP) process in 1999. In order to achieve this, they will need to implement the OFA in full as well as fulfil SAA and MAP conditions. Progress is being made, although significant challenges remain such as further ethnic integration and downsizing of personnel and equipment in the armed forces. The UK fully supports Macedonia's aspirations to join both the EU and NATO when the relevant criteria are met. We focus our efforts on helping the Macedonians themselves make quicker progress.

Bilateral relations and assistance

  32.  Between 2001 and 2003, the EU pledged

131.3 million in CARDS money to Macedonia, of which the UK contributes approximately 19%. Bilaterally, the UK has spent approximately £6.33 million from 2002-03 to 2003-04. In addition to this, at the Donors' Meeting for Macedonia in March 2002, the UK pledged an additional £3 million for Balance of Payments support.

  33.  We have a strong bilateral defence relationship including English-language training and staff courses. A British Brigadier heads up NATO's in-country presence, double hatted as special defence adviser to the Macedonian Government.

  34.  The Macedonian Speaker is due to visit in the autumn following visits from Deputy Prime Minister Xhaferri, Culture Minister Stefanovski and Foreign Minister Mitreva earlier this year. The Minister for Europe, Dr MacShane, visited Skopje in April as part of a regional tour, following a visit to attend the late President Trajkovski's funeral in March.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2005
Prepared 23 February 2005