Cablegate: Serbia Survives Medvedev Visit, but Must Deal With

VZCZCXRO2269
RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSL RUEHSR RUEHVK
RUEHYG
DE RUEHBW #1258/01 3011049
ZNR UUUUU ZZH
R 281048Z OCT 09
FM AMEMBASSY BELGRADE
TO RUEHC/SECSTATE WASHDC 0326
INFO EUROPEAN POLITICAL COLLECTIVE
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RHMFISS/HQ USEUCOM VAIHINGEN GE
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK

UNCLAS SECTION 01 OF 04 BELGRADE 001258

SENSITIVE
SIPDIS
DEPT FOR EUR/SCE (P. PETERSON), EUR/RUS

E.O. 12958: N/A
TAGS: PREL ENRG ECON SR RS
SUBJECT: SERBIA SURVIVES MEDVEDEV VISIT, BUT MUST DEAL WITH
CONSEQUENCES

REF: A) BELGRADE 841; B) BELGRADE 851

Summary

-------

(SBU) During a 12-hour visit to Belgrade on October 20, Russian
President Dmitriy Medvedev:

-- signed agreements on a gas storage facility and the South Stream
pipeline,

-- promised a $1 billion loan to the Serbian government,

-- reaffirmed Russia's support for Serbia's stance on Kosovo,

-- tepidly endorsed Serbia's European Union aspirations,

-- pitched his proposal for a new European security architecture,
and

-- secured agreement on a joint regional disaster response center
to be located in Nis.

The visit, planned to coincide with the 65th anniversary of the
liberation of Belgrade by Soviet and "Yugoslav" forces, was heavily
focused on the historical, cultural, and religious ties allegedly
binding Russia and Serbia. While the Serbian government attempted
to balance its praise for Medvedev and Russia with emphasis on
attaining European Union membership, that message was largely
obscured by public speculation over what Russia's security plans
mean for Serbia. End Summary.

Substance: Gas, Loan, Security, Disaster Response

--------------------------------------------- ----

2. (U) The most concrete deliverables of Russian President Dmitriy
Medvedev's October 20 visit to Belgrade, accompanied by a large
delegation of Russian businessmen, were not surprisingly in the
economic arena (Ref A). The Serbian and Russian governments signed
two energy-related agreements between Gazprom and Srbijagas. The
first created a joint venture firm to develop Serbia's Banatski
Dvor gas storage facility in Vojvodina. Gazprom is to provide 51%
($38 million) and Srbijagas 49% ($36 million) of the JV's total
capital of $75 million.

3. (SBU) The second agreement was a protocol to create within 30
days a Switzerland-based joint venture company to coordinate the
development of the proposed 450 km Serbian portion of the future
South Stream gas pipeline. Gazprom will hold a 49% stake and
Srbijagas 51%. The company will be responsible for conducting a
feasibility study on the pipeline route through Serbia. Energy
Minister Petar Skundric told us on October 22 that Serbia was the
first country along the proposed South Stream route to create a
joint venture with Gazprom. Russia, he said, had promised that the
pipeline would be operational by 2015. He voluntarily added that
Serbia would welcome a Nabucco alternative as well, but Serbia was
hoping to collect transit fees.

BELGRADE 00001258 002.2 OF 004

4. (SBU) Serbia and Russia initialed an agreement for a $1 billion
loan -- noticeably minus an agreement on interest rates -- which
will provide support for the Serbian state budget and funds for
infrastructure projects, as long as Russian firms participate. The
Finance Ministry announced that the details will be finalized in
discussions in Moscow the week of October 26. According to press
reports, $200 million is earmarked for budget support while the
rest would go to infrastructure projects still to be determined;
railways and a Belgrade metro were rumored to be likely projects.
Belgrade Mayor Dragan Djilas, however, told us on October 23, the
metro offer was not on the table. He had rejected the proposal and
instead was pursuing light rail options elsewhere in Europe. MP
Nenad Popovic, a member of former PM Vojislav Kostunica's
Democratic Party of Serbia (DSS) who has extensive business
interests in Russia through his firm ABS Holdings and whose family
lives in Moscow, harshly criticized the loan agreement to us on
October 22. He claimed the Serbian government had not even asked
about the interest rate, repayment term, or grace period; he
predicted that at least 75% of the money for infrastructure
projects would go to Russian firms. The Serbian government would
be better served by obtaining commercial loans for open tender
projects such as railways or the "Chinese" bridge across the Danube
(Ref B) rather than taking tied financing, Popovic emphasized.

5. (U) In his public comments, President Medvedev repeatedly
reaffirmed Russia's support for Serbia's territorial integrity and
its diplomatic battle to defend Kosovo. In much milder terms, he
expressed "respect" for Serbia's European integration goals and
commented that "for a very long time there will be countries in
Europe that do not belong to NATO or other organizations." During
his joint press conference with President Tadic after their meeting
and in a subsequent address to the National Assembly, Medvedev
elaborated on Russia's proposal for a new European security
architecture. Russia proposes to "sign a new treaty and create a
new, modern, effective system of European security," Medvedev said,
and enshrine the principle that "we cannot address security issues
in a way that threatens the security of others." Such a European
Security Treaty could be a starting point for a common security
zone in the Euro-Atlantic region, he said, emphasizing that the
arrangement would be open to all states "regardless of whatever
military or other alliances [they] belong to."

6. (SBU) In his remarks to the press, Tadic said that Serbia had
examined the Russian proposals "very attentively...and we are very
happy with them. Serbia's policy is that we are open to all future
initiatives in this area." In an apparent effort to reassure the
West that Tadic had not crossed any red lines with Medvedev, an
unnamed government source with knowledge of the talks told daily
"Blic" on October 21 that Tadic had told Medvedev that Serbia was
ready to participate in discussions of the idea but that such a
move would require the agreement of all. FM Jeremic muddied the
waters, however, by saying that Serbia wanted to be an "active
partner" in forming a new concept of European security in October
22 Vecernje Novosti and RTS interviews that generated headlines
saying "We Are Stronger than Yesterday."

7. (U) The two countries also signed an agreement for the Serbian
Ministry of Interior and the Russian Ministry of Emergency
Situations to establish a regional disaster response center in the
city of Nis to respond to forest fires, floods, or earthquakes. In
an October 21 press conference, Interior Minister Ivica Dacic and
Minister for Emergency Situations Sergey Shoigu announced that the
logistics base would be in Nis because it was served by an airport
and good infrastructure. Shoigu said that representatives of other
countries to be served by the center -- Greece, Bulgaria,
Macedonia, Montenegro, and Croatia, along with Serbia and Russia --
would meet in February 2010 to discuss the plan. Shoigu added that
the center would be created in 2012 and would handle mine clearance
in addition to natural disasters.

Pomp: Patriots, Parliament, Patriarch, Pageant

--------------------------------------------- -

BELGRADE 00001258 003 OF 004

8. (SBU) President Medvedev's schedule was heavy on symbolism
lauding the two countries' mythical deep connections, given its
timing on the 65th anniversary of the liberation of Belgrade from
the Nazis by the Soviet Army and the Yugoslav People's Liberation
Army, aka the "Partizans." It was also the first time in history
that the presidents of Serbia and Russia had met on Serbian soil.
To commemorate the liberation, Medvedev and Tadic laid wreaths at
the Monument to the Liberators of Belgrade in the New Cemetery and
saluted a group of WWII veterans. Medvedev was invited to address
the National Assembly, the first such address by a head of state.
The Kremlin has posted the full text of Medvedev's speech at

http://eng.kremlin.ru/speeches/2009/10/20/130 1_222271.shtml.

9. (SBU) Medvedev finished off the afternoon with a visit to the
Serbian Orthodox Patriarchate, where Metropolitan Amfilohije
presented him with the Order of St. Sava of the First Class. The
final event of the day was a gala presentation at the Sava Center
commemorating the liberation attended by government officials,
Republika Srpska Prime Minister Milorad Dodik, the diplomatic
corps, uniformed military, veterans, and hundreds of students
bussed in to fill seats at the last moment. The mixed symbol
event, consisting of anthems, speeches, historical films, and
dancing children, generated grumbling among many of the more
European-oriented members of the audience; Serbian Renewal Movement
(SPO) leader Vuk Draskovic commented to us "all that was missing
was a picture of Stalin." Israeli Ambassador Koll told Charge the
event was "pathetic." If you're going to put on an event like
this, either do it right, or don't do it at all," he commented,
noting the event's blurred images, lack of coherent messaging, and
brief duration.

Domestic Impact Mixed

---------------------

10. (SBU) Predictably, those close to Russia within the Serbian
government were buoyed by the Medvedev visit, as illustrated by FM
Jeremic's comments on Serbia being "stronger today than yesterday."
Others were quite concerned by the concessions the government
appeared to have made in return for Russian credits, as well as the
linkage made by some media and commentators between the Russian
proposal for a new European security architecture and the agreement
to establish the disaster response center.

11. (SBU) The Italian ambassador warned us that the disaster
response center was a "slippery slope" to establishing a Russian
military base in Serbia. Three parliamentarians from the Liberal
Democratic Party (LDP), including party leader Cedomir Jovanovic,
asked to meet with us on October 23 to express their concerns about
FM Jeremic's statements in favor of a new European security
architecture, Medvedev's comments on NATO and other alliances, and
the lack of clarity on terms for the Russian loan.

12. (SBU) Despite the Serbian government's many statements before
and during the visit that European Union membership remained the
country's central strategic goal, it appears that some local
leaders may have interpreted the Medvedev visit as license to
deploy anti-Western propaganda. During the annual commemoration of
the killing of students in Kragujevac during WWII on October 21, a
theatrical presentation by the Belgrade National Theater gave an
alarming Russian-authored alternative version of WWII history in
which Americans began bombing Belgrade and other cities in Serbia
to show the world "who its new master" was. The interpretative
reader then went on to talk of blood-letting, savagery, and
atrocities in Iraq and Afghanistan, as well as "massacres during
the illegal NATO bombings." (The Charge and other embassy
representatives walked out at that point.)

BELGRADE 00001258 004 OF 004

Comment

-------

13. (SBU) The Serbian government struggled for months to strike
the appropriate balance for Medvedev's visit by displaying
sufficient respect and gratitude for Russia's political and
economic support without alienating Serbia's European partners.
Overall we would give them a C- for their efforts: while President
Tadic resisted pressure to take extravagant steps such as
organizing a military parade or declaring a national holiday, made
no irreversible gaffes in his public comments, and made progress on
budgetary support, the policy outcomes of the Medvedev visit are
likely to complicate Serbia's relations with its Euro-Atlantic
partners in the near term. The message the Serbian public is
likely to take away from Medvedev's visit is that partnership with
Russia competes with, rather than complements, Euro-Atlantic
integration. End Comment.
BRUSH

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