297. European and US Policies in the Balkans

The following is a staff-prepared summary of a conference co-sponsored by EES and the Stiftung Wissenschaft und Politik (SWP), held on May 23, 2004 in Berlin. Meeting Report 297.

Because the European Union (EU) and the US share the same goals in the region, the Western Balkans have become a cornerstone of transatlantic cooperation over the last decade. Despite the many rifts that have appeared in the transatlantic partnership, the US and Europe continue to be united in their commitment to contain violent nationalism in the Balkans and help the region in its transition to liberal democracy and European integration.

The EU has played a large role in state-building and conflict-prevention measures, but it suffers from a credibility problem for not having intervened effectively in curbing ethnic violence when it first broke out in the Former Yugoslavia in the 1990s. Thus, the US-led NATO forces seem to hold the most sway in terms of curbing violent outbreaks and fostering political change. However, US involvement in the region is a reflection of its global power, rather than clear regional interests. With its attention turned elsewhere at the moment, the US does not want to be involved in the region indefinitely and is ready to shift responsibility to the EU. The EU may be well suited and prepared to accept this responsibility, not only in Bosnia and Herzegovina (BiH) where it is slated to take over later this year, but also in Kosovo, given the continuing failings of the UN mission to find a way to bridge the divide between Albanians and Serbs. In the face of shifting priorities, key questions and challenges remain: what should the US and EU do in order to resolve the situation more quickly without abandoning the region? How effective are the international community's current policies in the Balkans? How are external factors (the war in Iraq, the current enlargement of the EU) affecting the region? This colloquium was organized to analyze the current policies in the Balkans from both the American and European perspectives and discuss possible scenarios for the future.

EU in and US out? Examining political and military issues

London School of Economics professor, Dimitri Triantaphyllou, asserted that although transatlantic cooperation in the Balkans is strong, the threats to regional stability are still real, as illustrated by the violent outbreak in Kosovo last March. These threats stem largely from internal political instability. For instance, Albanian political stability is faltering due to its close involvement with the Kosovo crisis, as well as the government's corrupt practices and close ties to criminal groups. BiH remains dysfunctional despite the surface calm—one symptom of its problems is that Partnership for Peace membership has again been delayed. Finally, it has become clear that Serbia and Montenegro has failed to take advantage of the ‘revolutionary' potential that followed the 2000 overthrow of the Milosevic regime. The failed elections in 2003 are a clear indication of the dispirited mood in Serbia. Croatia, by contrast, has taken great pains to reform and sets an example for other countries in the region.

What are the implications for the transatlantic partnership of this largely negative assessment of the political situation in the western Balkans? Triantaphyllou believes that to a large extent, the EU membership carrot is being overplayed. It is clear, for instance, that the EU does not have as much influence on domestic policy in Serbia or Romania as it had on Slovakia or Estonia. This stems from the fact that there is a severe disconnect between the EU and the western Balkans, and it is counterproductive to assume that the same tactics that worked in the Baltics will work there.

Part of the disconnect stems from the international community's priority shift since September 11, 2001. While the US and EU have turned their attention to Afghanistan and the Middle East, the troubled Balkan region has continued to operate in a rut. The international community had hoped that the stability phase in the region was over, but the events in Kosovo in March indicate that this is not the case.

Nevertheless, there is room for optimism. For instance, Macedonia has recently submitted its application for EU membership, indicating that at least that country has membership aspirations and thus may be compelled to reform through the conditionality process. Also, the crucial issue of Kosovo's status will be up for debate by Summer 2005, which will certainly help stabilize Serbia, Albania and Kosovo.

Michael Haltzel, of the US Senate Committee on Foreign Relations, offered four basic truths about the current international intervention in the Balkans. First, in the long-term, it is the EU that will be the key player in the Balkans rather than the US. Second, 9/11 has brought about a situation which will lead to a quick removal of US troops from the Balkans. Third, NATO under US leadership will nevertheless continue to play a crucial role in the region. Finally, the shift of leadership from NATO to the EU in Bosnia and Herzegovina is an important test case for how the two organizations will cooperate in the future.

Haltzel asserted that the focus of the international intervention in the Balkans is shifting from military to one that is primarily concerned with law enforcement. This shift plays into the EU's strengths and addresses the greatest threat to stability, which is crime. He noted that there has been clear progress in the region, given that it has become almost inconceivable that ethnic groups in BiH would take up arms against each other.

Economic and business interests and crime

Sharon Fisher, Senior Economist at Global Insight, offered a relatively positive perspective on economic reforms in the region. She asserted that macroeconomic stabilization has been achieved, as reflected by the region's stable currencies, low inflation rates and GDP growth over the last few years. Within the region, Croatia offers a particularly good example of how quickly positive change can be realized when a reform-oriented government is in power. Croatia represents a special case as it enjoys a much higher level of development and is much closer to the standards of new EU member states than its southeast neighbors.

Nevertheless, problems still exist, most notably in high unemployment rates, huge trade deficits and in the fact that, in some places, the informal sector represents as much as 50 percent of the local economy. To help the region climb out of this situation, Fisher offered a general prescription of increasing foreign aid, foreign direct investment (FDI) and trade. Foreign aid has been quite high in the region, but as the violence is quelled, international actors must begin shifting aid from conflict management and refugee support to institution building. FDI is sorely needed, and requires some domestic change to encourage it. Namely, countries must implement a restructuring and privatization strategy that provides incentives for foreign investment. The recent boost of FDI in Serbia after its privatization provides an example to follow. It is clear that FDI would improve production output, which would surely help the trade deficit. But prior to improving product quality, regional trade within the western Balkans needs to expand, so that products that are not necessarily competitive in EU countries can find regional markets.

Offering a perspective on foreign investors, Committee on Eastern European Economic Relations member Michael Harms asserted that EU-US bilateral economic interdependence is strong, which creates a solid platform for pursuing common interests in the Balkans. Comparing the nature of US companies investing in the region versus European companies, it becomes clear that the two are not competing directly with each other, but catering to different markets. US companies, Harms explained, focus on large-size companies in strategic sectors, such as infrastructure and steel. US companies aim at market penetration and are less interested in lowering costs. Meanwhile, European companies are involved in a broad range of activities, tend to concentrate on medium-size enterprises and are motivated by cost reduction. Finally, European companies have a long-term orientation to the region, while US companies tend to be involved in riskier ventures with a short-term scope.

Although it would benefit all concerned to coordinate investment in the region, government coordination has been slow. The high degree of competition between European firms makes it difficult to coordinate their investment activities, with the result that there is no clear European design for economic development in the western Balkans. Because US companies concentrate on larger-scale industries, there seems to be little need to cooperate with their European counterparts. Thus far, EBRD has played the most active role in attempting to coordinate development and investment strategies.

Dusan Reljic, of the SWP, addressed the pressing issue of corruption and organized crime. He cited a Europol report that announced that Albanian crime groups are the most problematic, while those in other post-Yugoslav countries seem to be declining. In addition to other factors, high unemployment in Albania seems to be at the heart of the problem. Reljic asserted that economic development will ultimately help reduce the crime rate, but that it is vital to consider development strategies that create or at least maintain jobs, rather than eliminate them.

Reljic offered two strategies that might help manage the problem. He pointed to the fact that 20 percent of those engaged in organized crime groups have had no education. Therefore, he proposed increasing aid targeting educational opportunities, particularly for the large group of young men who see their futures only in organized crime. The other strategy is to open the borders to Europe and promote free movement of people. With open borders, unemployed Albanians could seek legitimate jobs elsewhere, thus diminishing the need to find work in the grey economy. Finally, Reljic stressed the importance of strengthening the rule of law throughout the region, as it is the necessary first step for economic development and FDI.

Kosovo

Susan Woodward, Professor of Political Science at CUNY, lamented the fact that the two elements of the transatlantic partnership—the Security Council Resolution 1244 and United Nations Mission in Kosovo (UNMIK)—have largely failed to produce a workable solution for conflict prevention in Kosovo. The March violence was a particularly discouraging sign that UNMIK has failed to prevent violence, protect property or adequately implement privatization and other goals. Woodward asserted that it was the "Standards before Status" policy that has caused the impasse, since all sides must wait for status to be decided in order to invest in improving standards of governance and economic reform. Indeed, borders define a nation and its citizens and without these nation-state foundations, societies cannot function. Moreover, the future status will determine the goals of the society and the trajectory of the nation, which is a vital first step before attempting to adopt any ‘standards.'

Janusz Bugajski, of the Center for Strategic and International Studies, stated that the greatest obstacle to implementing the policy is the critical lack of authority and credibility. On the one hand, Pristina does not enjoy the political control over the region to be able to implement standards. On the other hand, the government produces layers of bureaucracy rather than good governance. The government's credibility is further diminished by the fact that UNMIK ultimately controls everything.

Bugajski contends that the EU and the US must cooperate to bring durable security to Kosovo, since that is the precondition for good governance in the region. But the conditions to do so in Kosovo are not favorable, and a long-term EU-US police state is hardly practicable. He sees the establishment of Kosovo's statehood, guaranteed and protected by the international community, as the only solution.

Noted journalist Tim Judah pointed out how quickly things have changed in Kosovo over the last few months. The violence in March ended any misperceptions that the international community can pull out of the region soon, and the international leadership on the ground is threatened by the fact that SRSG Harri Holkeri has stepped down from his post. The violence against Serbs in Kosovo has further alienated them from the local political process. Thus, while many Serbs were already boycotting political processes there, now they will refrain from participating in politics altogether.

The way forward, Judah asserted, was by getting past the Standards before Status debate and focusing instead on the most important issue in Kosovo—decentralization. Finding a viable solution in the region depends on the reorganization of Kosovo's internal boundaries and the ability to establish effective local governance. In the meantime, the debate over Kosovo's external boundaries remains at an impasse, with Albanians calling for independence, Serbia's Foreign Minister Vuk Draskovic having no objections to Kosovo's status as an international protectorate for the next 20 years and the international community stalling on the status issue.

Despite the fact that the international community is doing its best to ignore it, Ivan Vejvoda, of the Balkan Trust for Democracy, contends that the determination of Kosovo's status is happening. It is clear that Kosovo cannot remain what it was and people in the region are actively looking for a fresh solution to the problem by trying to learn from the examples of Cyprus, Northern Tyrol, Scotland and Ireland. In Serbia, there is a growing sentiment supporting broader Balkan cooperation, which could help resolve the region's problems through mutual support. These developments may help find a solution for Kosovo, but two priorities must continue to prevail: preserving security and keeping borders open for refugee returns.

The issue of security is preeminent: in order to be able to make concessions to Albanians on Kosovo, the Serbian government must be able to show that Serbs in Kosovo are safe and those that want to return can. Without this precondition, negotiations cannot proceed. But how can an independent Kosovo be created without violence? Vejvoda believes that it is possible in the current political climate in Serbia, in which Kosovo is largely a non-issue. This has been accomplished by the creation of a rational, de-emotionalized policy on Kosovo by the Serbian government, which does not impinge upon Serbian politics. This could change, of course, if radicals are given a voice in Serbian politics or if violence in Kosovo against Serbs continues. US Undersecretary of State, Mark Grossman's 2005 deadline is fast approaching, and both Serbs and Albanians realize that if they do not find a solution beforehand, one will be imposed on them from outside, which is prompting both sides to increase cooperation.

In the discussion that followed, German Bundestag MP Rainer Stinner presented a proposal that his parliamentary faction had tabled, in which the EU takes a stronger role in the governance of Kosovo by basically taking over the UN mission. This would address the issues of UNMIK's waning credibility, as well as offer a clear indication of the EU's strong commitment to the Western Balkans and bring hope to both the Serbs and Kosovo Albanians that critical issues of minority rights and borders might be resolved within an EU context, which both sides wish to join.

EU and NATO membership for the Balkans

The best chance to break the cycle of hopelessness in the Western Balkans is the prospect of EU enlargement. The EU has been involved in the region since 1995 and enlargement is the major tool in its stabilization policy. But Franz-Lothar Altman, of the SWP and coordinator of the SWP/EES working group, asked important questions about the ability of the EU to follow through with the offer of enlargement. The Thessaloniki summit in 2003 resulted in an announcement that the countries of the Western Balkans are "potential" EU members, which seemed to have the effect of diminishing the credibility of that offer. Other recent developments have also called further enlargement into question, including enlargement fatigue after the most recent wave of enlargement. The enlargement process, in which countries must spend a great deal of time and effort adopting the political and economic criteria along with the 80,000 pages of the acquis communautaire, necessitates a long timeline, which may not appeal to local populations. With the EU itself constantly evolving, enlargement is an attempt by accession countries to capture a moving target.

Nevertheless, EU enlargement is the region's best chance at political and economic transition, and the international community must do all it can to ensure that this process is successful. The largest barriers to accession are in meeting the economic criteria. High budget deficits, trade deficits and low FDI have led to a development impasse. Moreover, competition is further distorted by rampant favoritism and corruption. Even Croatia, which is the clear front-runner in the enlargement process, is still behind the eight new member states from Central and Eastern Europe.

Peter Matthiesen, former officer in the German military, agreed that the prospects for EU enlargement are diminished by the fact that the remaining former Yugoslav countries will be admitted only after Bulgaria and Romania in 2007, and that within the EU only Slovenia has consistently supported further enlargement to the region. NATO enlargement is also an important conditionality tool, and is perhaps stronger than the EU in some countries, since membership in NATO can guarantee the absence of war, and since the US is the strongest player in NATO, the Western Balkans tend to follow its lead. Although both NATO and the EU demand changes in the region, they are doing little to help these countries along. Matthiesen argues that the legal approach taken by the international community (through the SCR 1244 and the Dayton Agreement) has become an excuse for not arriving at a reasonable solution.

EES Director Martin Sletzinger concurred that the international community is withholding needed support and aid to the region. The conditionality tool, he contends, is being misused in Serbia, where the international community is more or less holding the country hostage because it cannot, or will not, deliver one indicted war criminal—Radko Mladic—to the Hague. Without diminishing the importance of bringing war criminals to justice, Sletzinger asked whether the West should base its policy towards Serbia and Montenegro on the fate of one man. He argued for greater flexibility and creative thinking in US policy in Serbia, which remains at the mercy of nationalist groups. Stalling aid and entry into NATO's Partnership for Peace Program indefinitely could play into the hands of these groups, with negative consequences in the future.