VZCZCXRO7882
RR RUEHAG RUEHDBU RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSL
DE RUEHBW #0841 2461342
ZNY SSSSS ZZH
R 031341Z SEP 09
FM AMEMBASSY BELGRADE
TO RUEHC/SECSTATE WASHDC
INFO EUROPEAN POLITICAL COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHBW/AMEMBASSY BELGRADE
Thursday, 03 September 2009, 13:41
S E C R E T BELGRADE 000841
SIPDIS
AMEMBASSY ANKARA PASS TO AMCONSUL ADANA
AMEMBASSY ASTANA PASS TO USOFFICE ALMATY
AMEMBASSY BERLIN PASS TO AMCONSUL DUSSELDORF
AMEMBASSY BERLIN PASS TO AMCONSUL LEIPZIG
AMEMBASSY BELGRADE PASS TO AMEMBASSY PODGORICA
AMEMBASSY HELSINKI PASS TO AMCONSUL ST PETERSBURG
AMEMBASSY ATHENS PASS TO AMCONSUL THESSALONIKI
AMEMBASSY MOSCOW PASS TO AMCONSUL VLADIVOSTOK
AMEMBASSY MOSCOW PASS TO AMCONSUL YEKATERINBURG
EO 12958 DECL: 2019/09/03
TAGS PGOV, PREL, EINT, MASS, RS, SR
SUBJECT: SERBIA GRAPPLES WITH RUSSIA RELATIONS IN ADVANCE OF MEDVEDEV
VISIT
REF: (A) 08 BELGRADE 98, (B) 08 BELGRADE 1333
CLASSIFIED BY: Jennifer Brush, Charge D’Affaires; REASON: 1.4(B), (D)
Summary
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1. (C) As Serbia seeks to overcome mounting economic difficulties and move forward toward its primary goal of European
Union membership, the government is struggling to strike the right tone in the bilateral relationship with Russia:
President Tadic and his close advisors appear intent on giving the Russians their due without irritating the Europeans,
while others - including Foreign Minister Jeremic - seem to want to use close ties to Russia as a “bargaining chip” with
Europe and the United States (ref A). A planned visit by Russian President Dmitriy Medvedev in October is already
drawing additional attention to a bilateral relationship where warm, friendly rhetoric is often not matched by concrete,
mutually-beneficial cooperation in the political, economic, or security realms. End Summary.
October Medvedev Visit
----------------------
2. (C) The recent announcement that Russian President Dmitriy Medvedev will visit Serbia in October to mark the 65th
anniversary of the liberation of Belgrade during World War II by Soviet forces has focused public attention on the
Serbia-Russia relationship and triggered press headlines heralding the “return to a brotherly embrace” with Russia.
Presidential advisor Aleksandar Knezevic told us on August 20 that the Russians had proposed “grandiose” plans for the
visit (rumored to include a military parade); Knezevic said the presidency would tailor the events to show that Russia
was one of several key partners. With regard to the World War II celebrations in particular, he acknowledged the
challenge of balancing the commemoration of the Soviet role in liberating Belgrade with the role of other Allies in the
broader war effort. Presidential chief of staff Miki Rakic confirmed on August 25 that plans were still in flux and that
the date had not been set, despite widespread press reports that it would be October 20.
3. (SBU) The primary deliverables for the Medvedev visit will reportedly be a $1.4 billion Russian loan for budget
support and infrastructure projects and the creation of a joint venture between Gazpromneft and Srbijagas for the
expansion of the Banatski Dvor underground natural gas storage facility. Russian Ambassador Aleksandr Konuzin has told
the press that the two countries would sign a number of bilateral agreements but declined to reveal the topics. We
expect that the two sides will highlight the visa-free travel arrangement that went into force on June 1, as well as the
existing bilateral Free Trade Agreement.
Political Relations: Balancing the Rhetoric
-------------------------------------------
4. (C) The dilemma that Tadic and his associates in the Presidency face in calibrating the tone and lavishness of the
Medvedev visit is symptomatic of Serbia’s overall bilateral relationship with Russia. They perceive a continued need for
Russia’s UNSC veto and rhetorical support on Kosovo, particularly while the International Court of Justice case is
ongoing. At the same time, this more pragmatic group of policymakers sees that Russia is not always a reliable partner -
such as when the Russian government used Kosovo’s declaration of independence to justify its actions in Abkhazia and
Ossetia. This group also realizes that Russian assistance pales in comparison to the tangible benefits of eventual
European Union membership. They argue - correctly - that the two objectives of EU membership and good relations with
Russia need not be mutually exclusive, pointing to numerous statements by the Russian government that it supports
Serbia’s EU aspirations. Tadic and his closest foreign policy advisors therefore devote most of their energy to European
integration, focusing on Russia only when necessary to maintain balance in outward appearances.
5. (C) Vuk Jeremic and his team at the Foreign Ministry take a different approach, however. They appear unwilling to
fully commit themselves rhetorically or on a policy level to the EU course, and cling to Russia, China, and the
Non-Alignment Movement as counterweights or alternatives to the EU. Following from that logic, they see every positive
interaction with Moscow as a blow to Washington, and even attempted to leverage the Medvedev visit to lobby for a
meeting for FM Jeremic with the Secretary. Political Director Borko Stefanovic’s August 25 description to us of plans
for an elaborate Medvedev visit was emblematic: he and possibly Jeremic would travel to Moscow in advance of the visit
to coordinate messaging; Medvedev would address Parliament, becoming the first head of state to do so; and the
anniversary of the liberation of Belgrade would be used to highlight Serbia’s proud anti-fascist history.
Economic Relations: Skewed to Russia’s Benefit
--------------------------------------------- --
6. (SBU) Russia is Serbia’s second largest trading partner and eighth largest source of investment. Bilateral trade has
grown significantly in recent years, reaching a high of just over $4 billion in 2008; Russian imports account for about
13% of Serbia’s total imports. Numbers have fallen off in 2009 due to the global economic crisis, but the balance has
remained in Russia’s favor due to Serbia’s heavy reliance on energy imports; in the first six months of the year, total
trade was $1.1 billion, with an $830 million trade deficit for Serbia. Nearly 75% of Russian exports to Serbia are
energy-related, with crude oil accounting for 49% and natural gas 25%.
7. (SBU) Since 2000, Russian firms have invested approximately $1 billion in Serbia -- $742 million in cash, and the
rest in obligations for future investments. The 2009 purchase of Serbia’s state petroleum industry, NIS, by Gazpromneft
for $555 million (ref B) accounts for more than half of total Russian investment. Other significant deals include
Lukoil’s 2003 purchase of 80% of petrol distribution company Beopetrol for $187 million and auto parts producer
Autodetal’s troubled 2008 purchase of a 39% stake in bus manufacturer Ikarbus for $10.7 million. Russia’s only
greenfield investment in Serbia to date has been the Bank of Moscow, which began serving corporate and retail clients in
June 2009 with $24 million in founding capital. The Bank of Moscow appears to be focusing on potential energy deals and
acquisition of Serbian state-owned banks.
Security Cooperation: All Talk, (Almost) No Action
--------------------------------------------- ------
8. (SBU) As in the political realm, Serbia’s security relations with Russia are more symbolic than concrete. Minister of
Defense Sutanovac meets periodically with Russian counterparts and organizes photo opportunities with the handful of
Serbian students who attend Russian military institutes each year. The Serbian military still relies heavily on
Soviet-era equipment, including a dwindling fleet of MiGs, and therefore remains dependent on Russia for spare parts,
service, and technical training; the amount Russia charges for this support is a frequent sore point. Serbia’s military
relationship with Russia is largely void of content; there are no joint operational or planning exercises. A recent
Russian-funded demining project at the Nis Airport attracted significant media coverage, despite being modest in scope.
(Comment: In contrast to these relatively limited engagements with Russia, the Serbian military’s ties with the U.S. and
NATO are growing dynamically. In the past year alone, over 60 members of the Serbian military attended U.S. NCO
training, military academies, and war colleges; Serbia is restructuring its military on the Western/NATO model; it
enjoys a dynamic relationship with the Ohio National Guard; and it is upping its involvement in Partnership for Peace,
including hosting the ongoing MEDCEUR disaster response exercise with EUCOM. End Comment.)
9. (S) Russia has not been forthcoming on Serbia’s requests for assistance in locating Hague indictee Ratko Mladic,
presidential advisor Miki Rakic told us on August 25. Rakic said he believed based on Mladic’s profile that the former
Bosnian Serb military commander was likely hiding in Serbia, possibly with assistance from foreign sources. Asking that
the information “remain at this table,” Rakic told us that he had posed a series of questions about specific contacts
between Mladic associates and Russian diplomats, as well as phone calls and trips to Russia by Mladic associates, to FSB
Director Aleksandr Bortnikov in June, to Russian National Security Advisor Nikolay Patrushev in July, and most recently
to Presidential Administration Chief of Staff Vladislav Surkov. If the Russians did not respond before Medvedev’s visit,
Rakic said, Tadic would raise the issue himself.
Comment: This Is Not a Competition
-----------------------------------
10. (C) While the European Union is and should remain Serbia’s ultimate goal, the country is also inextricably linked by
energy dependency, military relationships, and cultural affinity with Russia. The Serbian government’s struggle to find
the proper balance between these two imperatives stems from conflict between policymakers - such as Jeremic -- who see
foreign policy as a zero-sum game, and those who believe in mutually beneficial relationships. We can strengthen the
hand of pragmatic forces in the Serbian government by recognizing in our public statements that Serbia needs to devote
effort to having a healthy, balanced relationship with Russia. We can afford to be magnanimous on this point because we
have the better story to tell: the foreign direct investment statistics and the results of our programs supporting
economic, political, and security reform demonstrate that Serbia benefits far more from cooperation with the United
States and the West than it does from Russian rhetoric. While the Serbian public has not yet fully accepted these facts,
our constant public diplomacy efforts to highlight the results of U.S. engagement are having an impact. We should
continue to let our actions speak louder than our words by engaging with Serbia on issues of mutual interest, avoiding
any direct comparisons with Russia, and flatly rejecting the notion that in the 21st century any country must choose
between East and West. End Comment. BRUSH