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  BOSNIA AND
HERZEGOVINA


REPUBLICAN REFERENCE

Area (sq.km)
51,129

Population
3,922,205

Capital
Sarajevo

Currency
Convertible Mark 

President 
Zivko Radisic

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Background:
Bosnia and Herzegovina's declaration of sovereignty in October 1991, was followed by a referendum for independence from the former Yugoslavia in February 1992. The Bosnian Serbs - supported by neighboring Serbia - responded with armed resistance aimed at partitioning the republic along ethnic lines and joining Serb-held areas to form a "greater Serbia." In March 1994, Bosniaks and Croats reduced the number of warring factions from three to two by signing an agreement creating a joint Bosniak/Croat Federation of Bosnia and Herzegovina. On 21 November 1995, in Dayton, Ohio, the warring parties signed a peace agreement that brought to a halt the three years of interethnic civil strife (the final agreement was signed in Paris on 14 December 1995). The Dayton Agreement retained Bosnia and Herzegovina's international boundaries and created a joint multi-ethnic and democratic government. This national government is charged with conducting foreign, economic, and fiscal policy. Also recognized was a second tier of government comprised of two entities roughly equal in size: the Bosniak/Croat Federation of Bosnia and Herzegovina and the Bosnian Serb-led Republika Srpska (RS). The Federation and RS governments are charged with overseeing internal functions. In 1995-96, a NATO-led international peacekeeping force (IFOR) of 60,000 troops served in Bosnia to implement and monitor the military aspects of the agreement. IFOR was succeeded by a smaller, NATO-led Stabilization Force (SFOR) whose mission is to deter renewed hostilities. SFOR remains in place at a level of approximately 21,000 troops. 

Update No: 067 - (19/11/02)

The Bosnia-Herzegovina Federation is a tangled affair. It has only been kept together since 1995 by the United Nations mission there, which is due to leave at the end of the year. While UN agencies will remain, its responsibilities for policing will be taken over by the EU.

The Bosnian model
The International High Representative in Bosnia is Paddy Ashdown, former leader of the Liberal Democrats in the UK and no stranger to combat, as a former commando. Such experience, that is of both in-fighting and out-fighting, has undoubtedly helped him to get a grip on the situation.
This is in a country recovering from civil war that was ended by the Dayton Agreement of 1995 after three bitter years that saw 250,000 killed and 200,000 wounded, with two and a half million, 60% of the pre-war population, being displaced. It was a horrendous catastrophe, far worse than anything in Europe since the Second World War, for instance than the Kosovo war. Bosnia became a by-word for endless mayhem and ethnic cleansing.
Now things are different, thanks to an initial 30,000 NATO troops on the ground, now reduced in number, keeping the peace, and a new pacific mood among the survivors of the cataclysm, most of whom do not want to see their country go down that route again.
The Europeans at the time dithered and refrained from action to restrain the Serbs in particular, but the Croats and Muslims too, from an unparalleled series of atrocities and ferocities in post-war Europe. Here was a Rwanda on the EU's doorstep and it did nothing conclusive about it. 
The US eventually did and, thanks to forceful diplomacy by Richard Holbrooke, brought the ghastly saga to a close. The US then handed over the job of keeping the peace and of nation-building to the Europeans.
The model that this has created is being pursued elsewhere, in Kosovo, East Timor and Afghanistan. Tomorrow it could be applied in Iraq. So argues Ashdown.
The formula is the old one of the carrot and the stick, but in a new international context. The international community becomes the key player, extending incentives and displaying disincentives to the obdurate ethnicities resisting the formation of a new nation. The incentives took the form of US$5bn or so in aid and credit over the last seven years; the disincentives the troops on the ground.
A similar combination would doubtless be the regimen for Iraq, if the US pursues its policy of ousting Saddam. A tripartite polity is in question in each case, Bosnia being divided between the Serb Republic and the Croat-Muslim Republic, which has its own religious divide, while that between itself and the Serb Republic is both religious and ethnic. An Iraqi equivalent would appear to call for a Kurdish Republic (already in existence, thanks to US and UK intervention) and a Sunni-Shi-ite Republic allowing for considerable autonomy for its two components and of itself as the dominant entity vis--vis the Kurds (under strong Turkish objection). It would be interesting to hear Ashdown's views on the subject. 

Ashdown's first reflections
He has made an original contribution to the debate on international peace-keeping in an article in the International Herald Tribune on November 5th. While endorsing Bosnia as the model, he recognises the international community has made mistakes in its 'colony.'
It was assumed that democracy was the top priority, leading to numerous structures of power and innumerable elections. There are countless layers of government, with 13 premiers and ministers galore, 57 political parties and perhaps 4,500 politicians. As he says, "the result seven years later is that the people of Bosnia have grown weary of voting. In addition the focus on elections slowed our efforts to tackle organised crime and corruption which have jeopardised the quality of life and scared off foreign investment."
His fundamental conclusion is this: "In hindsight we should have put the establishment of the rule of law first, for everything else depends on it: a functioning economy, a free and fair political system, the development of civil society, public confidence in the police and the courts. We would do well to reflect on this as we formulate our plans for Afghanistan and, perhaps, Iraq."

Advantages of UN role
Ashdown could still point to the fact the UN has helped to restore order establishing a professional police service in each constituent part. In 1995 when the Dayton peace accords were signed there were 430,000 people under arms: today there are 22,000. The foundations for a prosperous democracy are in place. More than one quarter of a million have returned to their homes, but by no means all the refugees. The transfer from the UN to the EU, which already has 9,000 troops there, is a turning-point, but not a disengagement by the international community.
Recent elections on October 5th saw nationalist parties return after being ousted several years ago. But Ashdown does not see this as a sign of failure by the international community's strategy in Bosnia. 
"The vote was a vote against the non-performance of the non-nationalist governing parties, not a vote for nationalism. Two of the three nationalist parties saw their share of the vote decline, and the party that made the greatest gains was a non-nationalist opposition party." But the nationalist party that forged ahead was in the Muslim area.
Ashdown has the powers to sack ministers and judges and has already exercised them, one deputy finance minister and a string of judges, a fact that is bound to restrain extremist tendencies. The record is largely one of success - so far.

Arms sales to Iraq
A NATO-led raid on Orao, a Bosnian Serb aviation firm, has revealed that it was refurbishing Iraqi military aircraft. US Lt-General William Ward, Commander of the NATO-led peacekeeping force in Bosnia demanded action by the Serb Republic's government. In fact its defence minister and chief-of-staff resigned at the scandal.
The astonishing thing is that the aviation firm thought that it could engage in the violation of the UN weapons embargo right under the noses of NATO. For Belarus or Ukraine to sell arms to Iraq is one thing, for Bosnia to do so quite another.

Islamic militants meet in Travnik
An alarming development that shows how there are others prepared to try and hoodwink NATO is that a secret meeting of Islamic militants from more than 50 countries, amounting to more than 150 strong, dared to hold a congress on October 8th in Travnik in the Moslem part of Bosnia-Herzegovina, with the aim of forging a united front against the "American-Zionist aggression." Russian and Yugoslav intelligence sources are claiming that the Islamicists are declaring a jihad against the "European race" - meaning both Americans and Europeans - because it has become "the willing slaves of Jews and Israel." 
"Terrorists acts can now be expected in Europe, with the UK, France, Germany and Belgium as likely targets. Bosnia makes a better base of operations for terrorists than might be thought, especially in the Moslem part of course. The NATO forces have limited powers to interfere in civic affairs on the ground and the terrorists are unlikely to make themselves conspicuous. But it is rather cheeky of them all the same. 

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BANKING

Bosnian Central Bank governor says successor must be Bosnian citizen 


The governor of the Bosnia-Herzegovina Central Bank [CB BiH], Peter Nicholl, has confirmed to the SRNA News Agency on 1st November that he would step down as governor in 10 months and that the new governor, according to the current law, will have to be a citizen of Bosnia-Herzegovina.
According to the Law on the CB BiH, the governor should be a foreigner for the first six years from the date the Dayton Agreement was signed and this period expires on 10th August next year.
"I believe that Bosnia-Herzegovina has potential candidates with good skills for the post of the CB BiH governor and among them are the three current vice-governors," Nicholl said.
Each of the CB BiH vice-governors represents one of the three constituent peoples, Ljubisa Vladisic - Serbs, Kemal Kozaric - Bosniaks and Dragan Kovacevic - Croats...

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ENERGY 

Uncertainty about gas supply from Russia this winter because of unpaid debt

The problem of a debt to the Russian gas exporting company, Gazprom, for the gas used by Bosnia during the 1992-1995]war has not been solved yet although 7 years have passed since the war ended. That is why it is not certain whether those who depend on this source of energy will have their homes heated throughout the winter. The Russian company has demanded the money or at least solid guarantees that the debt will be paid off, while Bosnia has been trying to make arrangements for alternative ways of paying the debt off. 
Mustafa Karahmet reported for BH Radio 1: "From the end of the war up to now, the first cold days usher in Bosnia-Herzegovina the question whether there will be any gas during the winter. Of course, this year is no exception. The Russian supplier of natural gas every now and then threatens that it will stop supplying our country. It can do that as we owe it almost US$105m for the gas we used during the war. At that time we were told that gas was a humanitarian donation as all else that we used. And nobody cared who would pay for it. As it happened, nobody paid for it."
There has been speculation that Bosnia-Herzegovina might have no gas from 1st December. BH Gas director, Huso Hadzidedic, hopes that this will not happen in the end.
Hadzidedic said: "Of course, the Russians have not asked that the debt be paid off by 1 December. They have asked for the issue to be regulated, in other words, to agree on a way in which we shall pay the debt off in the forthcoming time."
The radio reporter added that Bosnia-Herzegovina would like to resolve this issue by the so-called breaking up of the debt. The fact is that Russia has inherited from the USSR the [so-called] clearing debt it owes to the former Yugoslavia. Bosnia-Herzegovina has demanded its part of that debt to the amount of around 200m clearing dollars [which were used in accounts between the USSR and socialist Yugoslavia]. However, the negotiations on this have been halted at Russia's request. Bosnia-Herzegovina Council of Ministers Treasury Minister Anto Domazet said: "The Russians have not given us any indication when the negotiations might resume. The current explanation is that the Russians do not want to negotiate before the Croatian parliament has verified the agreement on succession with the former Yugoslavia."
In the period from 1996 until now all gas supplies have been paid in time. The Russian company said it would be satisfied to have certain guarantees of that the debt would be paid off, the BH Gas director said.
Hadzidedic added: "The Bosnia-Herzegovina Presidency should write a letter, a plea, to have this two issues discussed together and that we do not lose the gas supply in the winter with, of course, guarantees that this problem will be resolved."
Minister Domazet says that proposals on how to settle the debt could be put forward only after the negotiations on the distribution of the [so-called] clearing balance and the ways of its transfer between the successors of the former Yugoslavia and Russia are over.

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FINANCIAL NEWS

IMF envoy meets Bosnian Serb leaders to discuss budget, VAT

Peter Doyle, head of the IMF mission in Bosnia-Herzegovina, met Serb Republic [RS] officials to discuss the budget revision, implementation of the stand-by arrangement and the introduction of value-added tax, Bosnian Serb Television has reported.. 
After meeting Prime Minister Mladen Ivanic and Simeun Vilendacic, the RS minister of finance, Doyle said that they had discussed whether the RS had been fulfilling the obligations taken on with this IMF programme. The estimates regarding the implementation of the RS budget for this year are favourable, Doyle emphasized, adding that much more still needed to be done. 
Simeun Vilendacic, RS minister of finance, emphasized that he expected a favourable IMF assessment with regard to the budget revision and that a great increase in domestic revenues was noticeable, with exceptional efforts towards keeping domestic expenditure at the anticipated level. 
Speaking about value-added tax, Doyle said that its aim was to replace the present trade tax, as well as that it should come into force in Bosnia-Herzegovina in two years' time. 
The head of the IMF mission also talked to Dragan Cavic, the RS vice-president, and Dragan Kalinic, chairman of the republican [RS] parliament. Among other issues, they discussed the problems that arose from the failure to adopt the revision of this year's budget, which is the reason the payment of salaries, pensions and other budgetary obligations has been running late, as well as the projection of budgetary revenues for next year. The IMF representatives particularly emphasized the great progress that the former RS administration had made with regard to many economic and financial challenges and stated that it was necessary that the RS budget for the year 2003 be adopted by the end of November at the latest.

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FOREIGN ECONOMIC RELATIONS

Bosnian company wins Libyan contract worth US$50m 

The Sarajevo-based Energoinvest company has concluded an agreement worth US$50m with a big Libyan investor. The contract refers to the so-called cathode protection in the Great Man-Made River project, the managing director of Energoinvest, Dzemail Vlahovljak, has said, Bosnia-Herzegovin FederationTV has reported. 
He pointed out that this was the single biggest contract in the history of Energoinvest, towards which the company's employees had worked for more than a year. 
The contract will be realized by Energoinvest's electrical engineering department, and the project ought to be completed in two and a half years. Should the Libyans be satisfied with this project, it could be enlarged by 50 per cent, Vlahovljak said.

Swiss in cooperation deal with Bosnia 

The Swiss government has agreed an accord with Bosnia-Herzegovina for technical, economic and humanitarian cooperation, Swissinfo web site has reported. 
The Foreign Ministry said the agreement built on existing partnerships between the two countries and was based on the principles of sustainability and self-reliance in a democratic society. 
Switzerland has been active in Bosnia since 1991 and has earmarked 50m Swiss francs (US$33.6m) over four years in the fields of good governance, health, and environment, as well as the private sector. 
The accord still needs approval by the Bosnian government to take effect.

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