Statement of James W. Pardew, Jr.

Principal Deputy Special Adviser to the President and Secretary of State

for Dayton and Kosovo Implementation

U.S. Department of State

March 9, 2000

House Committee on International Relations

Mr. Chairman, I am pleased today to testify on U.S. assistance programs in Southeast Europe, particularly U.S. programs in the former Yugoslavia. I will describe our overall policy as a framework for decisions on U.S. assistance, the goals of our programs, policy successes, and the challenges we face as we go forward.

My colleague, Ambassador Napper, will then brief the committee on specific aspects of our program commitments, followed by Mr. Hamilton, who will address policy aspects of the Stability Pact for Southeast Europe.

The most fundamental interest of the United States in the Balkans -- the one that has required our intensive involvement in the region -- is our interest in regional stability. After all, history has proven that America is not secure without a stable Europe, and Europe is not stable if its southeastern corner is not at peace. The exploitation of ethnic rivalries in this part of Europe sparked World War I and led to three conflicts in the past decade, including the recent crisis in Kosovo. So far, we have successfully contained, then subdued, conflicts in Croatia, Bosnia and Kosovo as the former Yugoslavia broke apart. However, the area remains volatile, and will continue to be so as long as the Milosevic regime is in power in Belgrade.

NATO and its allies have done a superb job of stopping the killing in the Balkans and of establishing secure environments. But military forces are not the key to long-term stability. Democratic governments with viable market economies that are fully integrated into Europe offer the best hope for long-term stability in the Balkans. Our interests are therefore best served by promoting the transition to democratic, self-sustaining government and the vibrant economy and civil society that goes along with it.

Success in achieving long-term stability requires active and robust political and economic development programs supported with sufficient resources to make a difference. In Bosnia and Kosovo in particular, military efforts must be supported by adequate civilian programs that build the type of democratic, stable, self-governing societies that are necessary in the region. Real resources are required, as is a commitment to reform from the people and politicians of the region. However, we have seen repeatedly in the past that not making the necessary investments of time and money can end up being much more costly for everyone.

For fiscal year 2000, our bilateral Support for East European Democracy (SEED) assistance to all of Southeast Europe is $516 million, taken from SEED funds in this fiscal year's regular appropriation. This funding supports all manner of programs, including the economic, political and judicial reform and humanitarian assistance, on both the regional and the bilateral level, required to meet our goals. And we are making progress in many areas. Most recently, we watched with pride as Croatian citizens went to the polls and began a transition to a new, democratic and independent state and worthy partner for Western democracies. These elections and this transformation are the promise of more to come in the region, and we are confident that these events will resonate all over the Balkans.

Before I turn to a more specific discussion of our efforts in the former Yugoslavia, I wish to first raise one crosscutting regional issue that I know is of interest to you and your committee, Mr. Chairman. That issue is the destructive effects that crime and corruption have in the region and the necessity of continued work to fight against them. Corruption and organized crime threaten the stability of the legitimate democratic institutions we are working to establish across the region, and we have, therefore, committed to helping the region's governments deal with these problems. In this context, we have adopted both bilateral and regional approaches.

Bilaterally, we are providing organized crime experts as part of our civilian police contingents in Kosovo and Bosnia. Also in Kosovo, the U.S. and its European allies are engaged in an assessment of organized criminal activity and what is needed to address it. In Bosnia and Albania, we are helping to establish special professional units within the police forces to enforce ethical standards and deter corruption. We expect to undertake a similar effort in Kosovo in the future.

Regionally, the State Department is providing financial assistance to the government of Romania to host a regional conference of central and east European nations on fighting corruption among justice and security officials. The conference, which will be held March 30-31, 2000, in Bucharest, will include presentations on the new Southeast Europe Cooperation Initiative (SECI) center for fighting transnational crime. The SECI Center also will be a mechanism for member countries to share intelligence, identify targets for investigation, and coordinate with INTERPOL and other international law enforcement agencies. We will continue these and any other efforts necessary to fight crime and corruption in Southeast Europe.

Fighting corruption requires parallel efforts of aggressive policing and fundamental reform. Again, long-term success in fighting corruption requires adequate assistance programs for economic, political and judicial reform.

Mr. Chairman, I would like to take a moment to present a brief summary of our goals and accomplishments and the challenges we face in key countries and areas of the former Yugoslavia.

I'll start with Serbia because our efforts there have a great impact on the rest of the region. Our objective is to pressure the Milosevic regime and compel President Milosevic to call early free and fair elections, or otherwise convince him to leave power. There can be no long-term stability in Serbia and indeed in the Balkans as long as Milosevic is in power, and this is why we have focused our assistance efforts on advancing the process of democratization in Serbia.

Working with Congress, we have increased our democratization assistance to Serbia's democratic forces from $11.8 million in fiscal year 1999 to $25 million this year. We are encouraging opposition forces to unify and pool their efforts in upcoming elections, are providing assistance on grass roots democracy training, are moving to establish alternative humanitarian assistance channels, and are going forward with technical assistance for post-Milosevic macroeconomic planning. We are also promoting independent media and encouraging democratically-oriented NGOs, labor unions and youth groups.

We are keeping the pressure on Milosevic and his cronies by working with the European Union (EU) to stiffen financial sanctions and to expand the visa ban list, while reducing the flight ban in parallel to provide relief to the Serb people. Through our leadership on this issue, we have further isolated the Milosevic regime and stimulated international efforts at assisting the Serb opposition, including a EU-U.S.-Serb opposition dialogue.

In Bosnia and Herzegovina, we continue to press for implementation of key elements of the Dayton Peace Accords, including privatization and economic, political, military and judicial reform. The trend in U.S. assistance to Bosnia is downward. Recall that in 1996, the U.S. government gave $232 million in SEED funding for Bosnia and had 20,000 troops stationed there. By contrast, we directed $180 million in SEED funds in support of economic development and reform and democratization in fiscal year 1999, anticipate spending $100 million for these purposes in fiscal year 2000, and our troop levels will be at 4,600 by July of this year.

In addition to ending the war, our successes in Bosnia so far include a single currency, a customs regime, passport, and flag, and joint institutions. Over 600,000 displaced persons and refugees have returned to their homes since the Dayton Accords in 1995, 80,000 of them to areas in which they are part of the ethnic minority. Elections have been held at every level of government, and the Constitutional Court is functioning and has issued significant rulings.

As we look to the future, however, it is clear that many challenges remain for the international community. We can expect resistance to further implementation of the Dayton Peace Agreement from nationalist parties who now see their survival under threat by plans to privatize business and take away the levers of control that they have possessed for so long.

Two variables in the success of our efforts will be political developments in Zagreb and Belgrade. The recent election of a moderate regime in Croatia is generating dramatic reverberations in the Muslim-Croat Federation of Bosnia and Herzegovina. If the new Croatian government is able to carry out its plan of economic and political reform, including fulfillment of its commitment to end support to Bosnian Croat separatists, there will be significant advances in the Federation. In Republika Srpska, however, there is less cause for optimism, as the anti-Dayton influence and activities of President Milosevic continue to destabilize the relatively pro-Dayton government of the coalition led by Prime Minister Dodik. Dayton implementation in Republika Srpska will continue to be slow and difficult until Milosevic is unable to wield power in Bosnia.

In Croatia, our goal is to build upon the significant turning point represented by its recent elections. With the proper encouragement, Croatia can develop into an anchor of stability and an economic engine for the region. As I noted earlier, the first major steps were taken by the Croatian people in the parliamentary and presidential elections earlier this year. The new government itself has taken further steps with its pledges to faithfully implement the Dayton Accords. Concrete steps to implement these commitments will provide a firm basis for NATO to respond to Croatia's request to join the Partnership for Peace. We look forward to working with the Croatian government in its effort to fulfil these commitments.

The real work has just begun and we must engage vigorously with the new government to ensure that refugees return to their homes and that promised and long-overdue legal, commercial and economic reforms are implemented as soon as possible. These reforms may well prove to be painful in the short- and medium-term, which makes our assistance all that much more important. The $35.7 million we are seeking to supplement the $20 million we have already identified for fiscal year 2000 ($15.1 million of fiscal year 2000 funds and $4.9 million of fiscal year 1999 funding) will be used to facilitate these changes and will also demonstrate to Croatia's neighbors the benefits of democratic change.

In Kosovo, our goal is to work with UNMIK and KFOR to stabilize Kosovo and to develop and begin a transition to provisional, democratic institutions. As I have shared with you in previous testimony, we have had many successes in Kosovo. Over 800,000 refugees and internally displaced persons have returned to their homes since the air campaign ended, a UN mission with an exceptionally strong mandate has been established, and no one has been without food or shelter during the critical winter months.

Together with UNMIK, Kosovars have been engaged in a collaborative governing process that builds their self-governing capacity for the first time in more than ten years. The Kosovo Liberation Army has been demilitarized and its members are being integrated into civilian organizations. Elections will be held this year, police are being trained, and a judicial process is being reconstituted. We have begun to redress the deprivations and injustices of more than ten years of mismanagement under a Serb regime. Our programs in Kosovo received $77.2 million in SEED funding in fiscal year 1999, and we anticipate spending $150 million in fiscal year 2000. The President's request for supplemental funding also includes $92.8 million in further SEED support for Kosovo programs.

There is much left to do. Kosovo remains unstable and dangerous. The city of Mitrovica is particularly explosive and we must establish UNMIK and KFOR authority there. Tolerance and acceptance do not happen overnight, and extremists on both sides use every opportunity to promote their agenda and disrupt the efforts of UNMIK and KFOR to establish peace and security. Resources remain a problem, both in terms of personnel and in terms of prompt delivery of pledged contributions. International police are an absolute priority, and major reconstruction programs will be needed this spring to repair heavily damaged housing stock and infrastructure. We are working with our allies, UNMIK and KFOR to meet these challenges.

In Montenegro, our goals are to reduce pressure on President Djukanovic to take unilateral steps toward independence, to keep Montenegro strong enough to resist Belgrade's provocations, and to maintain Montenegro as a model, platform, and stimulus for democratic change in Serbia.

In pursuit of these goals, we have persuaded President Djukanovic to defer plans for a referendum on independence so as to avoid provoking Milosevic to use force in Montenegro. The government of Montenegro is also committed to implementing economic reforms recommended by a technical assistance team that we provided. Other technical assistance programs are focusing on macro-financial policy support, tax administration, budget management, and promoting democratic reforms. We have provided $55 million in total aid in fiscal year 1999, and are committing almost $55 million in fiscal year 2000.

We remain alert, however, to the constant threat of conflict between Serbia and Montenegro, and President Milosevic continues to provoke the Montenegrins. The most recent examples of this provocation are the Yugoslav Army's closure of the Montenegrin-Albanian border and closures of the Podgorica (in December 1999) and Tivat (in February 2000) airports.

The successes I have outlined above represent the culmination of many years of effort by the U.S. and its allies, and breakthroughs such as the one we have seen in Croatia are creating a momentum upon which we must continue to build. As I have said, however, we continue to face new challenges to this momentum every day. This is why the President's supplemental funding request is vital to the achievement of our goals in the region, and why I urge you to support this request.

I would like to interject one last note before turning the floor over to my colleagues. Just as we look to stabilize Southeast Europe through our assistance programs, so too do our European allies, who recognize their unique responsibility to ensure stability in the region. Burdensharing is a commitment that makes sense on many levels. The U.S. cannot and should not stand alone in facing demands for assistance, and in places such as Kosovo, Europe is taking the lead. In fact, the Europeans have pledged $731 million for the stability and revitalization of Kosovo, which amounts to 60% of total pledges for fiscal year 2000. The U.S. share of this spending amounts to 13.9%. On police, European and Canadian pledges account for 40% of the pledged 4,433 personnel; the U.S. pledge accounts for a little over 12%.

From 1991-99, the European Union and its member states reported $10 billion in development assistance to Balkan countries. The U.S. provided about $2.1 billion in development assistance to the same countries during a longer period, from 1990-99. The European Union has also pledged $11.5 billion of support for reform and economic development over the next six years, and member states' contributions should raise that figure significantly. Burdensharing is not just a concept, it is a reality -- one that we and our allies develop and deepen every day.

With your permission, Mr. Chairman, I would now like to turn the floor over to my colleague, Ambassador Larry Napper, to discuss the details of the SEED budget request for 2001 and to describe the President's supplemental request for SEED funding. Thank you.

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