October 10, 2003

LORD ASHDOWN'S BALKAN FIEFDOM
UNELECTED AND UNACCOUNTABLE, INTERNATIONAL ADMINISTRATORS RUN BOSNIA LIKE A COLONY

by Srdja Trifkovic

In the last two centuries Balkan states have been manipulated by the powers of "Old Europe" to slow and control the collapse of the Ottoman Empire. They were created, enlarged, and shrunk as the need arose. During the two world wars the territories inhabited by South Slavs were used as bargaining chips for alliance construction, while their ethnic loyalties and aspirations were never taken too seriously.

The war in Bosnia-Herzegovina (1992-1995) confirmed this trend. It was the most destructive segment of the War of Yugoslav Dissolution that began when the republics of Slovenia and Croatia seceded in the summer of 1991. The war's chief outcome was a transformed NATO coupled with the renewal of American influence in Europe to an extent not seen since before the Vietnam War.

International intervention could not alter the underlying centrifugal dynamics of Bosnia's deeply divided communities, however. It was due to foreign involvement that the war took longer than it would have done, and the future of the Serb entity (Republika Srpska, RS) is perhaps more uncertain, but the settlement that followed Dayton is not unlike a plausible compromise that could have been reached in April 1992.

Over the ensuing eight years Bosnia has become the "international community's" first major experiment in nation-building. Its experiences show that international bureaucrats are no more virtuous or high-minded than the old rogues who governed nation-states. Two years ago we reported on the case of Thomas Miller, the former United States ambassador in Sarajevo, who is said to have conspired in the summer of 2000 with Milorad Dodik, then the RS prime minister, to divert $500,000 of an American aid package to the Gore-Lieberman presidential campaign. Our sources said that Miller was behind the scheme "because he is a committed Democrat, just like all other key U.S. officials in Bosnia: Jacques Klein, Ralph Johnson and Robert Berry all rooted for Gore."

The alleged diversion of funds was neither the first nor the last impropriety involving foreign funds in post-Dayton Bosnia. In the summer of 1999, the Office of the High Representative-the U.N. proconsulate in Sarajevo that wields the real power in the hybrid country-confirmed that more than one billion dollars had been lost in postwar Bosnia through tax evasion, customs fraud, or embezzlement of public funds. Much of that money was simply stolen from international aid projects, worth over five billion dollars in 1996-1999 alone. Another form of institutionalized corruption involved international officials who lobby on behalf of companies from their countries. Lower down the scale, foreign bureaucrats-especially those from Eastern Europe and the Third World-were accused of involvement in smuggling of American cigarettes that arrived from Montenegro and were trans-shipped to the EU.

Things have become even worse since Paddy Ashdown, a failed British politician with a life peerage, replaced Petritsch in May 2002. According to a report published last summer by the European Stability Initiative, a prominent German think-tank, Ashdown displays a "bewildering conception of democratic politics" and his exercise of absolute powers in Sarajevo is frustrating the establishment of a democracy. As the Guardian commented on the report last July, "Lord Ashdown intervenes at will in routine economic and political matters in Bosnia." The German study criticized the former leader of Britain's Liberal Democrats for turning Bosnia into "European Raj" and using the methods of the British in India in the 19th century. It warned that the excessive powers vested in the "high representative" discourage local political initiative and reinforce a culture of international dependency. The report singled out Ashdown's alarming authoritarian tendencies: he imposed on average 14 decrees every month, compared with an average of four in 1999. It concluded that there are no checks and balances on his powers and no accountability, whether locally or internationally:
[OHR can] dismiss presidents, prime ministers, judges, and mayors without having to submit its decisions for review. It can veto candidates for ministerial positions without needing publicly to present any evidence. It can impose legislation and create new institutions without having to estimate the cost to Bosnian taxpayers. The HR is not accountable to any elected institution at all.
Such arbitrariness and lack of accountability are not detrimental only to the political life in Bosnia. They are having a negative impact on to the functioning of its economy and to the development of a free market-as a British company, Energy Financing Team (EFT), has learned the hard way over the past nine months.

EFT is an energy trading and investment group that was in the forefront of the development of a regional electricity market in the Balkans and in the refurbishment and expansion of the generation and transmission network in the war-ravaged former Yugoslavia. Since 2000 it has provided the financing that links electric energy producers and users in southeast Europe, and it absorbed risk in an area where the capital markets are still developing. It has been successful in a series of international public tenders to buy surplus power from the Republika Srpska, selling it to the neighboring utilities that have shortages (notably Albania, Montenegro and Croatia). It has also provided financing for the purchase of goods and the completion of civil engineering works in the Bosnian-Serb Republic, receiving repayment in the form of deliveries of energy. The largest of these projects involves the completion of a reservoir tunnel in which EFT has invested almost 30 million dollars.

In theory EFT should deserve praise from Ashdown and his team, because it promotes the establishment of a competitive free market economy. It has single-handedly "monetarized" electric energy in the region. It effectively advances the cause of inter-communal harmony by operating across political and ethnic boundaries, and facilitates economic reintegration of former war zones. With several infrastructure projects in Bosnia it is creating jobs and bringing investment to an area still considered too risky by most other Western companies, thus reducing the need for British, American and other Western taxpayers to continue subsidizing the region indefinitely.

In practice, however, EFT was singled out for criticism by an OHR-approved auditor for its allegedly corrupt practices in obtaining contracts. It appears that the company has become collateral damage in Paddy Ashdown's crusade for a more centralized, more tightly integrated Bosnia-Herzegovina, in which the entities would eventually lose all of the remaining attributes of independent statehood.

Ashdown is known to believe that the leading political groups in the entities-and especially the Serbian Democratic Party in the Republika Srpska-derive their power from the control of three public companies that generate substantial amounts of money: power, telecoms, and forestry. Believing that these sectors exhibit widespread corruption, OHR decided to audit the main state-owned companies running them. In the case of the electricity utilities Ashdown's strategy had as a clear secondary goal the ‘softening up' of opposition to power sector restructuring, i.e. the merging of the Serb, Croat and Muslim utility companies into all-Bosnian conglomerates.

The Special Auditor-an American CPA with prior savings and loan experience and without any known expertise in the energy sector-issued a report into the Bosnian-Serb electric utility company (EPRS) on February 25, 2003. It harshly condemned its operations and management, and in immediate response Ashdown ordered the dismissal of the RS energy minister and of the Director-General of EPRS. The Special Auditor directed some severe criticism at EFT, particularly in regard to its dealings with EPRS. The criticism focused on the alleged dominance of EFT in the tenders and its involvement in the reservoir tunnel project.

The accusations were made without proper investigation, without standard audit practice and test procedures, and without warning. Many claims were made on the basis of hearsay: "we were told" appears more than once in connection with serious allegations. It was full of factual errors, claiming, for example, that EFT's contracts specified certain favorable terms that would apply in the event that EPRS generation capacity was unavailable. The contracts show the opposite: there were no favorable terms but on the contrary EFT was committed to providing emergency energy supplies in case of reduced generating capacity. It is noteworthy that at no time did the Special Auditor contact EFT. Its first warning came when the report began to be comprehensively leaked in Nezavisne Novine newspaper in early 2003.

Once the report became public EFT responded immediately by instructing its London solicitors, Clyde & Co, to produce a detailed 10-page rebuttal of the Auditor's comments and allegations. At a subsequent meeting with Ashdown and his aides it was agreed that EFT would submit a detailed dossier defending its name and reputation. EFT produced this dossier-two inches thick and 270 pages long-in less than a week. In addition, five reports by separate RS commissions that have investigated individual transactions have all concluded that EFT's conduct had been entirely blameless.

Following the presentation of its dossier EFT has sought redress from the Office of the High Representative with the support of the British Foreign Office. It has asked for a statement from OHR and/or OSCE (the Special Auditor's employers) that the company had co-operated fully with the Special Auditor, that it has produced a substantial amount of data and documentation, and that all concerns raised by the report have been fully allayed. Such assurances are essential if EFT is to continue normal operations. The effect of the Auditor's allegations has already harmed its business operations in countries as diverse as Switzerland and Hungary.

More than eight months after the report's publication and five months after the company's detailed dossier was presented to Ashdown, EFT is still waiting for a formal response from the "international community's" proconsular team in Sarajevo. So far it has received only a terse one-sentence written reply from the auditor-a letter saying "We disagree with your response" -that is spectacular in its haughtiness and arrogance. It is currently considering its further options (and I have provided consulting services to EFT in what I believe to be a just and worthy cause). Furthermore, Deputy High Representative Donald Hays, an American diplomat deeply steeped in the Clintonite-Albrightesque mindset, has continued to slander EFT in private communications. As a direct consequence of his efforts the company is now being shunned even by the RS government.

In a normal country, with political, legal and moral checks and balances in operation, this behavior would not be possible. In Lord Ashdown's Balkan fiefdom it is commonplace. The immediate effect of the affair is a major reduction in the generation of electricity in the RS, harming its budget and increasing the price of electricity for neighboring importers. Its long-term consequence will be to make other foreign companies weary of operating in a market where ad-hoc decisions by unelected and unaccountable foreigners can alter the rules of the game literally overnight. Thanks to such behavior by its despotic but by no means benevolent rulers, Bosnia is in shambles: Since the end of the war in 1995, it has received almost $6 billion in reconstruction aid, but the beneficiaries were assorted crooks, international bureaucrats, and foreign contractors. It is now ranked economically behind Albania; in South Eastern Europe, only Moldova is poorer.

This matter deserves urgent attention by Western political leaders and legislators, in view of the fact that their taxpayers have been underwriting Bosnia, Inc. for the past decade. Indulging Messrs Ashdown, Hays and others by allowing them to continue running Bosnia like a feudal fiefdom is not only unnecessary and detrimental to peace and stability in the Balkans, it costs money.

Furthermore, people like Ashdown and Hays directly undermine the war on terror by continuing to support the Islamist side in Bosnia. Both were recently particularly active in giving credence to the Muslim claim that 7,000 of their men were killed at Srebrenica in 1995, and in arranging Bill Clinton's visit to unveil a monument there. That figure has been repeatedly challenged-most recently by the International Strategic Studies Association-as "vastly inflated and unsupported by evidence." ISSA warned that one-sided interventionist policies permitted al-Qaida forces and radical Islamists to take root during the Bosnian war, clouding the future of the region, and addd that the "memorialization" of false numbers in the monument perpetuates regional ethnic hatred and distrust. ISSA President Gregory Copley accused Ambassador Hays of using the power of the Office of the High Representative to force Bosnian Serb elected officials to sign a fraudulent document accepting the official version of events in Srebrenica:
It is significant in that the former US Clinton Administration fought this war unquestioningly supporting only the Croat and Muslim factions and disregarding the historic alliance of the Serbian peoples with the US. Then, after the war, the Clinton Administration failed to follow US tradition in helping to heal the wounds of war, but, rather, perpetuated ethnic divisions and hatreds… Unfortunately, all of the policies and officials put in place in the region by the Clinton Administration remain. The current Bush Administration has neglected the Balkans and has, instead, allowed the Clinton policies to continue, which has meant that divisive politics continue. This, then, requires the ongoing commitment of US peacekeeping forces in both Bosnia.
Copley added that, according to intelligence obtained from Islamist sources, that the monument was intended to become a shrine for radical Islamists in Europe and site for annual pilgrimages. In his words, Hays and Ashdown seek "to vindicate Clinton Administration policies of support for the radical Islamists."

Such behavior by Bosnia's foreign administrators discredits the very term "democracy" by associating it with the voluntaristic whims of a small coterie of arrogant bureaucrats. In the parlance of these new rajahs, "democracy" does not signify broad participation of informed citizens in the business of governance; it denotes the desirable social and political content of ostensibly popular decisions. Accordingly, if the citizens of Bosnia-Herzegovina vote for nationalist political parties-as they did, overwhelmingly, a year ago-such "wrong" outcomes are not seen by Ashdown & Co. as an exercise of democracy but as its violation.

And yet, in spite of Ashdown's efforts, eight years after the Diktat of Dayton the international nation-builders' goal of a "multiethnic" Bosnia remains as elusive and probably as impossible as ever. If the old Yugoslavia was untenable and eventually collapsed under the weight of the supposedly insurmountable differences among its constituent nations, it is still unclear how Bosnia-the Yugoslav microcosm par excellence-can democratically develop and sustain the dynamics of a viable polity. The full implications of this fact will become known when Ashdown becomes a minor footnote in the history of the Balkans, and when the outside powers lose their present interest in upholding the constitutional edifice made in Dayton.

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