Balkans: Stability Pact Goes into History

11 December 2007

After 8 years of operation, the Stability Pact - often referred to as the Marshall Plan for the Balkans - is phasing out.

With the final preparations for the setup of Regional Cooperation Council (RCC), a new body of regional cooperation, due to come to life beginning of 2008, the Stability Pact (SP) for Southeastern Europe (SEE) is getting ready to go into history.

It was created as a �comprehensive conflict prevention initiative� that aimed to put an end to the largely reactive and piecemeal measures of the international community to the trouble in former Yugoslavia. It built on the premise that the region shares a set of common problems and that country by country intervention was not good enough. The issues could only be effectively addressed through a regional approach.

The Stability Pact was not the first endeavor of this kind. The SEECP (South East Europe Cooperation Process), the US promoted SECI (Southeast Europe Cooperative Initiative), the Royamont process launched by the EU which was later transformed into the regional approach for the Balkans, had all preceded it. But the Stability Pact was an attempt to bring this to a higher level. It was called by some �the most complex political venture of the 20th century�. Over 40 countries and international organizations signed the founding document.

The Pact�s beneficiaries comprised the wider Balkans: former Yugoslavia (minus Slovenia plus Albania), Romania, Bulgaria and Moldova (joined later). Serbia entered only after the fall of Milosevic.

Inaugurated only days after the end of the war in Kosovo, it received an unprecedented response in terms of the number of actors that supported it. All the Balkan neighbors, as well as the EU countries; the non-EU G8 countries, US, Russia, Canada and Japan; all the major international organizations.

With so many actors, delicate balances need to be struck. NATO wanted and was expected to get an important role in the area of security (Working Table 3 of the SP) but, according to analysts, because of �the reservation of some EU governments and Russia, which took part in the final drafting of the Stability Pact, the role of NATO was minimized in a way that does not correspond with its actual significance in the region.�

It was originally a German project and a lot of the credit went to Joschka Fischer. According to some analysts it came in handy to offset the criticism of his support to the NATO bombing campaign. In reality, Germany was pushing for the project even before the NATO intervention was decided.

The legacy of the Pact tends to be seen favorably today. But this was not the case several years ago.

Everybody agrees that the Pact didn�t manage to achieve some of the early expectations, such as living up to the myth of the Marshal Plan.

�There was great hope that the international community would be able to generate immediate and massive transfers of assistance that would transform the region overnight. However, when the bulldozers and other heavy construction equipment did not appear, there was a significant letdown and a broad sentiment emerged in the region that the Stability Pact had failed to deliver on its promises�, reads a review of the Pact from that period, done by Stewart Henderson, a NATO diplomat.

Nevertheless, quite a consensus emerged that the Pact was felt as a failure in the early years after its creation precisely because the initial expectations were too high.

A report of the UK House of Lords from that period, assessing aid to the Balkans, concludes that the �Stability Pact was launched in a manner which raised exaggerated expectations of what it might achieve�. In the words of Claire Short, former UK Secretary of International Development, the �grandiose promises made at its inception were a cause for concern because they were seen by many as too ambitious�.

Along the same line goes Chris Patten�s testimony for the same report that �it is unfair to blame those who run the Pact for the gap between the initial rhetoric and what the Pact has usefully been able to do.�

The same assessment still holds today.

�When it was launched in 1999� says Dr. Busek , �some did think it would be a Marshal Plan. It became obvious very soon that neither the international community had the billions to inject in the Balkans, nor did the region have the capacity to effectively absorb such amounts.�

�The line-up of world leaders and rhetoric at the 1999 Sarajevo conference that launched the Pact had raised expectations that the Pact was never able to meet. The result was almost immediate disappointment in the region�, says Gerald Knaus, director of the influential European Stability Initiative (ESI).

�The Stability Pact did not distribute money but was able to convince the actors in the region that what matters, is the political will to reform and to engage in regional co-operation. When there is such a will, the investments arrive. This is precisely what is happening now�, said Dr. Busek.

�We made a thorough evaluation of the Pact in 2001 and our recommendation was that it refocuses on specific issues, including in particular energy cooperation. Some people running the Pact at the time were not happy about our criticism. However, focusing on concrete projects turned out to be a better strategy than promising the moon� said Mr. Knaus.

According to him, this shift has turned the Pact into a success story. �It has produced tangible benefits and deepened regional cooperation, something very visible when one compares the Balkans with other post-conflict regions, from the Southern Caucasus to the Middle East�, adds Mr. Knaus.

A couple of years after the Pact�s formation, when it was very clear that it would not do for the Balkans what the Marshal Plan did for Europe, many no longer saw the reason for its further existence. It nevertheless endured.

The role of a foreign aid supreme failed. However, the Pact reinvented itself, in the words of its coordinator, as an �honest broker�.

After 8 years of streamlining regional cooperation, the Pact goes into history. The new secretary general of the RCC successor was appointed, Mr. Hido Biscevic, state secretary at the Croatian Foreign Ministry. A SEECP summit earlier this year in Zagreb approved the appointment.

The head office of the RCC will be in Sarajevo (which was already called �small Brussels� for the occasion), and the financial contributions of the beneficiary countries to the RCC�s budget were set. They are fairly modest and make up to 1 million euro total per year. The West is expected to top that.

�The bonds of regional co-operation are tightened and the process of integration into Euro-Atlantic structures has advanced considerably. Now it is important to ensure that these achievements are firmly rooted in the region. With the transformation of the Stability Pact into regional ownership this is now taking place�, German Chancellor Angela Merkel told the Zagreb summit in May.

The succession of the Pact into the RCC is widely seen as happening because the region is finally ready to take things into its own hands.

According to Enlargement Commissioner Olli Rehn, who also attended the summit, it is a sign of �maturity of a region that is moving away from the tragedies of the 90s, increasingly pursues co-operation among its countries and follows a European course.�

�Now the reins of regional co-operation are firmly in your hands�, said the Pact�s Special Coordinator Dr. Erhard Busek to the summit.

The most often pointed successes of the Pact are the signing of the CEFTA agreement by the SEE countries in December of 2006, and the creation of a regional energy market, with the signing of the Energy Community Treaty in October 2005, with strong support by the EU. The list of achievements is much longer however, according to the Pact officials. It includes a common approach in fighting organized crime and corruption; exchange of good practices in the area of migration; the forming of the Sava River Commission to manage the economic and environmental issues among four countries of the region; improved cross-border cooperation, and so forth.

Achievement in of itself is the fact of - cooperation, say from the Pact.

�Such a high degree of co-operation between the countries of the region was not even thinkable only a few years ago,� Dr. Busek told the May summit in Zagreb.

It is always tempting when doing evaluations, to be able to quantify. However, likely the Pact�s greatest achievement should be defined not in terms of outputs but � process. In the words of one of its officials, �if you look at [the list of achievements], you may not be able to see finished road projects of a grand scale, but you will certainly see cooperation and coordination of a large number of states.�

It is difficult to say how much funding has the Pact actually disbursed over the years. Different estimates range anywhere between 6 and 20 billion euro. However the Pact never had big budgets to give away; it only had �some� possibility of coordinating and prioritizing goals. So whatever financial amount mentioned, it was essentially �channeled� through the Pact.

But as much a challenge, the Pact�s specific institutional character, in the sense that it was �a pact�, a network, worked also to its advantage. It allowed it to find its way through some of the Balkan entanglements, and not only. For example, it managed to involve Kosovo, with its unresolved status. But it also managed to mediate between entities which do not have much contact with one another, such as the World Bank and NATO.

As of present, the Pacts greatest achievements remain the CEFTA and the Energy Community Treaty. The first one links the Balkans to a huge market of 80 million people; the second, strongly supported by the EU, strives to create and common, liberalized energy market.

The CEFTA was signed in April 2006 in Bucharest by the prime ministers of the Balkan countries. It is to replace the numerous bilateral free trade agreements between the countries of the region, which analysts say, have not been implemented too well, and to boost intra-regional trade as well trade with the EU.

The Energy Community Treaty was signed in October of 2005 in Athens. It is a big step towards creating a common energy market. The energy markets (gas and electricity) should be liberalized for the big consumers starting next year, and for individual consumers in 2015.

Addressing the signing ceremony in Athens Mr. Busek, said that the �Implementation of the treaty will have far-reaching political, economic, and social consequences, among them the development of a stable and efficient energy supply in southeastern Europe, the introduction of market-based regulatory systems and the geo-political importance of securing different supply routes for energy in Europe.�

Nevertheless, both treaties are in their infancy; they are yet to be fully ratified and implemented. Some countries did have objections to the CEFTA, and there are quite some concerns that liberalized energy markets can have serious consequences on the poor countries� economies. Some big energy consumers already said they would be forced to shut down if forced to buy electric power on the market.

Event though perhaps not universally accepted, the CEFTA and the regional energy market remain amongst the Pact�s most visible legacies.

Finally, there are also those who fear that the phase out of the Pact means withdrawal of the international community. This is not so, say Western officials. The RCC steps in, they say, because the region is more ready to take a hold of the wheel.

In the words of Dr. Busek from an older speech, �Regional ownership is a nice phrase, but for the last 200 years it didn�t exist [in the Balkans]. Every decision made [concerning the region] ever since the 20s of the 19th century wad done from outside.�

The RCC is a big step in changing that, Pact people say.

The new phase in regional cooperation opens in February. As the Pact closes, those commemorative stamps issued on the occasion of its launch, might end up being worth while.