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A recent statement from the EU on Trepça is the latest sign
of a renewed EU-US push to force a conclusion to the Kosovo-Serbia
negotiation process to normalise bilateral relations.
The EU's foreign affairs spokesperson, Maja
Kocijančič, recently called for the inclusion of
Trepça in the paused negotiations between Kosovo and Serbia to
normalise their bilateral relations.
The call is the latest sign of renewed and concerted
international pressure on the two governments to reach a
comprehensive agreement.
The success of negotiations will depend on the EU's ability to
provide a credible path towards EU integration for Kosovo and
Serbia.
On 5 February, the EU spokesperson for foreign affairs, Maja
Kocijančič, stated that the Trepça mining and
smelting complex in northern Kosovo should be part of the paused
dialogue between Kosovo and Serbia to normalise their bilateral
relationship. The ownership structure of the Trepça complex, a
producer of lead, zinc and silver, is the subject of specific
dispute between the two governments, which are involved in a
broader ongoing negotiation process. Until now, the Trepça
complex has been left out of the discussions. IHS Markit assesses
that the EU's willingness to focus specifically on this contentious
issue is indicative of a renewed drive by the EU and US to broker a
definitive and comprehensive agreement between Kosovo and
Serbia.
Trepça
Kocijančič's statement on including Trepça in the
negotiation process came in response to Kosovo's parliament
adopting a new statute for Trepça on 31 January. The move,
which aims to restore the mine's operating level from the current
minimum capacity, is the culmination of a legislative process that
began in 2016, when the Kosovan parliament passed a law that placed
80% of the share capital under government ownership (the remaining
20% will be owned by Trepça's employees). The law was opposed
by Serbia, which claims ownership over the complex. During the
1990s, Trepça was directed by individuals loyal to former
Yugoslav president Slobodan Milošević. These parties
arranged loans secured against the mine's future production. This
has provided the basis for the dispute over ownership, with the
Serbian authorities claiming that the bulk of the debt, and
therefore ownership, has been held by commercial banks later
nationalised by Serbia. Kosovo disputes the legality of such
previous arrangements.
Trepça and its untapped mineral reserves are seen by
Kosovo's policymakers as key to the country's economic growth and
development. Unsurprisingly, therefore, Kocijančič's
statement was criticised by Kosovo's Prime Minister Ramush
Haradinaj as "unacceptable" and damaging to the country's
sovereignty. We assess that the willingness of EU officials
specifically to raise the contentious issue of Trepça is
indicative of a renewed EU and wider international effort to reach
a permanent solution that also would need to cover such strategic
assets.
A new push for a Comprehensive Agreement
In mid-2018, there was new impetus to find a permanent
settlement between Kosovo and Serbia through a suggested land swap.
The plan was endorsed by the presidents of Kosovo and Serbia,
Hashim Thaçi and Aleksandar Vučić. The proposal,
however, was met by strong domestic opposition, especially in
Kosovo, where the plan was criticised by Prime Minister Ramush
Haradinaj, and much of the opposition. Negotiations were further
damaged by the imposition of a 100% tax on Serbian goods by the
Kosovan government, in response to Serbia successfully lobbying
against Kosovo's membership in Interpol.
However, on 13 December 2018, Haradinaj published a draft
Comprehensive Agreement between Kosovo and Serbia. The 30-page
document aimed to provide an alternative to the land-swap proposal
advocated by President Thaçi, offering a framework for future
negotiations. The draft document includes some upfront concessions
to Serbia, including granting levers to encourage Kosovan
compliance through scope to take direct legal action at the
Permanent Court of Arbitration if Kosovo fails to honour its
commitments. In exchange, Serbia would be required to recognise
Kosovo's independence. This move contrasts with Haradinaj's
otherwise more hawkish stance towards negotiations with Serbia: he
has maintained, for example, that the 100% customs tariff on
Serbian imports will remain in place until Serbia recognises
Kosovo, despite diplomatic pressure from the EU and the US.
Five days after the publication of the draft Comprehensive
Agreement, US Pesident Donald Trump sent a letter to Thaçi,
emphasising the need for a comprehensive agreement that balances
the interests of both Kosovo and Serbia, and saying that such an
agreement was "within reach". This, in tandem with the upfront
concessions Kosovo appears to be offering to Serbia in the draft
Comprehensive Agreement, suggests that this proposal was likely to
have been drafted in liaison with the US authorities, who retain
significant influence in Kosovo.
Outlook and implications
The publication of a draft Comprehensive Agreement, with the
likely involvement of the US authorities, and the latest EU call
for the inclusion of Trepça in the Kosovo-Serbia dialogue,
appear to be strong indicators of a renewed, concerted US-EU effort
to bring the outstanding dispute between the two countries to an
end. This would require achieving a comprehensive agreement that
covers all the issues currently subject to dispute, including
strategic assets such as Trepça.
The abolition or suspension of the 100% duty on Serbian imports
by Kosovo would be a key indicator that negotiations are about to
recommence. This would in turn be contingent on Kosovo being given
some face-saving concessions in return, given the prior resolute
stance by Prime Minister Haradinaj to uphold the tax. This could,
for example, include new commitments by the Serbian authorities to
implement outstanding agreements previously reached between the two
governments, including those on energy. Another key factor that
will be crucial in coaxing the two countries to reach a compromise
is the ability of the EU to promise a credible pathway to EU
integration. This could be seriously compromised by the potential
European Parliament election, which may well result in a change to
the EU political landscape which indicates significantly reduced
appetite for further EU enlargement. EU statements to accelerate or
delay such integration thus represent an important indicator of the
likelihood of a final deal being reached.
Posted 14 February 2019 by Dijedon Imeri, Senior Analyst, Country Risk, Economics & Country Risk, IHS Markit