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INTERNATIONAL AFFAIRS:

Security Issues:The crisis over the breakup of the Former Yugoslavia dominates Croatia's security concerns. With the military victories of June and August 1995, the primary concern is the status of the last-remaining piece of Serb-occupied Croatian territory. The Erdut Agreement of 12 November 1995 provides for the return of the territory to Croatia, but differing interpretations of the terms of the agreement between Zagreb and the Croatian Serbs have raised questions whether the agreement will hold. Croatia has threatened on several occasions to use force, if necessary, to secure the territory in question. While such an action would not necessarily pull in the Yugoslav (Serbian) Army, the possibility has been enough to generate international pressure to avoid the use of force. A second source of international concern were attacks by Croatian forces in August on remaining ethnic Serb civilians in the Krajina, and subsequent official actions that appeared to block the return of other ethnic Serb refugees to their homes.

With the signing of the Bosnian peace accord in Paris on 14 December 1995, a second major Croatian concern was assuaged. A much less-urgent concern is the Italian attitude toward claims of Italian citizens for property in Croatia lost at the end of World War II.

Relations with Neighboring Countries:

Bosnia-Herzegovina: Relations with Bosnia-Herzegovina have improved substantially since the signing of the Constitution of the Federation of Bosnia-Herzegovina in early 1994 and the end of fighting between Bosnian Croats and the Bosnian Government. Bosnian concern over long-term Croatian intentions remains. Consistent pressure from Zagreb on the Bosnian Croats to implement the Federation Constitution is vital to the success of the Federation.

Hungary: Budapest has been highly supportive of Croatia since before official independence. Cooperation between the two countries has evidently ranged from economic support to assistance in developing the Croatian armed forces.

Slovenia: Coordination of positions on resolving questions left over from the former Yugoslavia is the most difficult point of discussion between Zagreb and Ljubljana. These questions include the right of the current Belgrade authorities to inherit the position of the former Yugoslavia in international organizations, the disposition of property of the former Yugoslavia, and the division of the former Yugoslavias foreign debt. The fate of the nuclear power plant at Krsko in Slovenia has been a point of disagreement between the two countries. Croatia has depended on a portion of the power produced there, and Slovenia is anxious that the plant is unsafe and wishes to close it.

Federal Republic of Yugoslavia (Serbia and Montenegro): In spite of the signature by Presidents Tudjman and Milosevic of the Bosnia accord, relations between the two countries are still difficult. A separate agreement on mutual recognition between the FR Yugoslavia and Croatia, which French officials had hoped would also be signed 14 December 1995, reportedly was delayed by continuing disagreement over how to divide the foreign assets of the former Yugoslavia. The threat of Croatian military action against eastern Slavonia is also a source of some tension, although not critical.

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