[Senate Hearing 116-108]
[From the U.S. Government Publishing Office]


                                                   S. Hrg. 116-108

                   SUCCESSES AND UNFINISHED BUSINESS
                         IN THE WESTERN BALKANS

=======================================================================

                                HEARING

                               BEFORE THE

                      SUBCOMMITTEE ON EUROPE AND 
                     REGIONAL SECURITY COOPERATION

                                 OF THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 23, 2019

                               __________


       Printed for the use of the Committee on Foreign Relations
       
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38-990 PDF                  WASHINGTON : 2020                     
          
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                 COMMITTEE ON FOREIGN RELATIONS        

                JAMES E. RISCH, Idaho, Chairman        
MARCO RUBIO, Florida                 ROBERT MENENDEZ, New Jersey
RON JOHNSON, Wisconsin               BENJAMIN L. CARDIN, Maryland
CORY GARDNER, Colorado               JEANNE SHAHEEN, New Hampshire
MITT ROMNEY, Utah                    CHRISTOPHER A. COONS, Delaware
LINDSEY GRAHAM, South Carolina       TOM UDALL, New Mexico
JOHNNY ISAKSON, Georgia              CHRISTOPHER MURPHY, Connecticut
JOHN BARRASSO, Wyoming               TIM KAINE, Virginia
ROB PORTMAN, Ohio                    EDWARD J. MARKEY, Massachusetts
RAND PAUL, Kentucky                  JEFF MERKLEY, Oregon
TODD, YOUNG, Indiana                 CORY A. BOOKER, New Jersey
TED CRUZ, Texas


              Christopher M. Socha, Staff Director        
            Jessica Lewis, Democratic Staff Director        
                    John Dutton, Chief Clerk        

                   SUBCOMMITTEE ON EUROPE AND        
                 REGIONAL SECURITY COOPERATION        

                RON JOHNSON, Wisconsin, Chairman        
JOHN BARRASSO, Wyoming               JEANNE SHAHEEN, New Hampshire
ROB PORTMAN, Ohio                    CHRISTOPHER MURPHY, Connecticut
RAND PAUL, Kentucky                  BENJAMIN L. CARDIN, Maryland
MITT ROMNEY, Utah                    CHRISTOPHER A. COONS, Delaware

                              (ii)        

  
                            C O N T E N T S

                              ----------                              
                                                                   Page
Johnson, Hon. Ron, U.S. Senator From Wisconsin...................     1
    Prepared statement...........................................     1
Shaheen, Hon. Jeanne, U.S. Senator From New Hampshire............     2
    Prepared statement...........................................     2
Palmer, Matthew A., Deputy Assistant Secretary, Bureau of 
  European and Eurasian Affairs, U.S. Department of State, 
  Washington, DC.................................................     4
    Prepared statement...........................................     6
 Bugajski, Janusz, Senior Fellow, Center for European Policy 
  Analysis (CEPA), Washington, DC................................    23
    Prepared statement...........................................    25
 Ruge, Majda, Fellow, Foreign Policy Institute, Johns Hopkins 
  University, Washington, DC.....................................    29
    Prepared statement...........................................    30

              Additional Material Submitted for the Record

Responses of Deputy Assistant Secretary Matthew A. Palmer to 
  Questions Submitted by Ranking Member Robert Menendez..........    46

                                 (iii)

 
                   SUCCESSES AND UNFINISHED BUSINESS
                         IN THE WESTERN BALKANS

                              ----------                              


                      WEDNESDAY, OCTOBER 23, 2019

                           U.S. Senate,    
                 Subcommittee on Europe and
                     Regional Security Cooperation,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:30 p.m., in 
room SD-419, Dirksen Senate Office Building, Hon. Ron Johnson, 
chairman of the subcommittee, presiding.
    Present: Senators Johnson [presiding], Barrasso, Risch, 
Shaheen, and Murphy.

            OPENING STATEMENT OF HON. RON JOHNSON, 
                  U.S. SENATOR FROM WISCONSIN

    Senator Johnson. Good afternoon. This hearing is called to 
order.
    I want to, first of all, thank the witnesses for taking the 
time for your attendance, for your thoughtful testimony, and 
look forward to hearing your oral testimony and your answers to 
our questions.
    We do have a vote scheduled for 2:45. I spoke with our 
floor manager, and she said she wants it wrapped up by 3:30. 
So, what I will do is, I will just ask that my opening--my 
written opening statement be entered in the record.
    [The prepared statement of Senator Johnson follows:]

               Prepared Statement of Senator Ron Johnson

    Good afternoon and welcome.
    The Senate Foreign Relations Subcommittee on Europe and Regional 
Security Cooperation is meeting today to examine recent developments 
and opportunities for the future in the Western Balkans. We will hear 
from the Administration and a private panel on U.S. interests and 
policy options in the region.
    Yesterday, for the second time in 2 years, I had the honor of 
presiding over the Senate as we voted overwhelmingly to welcome a 
Western Balkans nation into NATO. In 2017, the Senate voted 97-2 to 
approve Montenegro's accession. Yesterday, North Macedonia was welcomed 
into the alliance by a vote of 91-2. These near unanimous decisions 
illustrate the bipartisan consensus on the importance of integrating 
the Western Balkans into the transatlantic community.
    In North Macedonia's case, the path to NATO was paved by courageous 
political leadership in Greece and North Macedonia in signing the 
Prespa agreement, significant economic and political reforms, and 
determined U.S. diplomacy in the region. It was a significant 
achievement and has created a palpable sense of momentum behind 
resolving some of the region's remaining issues--in particular, 
relations between Serbia and Kosovo and political deadlock in Bosnia 
and Herzegovina.
    Over the past several years, I have spent considerable time with 
Serbian and Kosovar leaders and I am optimistic that both sides will 
show the leadership and flexibility to make the hard choices necessary 
to secure a more prosperous future for their people. Earlier this 
month, President Trump signaled his desire to push forward on a 
resolution by naming U.S. Ambassador to Germany Richard Grenell, as his 
special presidential envoy for peace talks between Serbia and Kosovo 
and Deputy Assistant Secretary Matthew Palmer as special representative 
for the Western Balkans. Key pieces are in place, but this opportunity 
will likely disappear if the parties do not pursue it with sufficient 
urgency.
    I urge Kosovo's next government to remove the tariffs imposed last 
year and to treat negotiations with Serbia as one of its highest 
priorities. Both Serbia and Kosovo will need to be flexible if a 
solution is to be found. It is also critical that the EU redouble its 
efforts. France's veto against opening EU accession negotiations with 
North Macedonia and Albania is disappointing and sends the wrong 
message to the region. Normalization of relations between Serbia and 
Kosovo would remove a significant agitant in the region and continue 
its momentum toward transatlantic integration.
    Recent history has shown with remarkable clarity the impact of EU 
and U.S. engagement in the Western Balkans. When countries in the 
region see the EU and NATO as real possibilities, they have been 
willing to implement the difficult political and economic reforms 
required for membership. When the West's attention has faltered, 
reforms have stalled and corruption has re-entrenched. Much is at 
stake. Even a cursory glance at the 20th century shows that stability 
in the Western Balkans should be a high priority. This hearing will 
explore how we can sustain the current positive momentum in the region.

    Senator Johnson. But, I do just want to briefly say that 
the Balkans is an important region. There have been some real 
turmoil that has spring out of that. I got involved, as, 
obviously, a member of the Senate Foreign Relations Committee, 
but particularly with Assistant Secretary Wes Mitchell asking 
me to go there and pay attention. And I think, to a certain 
extent, that is what this hearing is about. And it is 
incredibly important that we, as the United States of America, 
expresses the fact that we believe that is an important region, 
we have to pay attention to it, we want to do everything we can 
for the people of that region to enjoy safety, security, and 
prosperity. It is what everybody around the globe wants. That 
is what we want for them. So, that, from my standpoint, is what 
America represents. It is that kind of leadership, when we 
promote those types of values and we help countries achieve 
what they really are trying to strive to achieve.
    With that, I will turn it over to our Ranking Member, 
Senator Shaheen.

               STATEMENT OF HON. JEANNE SHAHEEN, 
                U.S. SENATOR FROM NEW HAMPSHIRE

    Senator Shaheen. Well, thank you, Mr. Chairman. And thank 
you for holding this hearing on, as you point out, a very 
important region of the world.
    And I will echo all of your comments and submit my full 
statement for the record.
    [The prepared statement of Senator Shaheen follows:]

              Prepared Statement of Senator Jeanne Shaheen

       Thank you, Mr. Chairman, for calling this important 
hearing, and thank you to the three experts we have before us today for 
their work on the Balkans, and for taking the time to discuss a region 
which I truly believe holds great promise.
       As co-chair of the NATO observer group, it gives me 
great pleasure to announce that yesterday, the Senate voted 
overwhelmingly to ratify North Macedonia's entry into NATO as the 
alliance's 30th member.
       I also want to take the opportunity to express my great 
disappointment with the European Council's strategic error in blocking 
the start of accession talks for North Macedonia and Albania.
       With this, the EU has not only failed to recognize 
significant reform efforts in both countries, it has also dealt a heavy 
blow to all reform-oriented governments in the Western Balkans.
       I hope the governments of France, the Netherlands and 
Denmark reconsider their decision--a decision that undermines the 
credibility of the EU and exposes the Balkans to further encroachment 
by Russia and other malign influences.
       The United States played a leading role in brokering 
peace in the Balkans two decades ago, and while it is critical for the 
EU to take the lead on integration, it is likewise important that we 
continue to support the region's efforts toward prosperity, rule of law 
and good governance.
       The most recent evidence of this progress was when the 
leaders of Greece and North Macedonia entered into the Prespa 
Agreement.
       I want to thank Ambassadors Jess Baily and Geoff Pyatt 
for their tremendous diplomatic efforts in helping the two countries 
reach this agreement.
       It demonstrated that conflicts can be resolved through 
diplomacy, and that our countries are all stronger when we are in 
alliance together.
       But, these efforts will only be as successful as Balkan 
leaders will allow them to be.
       Balkan countries must work to protect themselves from 
Russian, Chinese and other malign influence by continuing down the path 
of reform, fighting corruption and creating economic opportunities for 
their people.
       Balkan leaders and citizens, alike, must redouble their 
efforts to prioritize the future and not waste time rehashing the past. 
They must kick-start prosperity and growth by leveraging technology, 
diversifying energy sources, increasing linkages and pulling the region 
firmly together; and they must tackle issues threatening the region 
from within like corruption, criminality and violent religious and 
nationalist extremism.
       I believe that now is the time for the United States to 
reassert its leadership role in the region.
       We must seize the opportunity to help create a 
democratic, secure and prosperous Balkans firmly aligned to the West.
       The issues before us--democracy, rule of law, 
prosperity, and good governance--are not new. We have been working on 
them together for more than two decades. But today, with growing 
challenges to Europe's south and in the East, the Balkans sits in the 
balance.
       I look forward to the testimony of our distinguished 
witnesses and to hearing their perspectives on how the United States 
can best work with the region to meet these challenges.

    Senator Shaheen. But, I do just want to point out that, 
yesterday, the Senate overwhelmingly voted to ratify North 
Macedonia's interest--entry into NATO as the alliance's 30th 
member, and also express my real concern about the effort, to 
date, by France and other countries in Europe to block 
secession--accession into the EU by the Republic of North 
Macedonia and Albania. I think one of the things that is really 
important as we think about the future of this--the Western 
Balkans is that we provide an option for the Balkans to look 
West, not to look back toward Russia and the East, and that, 
whenever we fail in that opportunity, as I think the EU did 
recently, that it sends a very strong message to the Western 
Balkans that they should not continue with the reforms, they 
should not continue to look West and to embrace the values of 
the West.
    So, I just wanted to point that out. That is in my opening 
statement. And I look forward to the hearing.
    Thank you, again, Mr. Chairman.
    Senator Johnson. Thank you, Senator Shaheen. And, by the 
way, completely agree. It is--it really is--the ability to join 
NATO, to join the EU, that is what provides the incentive for 
these countries to enact and pass sometimes very difficult 
reform for those countries, but necessary if they are--they 
need the rule of law to attract to attract Western investment. 
So, I could not agree more. I was actually pretty honored to be 
in the presiding chair both for the accession vote of 
Montenegro and for North Macedonia, so we really welcome them 
to NATO.
    Our first witness is Mr. Matthew Palmer. Mr. Palmer is 
Deputy Assistant Secretary and Special Representative for the 
Western Balkans at the State Department. Mr. Palmer is a career 
member of the U.S. Senior Foreign Service, with over 22 years 
of experience under six U.S. administrations. His previous 
postings include Director for South Central European Affairs, 
Political Counselor at the U.S. Embassy in Belgrade, and Deputy 
Director for Mainland Southeast Asia. Mr. Palmer also served as 
Director for Europe at the National Security Council under 
President George W. Bush. He speaks Serbian, Greek, and 
Japanese.
    Mr. Palmer.

  STATEMENT OF MATTHEW A. PALMER, DEPUTY ASSISTANT SECRETARY, 
  BUREAU OF EUROPEAN AND EURASIAN AFFAIRS, U.S. DEPARTMENT OF 
                     STATE, WASHINGTON, DC

    Mr. Palmer. Mr. Chairman, Ranking Member Shaheen, thank you 
for inviting me to appear before you today to discuss the 
successes and challenges faced by the countries of the Western 
Balkans on their path toward Euro-Atlantic integration.
    I would especially like to thank the members of the Senate 
Foreign Relations Committee for their leadership, for your 
leadership, which paved the way for the Senate's approval of 
North Macedonia's NATO accession protocol. That step is 
critical to demonstrating our ongoing support for the Euro-
Atlantic integration aspirations of North Macedonia and the 
wider region.
    For the past 30 years, the United States has joined our 
European allies and partners in working to fulfill our shared 
vision of a strong and free Europe. Over the last decade, our 
efforts have started to bear fruit, and we are seeing examples 
of progress that bring the region closer to the Euro-Atlantic 
family.
    One has to look no further than at North Macedonia to see 
an example of that progress. Since assuming office in June 
2017, the government of Prime Minister Zoran Zaev has not only 
signed a treaty of friendship, good neighborliness, and 
cooperation with Bulgaria, but also negotiated the historic 
Prespa Agreement with Greece, arguably the most significant 
purely diplomatic achievement in the region since the Dayton 
Peace Accords.
    The Prespa Agreement resolved the longstanding name dispute 
between the two countries and paved the way for North Macedonia 
to become the 30th ally in NATO and eventually to join the 
European Union. It also created a model other leaders in the 
Western Balkans can follow to break through the nationalistic 
and cultural barriers that have held the region back for 
decades.
    With its peaceful, multiethnic society and fast-growing 
economy, Montenegro has emerged as a regional leader. 
Montenegro has consistently punched above its weight in its 
commitment to global security, and joining NATO in 2017 was a 
significant and well-deserved step forward.
    Albania has made tremendous strides in its reform path 
since joining NATO in 2009, implementing unprecedented judicial 
reforms and indicting high-profile criminal suspects.
    Despite these successes, the remaining challenges to Euro-
Atlantic integration and regional stability are considerable. 
We were profoundly disappointed with the failure of EU member 
states to approve opening accession negotiations with North 
Macedonia and Albania last week in Brussels. Although we are 
not members of the European Union, we agree with the European 
Commission's May 29 assessment that both countries have made 
significant reform progress, meeting the European Council's 
conditions and laying a solid foundation to continue reforms 
during the accession process.
    The European Council's inaction undercuts EU credibility in 
the region, risks the continued implementation of the Prespa 
Agreement, demotivates leaders ready to make hard reforms, and 
creates a leadership void that Russia, China, and others would 
be more than happy to fill.
    Secretary Pompeo appointed me to serve as his Special 
Representative for the Western Balkans to help tackle these 
challenges, underscore the U.S. commitment to the region, 
deepen cooperation with our European partners, and make clear 
that there is a path to Euro-Atlantic integration, one that is 
achievable, even if it is difficult.
    One of my top priorities will be to work with President 
Trump's Special Presidential Envoy for Serbia and Kosovo Peace 
Negotiations, Ambassador Richard Grenell, to help the two 
countries reach a comprehensive agreement on normalization.
    We expect that the new government in Kosovo will 
demonstrate its commitment to this shared goal by suspending 
the tariffs imposed on Serbian and Bosnian imports that have 
damaged Kosovo's international standing. Serbia, in turn, must 
cease its campaign to delegitimize Kosovo in the international 
community. This has undermined international law enforcement 
cooperation and soured the atmosphere for compromise.
    In Bosnia, we are supporting efforts to reach agreement on 
a compromise that allows for government formation at all 
levels, as well as its submission of the Annual National 
Program to NATO. We will continue to call out parochial, 
nationalistic, and risk-averse leaders, at both the entity and 
state levels, who do little to help ordinary citizens, while 
cultivating the new generation of political leaders, at the 
cantonal and municipal levels, who have a stake in the future 
of the country and the will to succeed.
    While Montenegro is the frontrunner within the region to 
join the EU, it must stay focused and accelerate efforts to 
implement necessary reforms. This includes strengthening the 
rule of law and media freedom, and tackling organized crime and 
corruption.
    While the United States supports the desire of the people 
and the governments of the Western Balkans for a more secure, 
prosperous, and democratic future, the same cannot be said of 
all the external actors operating in the region. Russia rejects 
the post-Cold War settlement in Europe and is trying to push 
back on it with a variety of tools, overt and covert, in order 
to incite divisions and forestall the region's Euro-Atlantic 
integration. Chinese authorities have been insinuating 
themselves in the region through the ``17+1'' and the Belt and 
Road Initiatives, as well as through their investment in 
strategic industries, including information and physical 
infrastructure, creating new political and economic 
vulnerabilities. To support the countries of the Western 
Balkans, we need to increase our own engagement with the region 
and reenergize our relationships with these important partners.
    But, messaging is not enough. We need to increase our own 
presence and our investment in the region. It is indisputable 
that congressional support has been instrumental in our 
successful partnership with the people and governments of the 
region. Recent visits from congressional delegations to 
Croatia, Kosovo, Montenegro, and Serbia have helped to 
reinforce our shared values and demonstrate our strong support 
for reforms. We hope to see additional visits from Congress in 
the future and ask for your help in supporting U.S. businesses 
as they look for opportunities in the region.
    Mr. Chairman, Ranking Member Shaheen, thank you again for 
the opportunity to meet with you today to discuss our 
relationship with the Western Balkans and our continued 
cooperation in the region. And I look forward to your 
questions.
    [The prepared statement of Mr. Palmer follows:]

                Prepared Statement of Mr. Matthew Palmer

    Mr. Chairman, Ranking Member Shaheen, and members of the Committee, 
thank you for inviting me to appear before you today to discuss the 
current situation in the Western Balkans and the successes and 
challenges faced by the countries there on their path toward Euro-
Atlantic integration. I would especially like to thank the members of 
the Senate Foreign Relations Committee for their leadership, which 
paved the way for the Senate's ratification of North Macedonia's NATO 
Accession Protocol. Continued progress on North Macedonia's NATO 
accession is critical to demonstrating our ongoing support for the 
country's and the region's Euro-Atlantic integration aspirations.
    For the past 30 years, the United States has joined our European 
Allies and partners in working to fulfill our shared vision of a 
``strong and free Europe.'' Over the last decade, many of our efforts 
have started to bear fruit. We are now seeing examples of extraordinary 
progress that bring the region closer to the Euro-Atlantic family.
    One has to look no farther than at North Macedonia to see an 
example of that progress. Within 2 months of assuming office in June 
2017, the government of Prime Minister Zoran Zaev was able to negotiate 
and sign a Treaty of Friendship, Good-neighborliness, and Cooperation 
with Bulgaria that recognizes the already strong ties between the two 
countries and opens the door to even closer cooperation going forward 
in areas as diverse as infrastructure and culture. This agreement 
demonstrated that where there is political will, it is possible for 
differences between neighbors to be resolved peacefully, and it paved 
the way for the historic June 2018 Prespa Agreement between North 
Macedonia and Greece. Arguably the most significant purely diplomatic 
achievement in South-Eastern Europe since the Dayton Peace Accords, the 
Prespa Agreement resolved the long-standing name dispute between the 
two countries and paved the way for North Macedonia to become the 30th 
Ally in NATO and to eventually join the European Union. Under the 
courageous and forward leaning leadership of Prime Minister Zaev and 
former Greek Prime Minister Alexis Tsipras, the Prespa Agreement 
created a model other leaders in the Western Balkans can follow to 
break through the nationalistic and cultural barriers that have held 
the region back for decades.
    With its peaceful multi-ethnic coexistence, growing economy, and 
willingness to work with Kosovo in 2018 to implement the 2015 border 
demarcation agreement between the two countries, Montenegro has emerged 
as a leader and a role model for other countries in the region. It has 
consistently punched above its weight in its commitment to global 
security, and joining NATO in 2017 was a huge and well-deserved step 
forward for the country. This new NATO member has proven to be a 
stalwart ally, putting its troops in harm's way in a number of NATO-led 
missions and making steady progress in fulfilling the Wales 2 percent/
20 percent pledge.
    In 2016, Montenegro thwarted a brazen coup attempt aimed at 
undermining Montenegrin democracy. This coup attempt was only one prong 
of Russia's efforts to destabilize the country; Russia also unleashed a 
pervasive anti-NATO disinformation campaign to thwart Montenegro's NATO 
accession and continues to subject the country to broad-scale hybrid 
attacks on a daily basis. Thanks to our direct cybersecurity 
cooperation with Montenegro, we have been able to develop patches 
against the latest Russian malware that now protect billions of devices 
worldwide. On May 9, a Montenegrin court found two Russian GRU officers 
guilty of attempted terrorism during the 2016 coup attempt, laying bare 
Moscow's blatant attempt to destabilize an independent European 
country. The open and transparent trial represents an important step 
forward for the rule of law and is an example of Montenegro's 
resiliency.
    There are a number of other notable successes throughout the region 
worth mentioning. Our NATO Ally Albania has made tremendous strides on 
its reform path, implementing unprecedented judicial reforms to root 
out endemic corruption. Reforms required the vetting of all 800 judges 
and prosecutors for unexplained wealth, organized-crime ties, and 
competence. Only 43 percent of the 143 jurists vetted so far have 
passed, confirming the old justice system's deep corruption and links 
to organized crime. Albania also established two new judicial oversight 
bodies, the High Judicial Council and High Prosecutorial Council, to 
appoint, govern and discipline judges and prosecutors; a key benchmark 
in justice reform implementation. The country is now on the cusp of 
establishing a new independent special anticorruption prosecution 
office and court (SPAK) and National Bureau of Investigation (NBI), 
whose job it will be to investigate corruption, organized crime, and 
crimes of high officials. And it has taken steps to crack down on 
previously untouchable organized crime bosses, as evidenced by the 
convictions of high profile drug kingpin Klement Balili and notorious 
crime boss Emiljano Shullazi.
    Croatia not only became a NATO Ally in 2009, but also joined the EU 
in 2013. It will be the next country to hold the Presidency of the 
Council of the European Union from January through June of 2020, during 
which time it will host the next major EU summit on the Western Balkans 
in Zagreb. In Bosnia and Herzegovina, the willingness of the three 
presidents to discuss linking government formation with the submission 
of the country's Annual National Program to NATO represents a 
significant step forward and demonstrates that leaders can make 
compromises. These are but a handful of achievements the United States 
has supported over the past decade.
    While it is important to articulate the successes of the region, no 
discussion of the Western Balkans would be complete without addressing 
the many challenges to the stability of the region and impediments on 
the path to Euro-Atlantic integration. We are profoundly disappointed 
with the failure of EU member states to approve opening accession 
negotiations with North Macedonia and Albania last week in Brussels. 
Although we are not members of the EU, we agree with the European 
Commission's May 29 assessment that both countries have made 
significant reform progress, meeting the European Council's conditions 
and laying a solid foundation to continue reforms while opening and 
closing acquis chapters.
    The European Council's inaction last week risks eroding the EU's 
credibility not just in the Western Balkans, but throughout Europe and 
globally. By not explicitly recognizing the achievements made by North 
Macedonia and Albania and continuing to stall their enlargement 
progress, the European Council sends a negative signal to other 
aspirants that the door to Europe is barred. It also weakens arguments 
asserting the utility of enacting difficult reforms and making 
courageous compromises necessary to resolve regional disputes and 
promote peace and democratic development. Finally, it creates a 
leadership void that Russia, China, and others are more than happy to 
fill.
    We remind the EU and its member states of their statements in 
Thessaloniki in 2003 and in Sofia in 2018 that there is a clear 
``European perspective'' for all six Western Balkan aspirants to join 
the EU, based on firm, established criteria. The EU member states 
should clearly outline real and tangible reforms North Macedonia and 
Albania can achieve in the short term that will lead to a more positive 
outcome before the EU-Western Balkans summit in Zagreb in May 2020.
    Secretary Pompeo appointed me to serve as his Special 
Representative for the Western Balkans to underscore the U.S. 
commitment to the region and deepen cooperation with our European 
partners to make clear there is a path to Euro-Atlantic integration 
that is achievable, even if it is difficult. I will focus my efforts on 
anchoring the region to the West, working with governments to advance 
reforms and strengthen them against outside malign influences, as well 
as helping them overcome issues that hold them back from their European 
and Euro-Atlantic aspirations.
    One of our top priorities that has a significant impact on the 
entire region and trans-Atlantic security, is the normalization of 
relations between Serbia and Kosovo. With negotiations at a standstill, 
both countries risk squandering the best chance in a generation to 
normalize relations and move toward a more secure and prosperous 
future. Because of the strategic importance of this issue and the 
historic and limited window of opportunity for Serbia and Kosovo to 
reach a comprehensive agreement, President Trump has also appointed 
U.S. Ambassador to Germany, Richard Grenell as the Special Presidential 
Envoy for Serbia and Kosovo Peace Negotiations. Together, Ambassador 
Grenell and I will work toward helping the parties reach a 
comprehensive agreement on normalization. With enhanced political 
engagement as well as the pursuit of business and commercial 
incentives, we will endeavor to help the parties themselves find a 
locally-owned agreement that is durable, implementable, and increases 
regional stability. By reaching such an agreement, the parties can 
unlock the inherent untapped economic potential that comes with peace 
and integration. It is our hope this more robust approach that 
highlights the economic benefits of progress will help encourage 
Belgrade and Pristina to find a political settlement.
    Our message to leaders in both Belgrade and Pristina is clear: you 
have an opportunity to refocus on your strategic interest by removing 
barriers to negotiations, refraining from engaging in provocative 
actions, and returning to the negotiating table with a spirit of 
flexibility and readiness to compromise. We expect that the new 
government in Kosovo will demonstrate its commitment to these shared 
goals by suspending the tariffs imposed on Serbian and Bosnian imports 
that have damaged Kosovo's international standing. The next government 
should also make a clear and compelling case to the citizens of Kosovo 
about the importance of returning to the Dialogue negotiations.
    Serbia, in turn, must cease its campaign to delegitimize Kosovo in 
the international community. Through its campaign to incentivize 
countries to withdraw recognition of Kosovo and block its membership in 
international organizations such as INTERPOL, Belgrade has undermined 
international law enforcement cooperation and soured the atmosphere for 
compromise. This impedes progress toward an agreement that Serbia needs 
to reach its own strategic goal of integration with Europe. We are 
convinced that President Vucic is ready to negotiate an agreement. Once 
Serbia and Kosovo take these steps, we stand ready to work with him to 
explore options that will help him build support among the Serbian 
people for normalization of relations with Kosovo.
    Turning to Bosnia and Herzegovina, we are supporting efforts to 
reach agreement or a compromise that allows for government formation at 
all levels as well as submission of Bosnia's ANP to NATO. We continue 
to find leadership at both the entity and state levels to be 
disappointing, parochial, nationalistic, and risk-averse, doing little 
to help ordinary citizens. As a new generation of political leaders 
emerge at the cantonal and municipal levels, particularly in the 
Sarajevo Canton, there is reason to be hopeful. We continue to be 
optimistic that Bosnia and Herzegovina can succeed, and as a guarantor 
of the Dayton Peace Accords, we remain committed to the territorial 
integrity and sovereignty of the country.
    While Montenegro is the front runner within the region to join the 
EU, it must accelerate efforts to implement necessary reforms, such as 
strengthening the rule of law and tackling organized crime and 
corruption. We are concerned that Montenegro has backslid on media 
freedom in light of government interference in the public broadcaster's 
management and outstanding unsolved cases of attacks on journalists. We 
encourage the government to do more to demonstrate that Montenegro 
values and protects journalists, including refraining from incendiary 
language that encourages hostility toward journalists and imposing 
meaningful sentences for those who commit attacks on journalist and 
media property.
    The peoples of the Western Balkans and their governments have made 
clear what they want--a more secure, prosperous, and democratic future 
for themselves and the entire the region. The United States fully 
supports these efforts--something we cannot say of all the external 
actors that increasingly see the region as ripe for engagement and 
interference. Some of these actors have very different values and very 
different visions for the future of the region. Russia rejects the 
post-Cold War settlement in Europe and is trying to push back on it 
with a variety of tools, overt and covert, in order to forestall the 
region's Euro-Atlantic integration. It seeks to incite divisions and 
chaos. Chinese authorities have been insinuating themselves in the 
region through their ``17+1'' and ``Belt and Road'' initiatives, as 
well as their investment in strategic industries and information and 
physical infrastructure, creating new political and economic 
vulnerabilities.
    Turkish engagement and influence is present across the Western 
Balkans--primarily focused in Kosovo, Bosnia and Herzegovina (BiH), 
Albania and North Macedonia--and appears to be increasing in scale and 
scope in Montenegro as well. Under President Erdogan, Turkey has 
invested heavily in the region in an effort to expand its political, 
cultural and economic foothold. It has provided development aid, 
invested in major infrastructure projects, and restored mosques. We 
welcome Turkey's engagement when it serves a constructive role in 
helping the countries of the Western Balkans achieve their stated goal 
of Euro-Atlantic integration. Also, given Turkey's historical role in 
the region and deepening economic ties, Turkey's support of the Kosovo-
Serbia Dialogue and Prespa Agreement is particularly important.
    To support the countries of the Western Balkans own stated goals, 
we need to increase our own engagement and investment in the region and 
re-energize partnerships with these important partners. The countries 
of the Western Balkans need to know what they will get--and what they 
stand to lose--from the ``deals'' Moscow and Beijing peddle. But 
messaging is not enough; we need to increase American private sector 
presence and investment in the region. It is indisputable that 
congressional support has been instrumental in our successful 
partnership with the people and the governments of the region. Recent 
visits from congressional delegations to Croatia, Kosovo, Montenegro, 
and Serbia have helped to reinforce our shared values and demonstrate 
our strong support for reforms. We hope to see additional visits from 
Congress in the future and ask for your help in supporting U.S. 
businesses as they look for opportunities in the region.
    Mr. Chairman, Ranking Member Shaheen, and distinguished members of 
this Subcommittee, thank you, again, for the opportunity to meet with 
you today to discuss our relationship with the Western Balkans and I 
look forward to our continued cooperation in the region.
    I look forward to your questions.

    Senator Johnson. Thank you, Mr. Palmer.
    Let me just start out. Let us hone in on Kosovo and Serbia. 
With the new elections in Kosovo, they will be forming that 
government. Can you just, first, give me your assessment of, 
you know, how that has changed the situation? And, again, I--
with means--President Thaci and President Vucic, there is--
those are certainly two leaders that want to do a deal. It is a 
difficult situation. There is no doubt about it. There is 
nothing easy about this. But, what is your assessment of the 
results of the elections in Kosovo?
    Mr. Palmer. Mr. Chairman, these were significant elections 
for Kosovo, watershed elections in many ways. What you are 
looking at is going to be the first post-KLA government in 
Kosovo, the first government that does not include one of the 
parties headed by one of the major figures from the wars in the 
1990s.
    Senator Johnson. So, do you view that as a good sign?
    Mr. Palmer. I view it as an impulse, on the part of the 
people of Kosovo, for change. And it is understandable. There 
is a great degree of frustration on the part of the citizens of 
Kosovo with the situation in which they find themselves, both 
the degree of international isolation, the economic stagnation, 
and the failure of Kosovo's governments to make progress on 
commitments and promises to fight corruption and crime. There 
is certainly a lot of work to do. The LDK, of course, is no 
stranger to government, and, at this point, I think most people 
are assuming that the next government in Kosovo is likely to 
include both the LDK and Vetevendosje. That is the most likely 
outcome to this process of government formation. Vetevendosje 
is an entirely new player in government. They have been around 
for a long time, but this would be the first time that 
Vetevendosje takes a share of power. And they are taking a 
significant share of power. They came in number one in the 
polls. The presumptive Prime Minister is Albin Kurti. I have 
known Mr. Kurti for a long time, but how he is going to behave 
in government, how he is going to deal with the kind of 
responsibility that comes with that sort of office, is unclear 
and uncertain at this point.
    Senator Johnson. According to news reports, he has somewhat 
de-emphasized the dialogue, looking toward longer-term reforms, 
putting those in place first. I mean, does that give you a 
little concern, in terms of his commitment to solving that 
longstanding dispute with Serbia?
    Mr. Palmer. I think that what that reflects is an 
assessment on the part of those who did well in the October 
elections, that what the people are demanding of the next 
government is to focus on domestic issues, on employment, on 
economic growth, on fighting corruption. And I think there is 
truth in that. You will certainly see, when you talk to the 
people in Kosovo, when you look at the poll numbers, when you 
look at what it is that people are writing in the newspapers or 
talking about in the cafes, there is a lot of frustration with 
the domestic scene, and desire for change. And that is all well 
and good. Kosovo is capable of doing multiple things at the 
same time, however. Even as the next government moves on a 
domestic agenda, it is entirely capable of simultaneously 
reengaging in the dialogue with Serbia and working to achieve a 
full normalization agreement with Belgrade that opens up a 
European and Euro-Atlantic future for Kosovo.
    Senator Johnson. So, you are the State Department's Special 
Representative. Ambassador Grenell will be the President's 
Special Envoy Representative. How are you two going to work 
together? And what do you view the U.S. role in helping those 
two sides reach agreement?
    Mr. Palmer. I think we are going to work well and closely 
together, Mr. Chairman. I just spoke with Ambassador Grenell a 
few hours ago. We regularly speak about these issues and 
coordinate our message and the strategy for moving things 
forward. I know that Ambassador Grenell is especially 
interested in identifying commercial business economic 
incentives that can be used to help loosen the lid, grease the 
skids, whatever metaphor you might want to use for progress on 
the political front. And he is engaged already, actively, with 
the parties, with the leadership in Belgrade and Pristina, as 
well as with the business communities, to identify those 
opportunities and push the parties forward in areas where they 
can cooperate and compromise on economic and commercial matters 
that stand to benefit all of their publics. And this is 
something that I think will be enthusiastically received by the 
leadership in--on both sides. This does not obviate the need 
for a political solution, that long-term Kosovo's future as a 
European country can only be secured through an agreement on 
normalization with Belgrade. I think that is broadly understood 
in Kosovo, as well. But, at least at first, I think a focus on 
business and commercial interests can help reframe the issue in 
a more positive way.
    Senator Johnson. My assumption, right or wrong, has always 
been, the public is going to greet any agreement similarly to 
the way the public in Greece and now North Macedonia greeted 
their leaders' agreement: Will not be real popular. So, I have 
always felt the U.S. role really needs to be to provide the 
support, post agreement, to make sure that it works out, that, 
you know, in 6 months, both Serbians and Kosovars are looking 
at that and kind of shrugging their shoulders, ``Why was this 
ever a big deal? This is really working out well.'' You know, 
hopefully, for Kosovo, they get recognized by the U.N. and 
Western investment begins to flow.
    What--one incredibly important economic factor is the power 
plant in Kosovo. Do you have any updates, in terms of the 
financing of that?
    Mr. Palmer. My understanding, Senator, is that the 
financing is still coming together and that the companies that 
are involved remain committed to the project and are looking to 
move it forward. There are a number of obstacles that will need 
to be overcome in order to arrange the financing. The United 
States remains committed to the Kosova e Re project and to 
seeing a new power plant constructed in Kosovo. We think it is 
important, vitally important, that the next government 
demonstrate that it is committed to ensuring the provision of 
basic goods and services to the people of Kosovo, and that 
includes making sure that the lights stay on. This is something 
that we are going to continue to work with the business 
community on, as well as with the next Kosovo Government.
    Senator Johnson. I do not know the exact dollar figures, 
but the savings are so massive in comparison to the cost. You 
know, I think the payback would be pretty short. I--it has 
always puzzled me why that has been difficult to really get the 
financing. I guess my only solution would be, again, just the 
uncertainty, lack of agreement with Serbia, and always concern 
about rule of law.
    Mr. Palmer. I think there are also some particular 
challenges, Mr. Chairman, associated with arranging 
international financing for a coal plant, which has opponents 
that are arguing against the plant, not on the specifics, but 
on the general principles.
    Senator Johnson. Right.
    Thank you.
    Senator Shaheen.
    Senator Shaheen. Well, thank you, Mr. Chairman.
    And, Mr. Palmer, I want to pick up on the Serbia-Kosovo 
question, as well. And you talked about the good working 
relationship that you have with Ambassador Grenell, who has 
been appointed by the President to be a Special Envoy to Serbia 
and Kosovo on their negotiations. Can you talk specifically 
about how you view division of responsibilities with respect to 
dealing with Kosovo and Serbia?
    Mr. Palmer. I would look at it more as a partnership, 
Ranking Member Shaheen, than necessarily a division of 
responsibilities. We share the same goal and objective, which 
is to promote a more cooperative relationship between Belgrade, 
Pristina, restart the dialogue process, get these countries 
moving toward an agreement on full normalization. I do think 
that Ambassador Grenell is going to be pushing the parties to 
move quickly. Right now, they have the attention of the White 
House, they have the full focus of not just the administration, 
but the President and the White House. That is a very useful 
tool, a very useful instrument. That is not forever. And to 
take advantage of that, the parties need to demonstrate that 
they are prepared to move on an expedited basis to actually 
reach some agreements, implement them, and demonstrate that 
they are as committed to reconciliation and normalization as we 
are.
    Senator Shaheen. And so, are there parameters that you and 
Ambassador Grenell have discussed with the State Department and 
the White House with respect to what we would encourage Serbia 
and Kosovo to think about in any negotiated settlement?
    Mr. Palmer. I--Ambassador Grenell and I certainly talked 
about this as a path forward. And I think that he has had some 
initial exploratory conversations in Belgrade and Pristina. We 
are going to continue the dialogue. Ambassador Grenell and I 
will maintain regular communications. And what we are going to 
do is look for opportunities that we can seize and capitalize 
on and take advantage of. Certainly, right now, we are 
handicapped some by the fact that Kosovo does not have a 
government. So, to really engage on some of these difficult 
issues, Kosovo is going to need to form that government, they 
are going to need to identify the compromises that are 
necessary for a working majority to come together in 
Parliament, identify a Prime Minister, split up the ministries 
between the coalition partners, all the things that go into 
that. I think they understand the urgency of this, as well. And 
I am hopeful that they will move quickly to put a government in 
place. Kosovo has traditionally taken quite a long time to do 
this, and we are underscoring for them that time is not on 
their side, and they should move urgently to put the government 
together and find a path back to the dialogue process.
    Senator Shaheen. And so, have we taken a position on land 
swaps as a potential tool in settling the dispute?
    Mr. Palmer. What we would like to see, Senator, is an 
agreement that is durable, one that is locally owned, one that 
is salable in both Serbia and Kosovo. I think it is important 
to underscore that any agreement that is comprehensive, that is 
really full normalization, is multidimensional. There will be a 
security component, there will be a political component, there 
will be an economic and trade component, there will be a 
cultural component, when you look at issues like the status of 
orthodox church properties in Kosovo. As to whether the borders 
may or may not be part of an overall comprehensive settlement, 
that is really up to the parties to decide if that is a viable 
path forward.
    Senator Shaheen. I appreciate that. However, there are 
experts on the Balkans who think that sets a dangerous 
precedent, going forward. So, again, do you have a view on 
that? Is that something that we should encourage or discourage 
as we are talking to the negotiating parties?
    Mr. Palmer. I absolutely understand the Pandora's Box 
argument that many observers in the Balkans have made about, 
you know, ``If you start changing a border here, what about a 
border there? Where do you draw the line?'' I think that is a 
legitimate concern. And if the parties move in the direction of 
discussing these issues, I think that is something that we 
would have to work through and see if, in fact, that was a risk 
that could be appropriately managed.
    I do also believe that the leadership of the parties, who 
are the presumptive government in waiting, have also made clear 
that that is not their preferred path forward. So, rather than 
get too far ahead of the negotiations, what I am focused on 
right now, Senator, and where I am working with Ambassador 
Grenell, is to identify a path back to the dialogue process. 
There is a lot of hoops to jump through and work that needs to 
be done before we even get the parties back into a negotiating 
process. So, I do not want to get too far ahead of the process 
in determining what it is that they can and cannot negotiate 
through this dialogue mechanism.
    Senator Shaheen. So, if there are two of you working on 
behalf of the United States to work with Kosovo and Serbia, 
does that mean that we have a very formal role in that 
dialogue? Or, again, can you describe a little bit more how 
that works? And the reason I ask is because, during the last 
talks, after the war in Kosovo, between Serbia and Kosovo, one 
of the things that I heard from the EU Ambassador, who was very 
engaged in working with Kosovo and Serbia, was that, every day, 
Serbia was being called by Putin or someone on behalf of Russia 
to discourage them from continuing to participate in any 
negotiations. Are we seeing that kind of interference now on 
the part of Russia?
    Mr. Palmer. Well, I--Senator, I do not think Russia needs 
to do that just yet, because there is no dialogue process, and 
there has not been a dialogue process that has been moving 
forward for almost a year now. I think it goes back to last 
November, was the last time they had a dialogue session. In 
order to get back to the table, we need our partners--Kosovo--
to commit to this process, to suspend the tariffs that have 
been an obstacle to the dialogue process, and return to the 
negotiations with Serbia with a dialogue team or a dialogue 
representative that is empowered and flexible and ready to 
compromise and negotiate. At which point I fully expect Russia 
to resume its spoiler role. It is not at all in Russia's 
interests that Serbia and Kosovo are reconciled. It is not in 
Russia's interest that Serbia and Kosovo normalize their 
relationship. The unrecognized status of Kosovo by Serbia is 
the single-greatest source of leverage that Moscow has over 
Belgrade and Serbia's behavior, and they use that leverage 
aggressively.
    So, as this process moves forward, we will be very mindful 
of Russia's role, and particularly Russian efforts to undermine 
the prospects for success.
    Senator Shaheen. So, I am out of time, but can I just 
follow that line of questioning, Mr. Chairman?
    So, what are we doing to prepare for that? And how are we 
urging Kosovo and Serbia to look at any potential negotiations 
and address Russian interference?
    Mr. Palmer. Well, I think what we are doing, among other 
things, Senator, is to have this conversation with both parties 
right now, to try and identify what the challenges are to 
success, and to reinforce, with both Serbia and Kosovo, the 
value of these negotiations. These are EU-led negotiations. It 
is the--the United States does not have a formal role in the 
dialogue process, itself. We are there, we are supportive, we 
are encouraging the parties to reach this agreement, but we 
also want them to be well aware of the value, what is on offer 
for them, why it is important that they secure this agreement 
on normalization. This, frankly, is one of the reasons why the 
decision by the European Council not to extend the offer to 
open accession negotiations with Albania and North Macedonia 
last week was so disheartening, because it sends----
    Senator Shaheen. Absolutely.
    Mr. Palmer.--exactly the wrong message to both Belgrade and 
Pristina. That message is, ``You can do difficult things, you 
can make hard choices, you can compromise, and you can still be 
denied a path forward to Europe.'' And that is a very 
unfortunate message to send, and we are going to work with our 
European partners to change that message in advance of the May 
timeframe that the European Council has identified as the next 
decision point on accession negotiations.
    Senator Shaheen. Thank you.
    I am out of time.
    Senator Johnson. Senator Barrasso.
    Senator Barrasso. Well, thank you very much, Mr. Chairman.
    Appreciate you being here again. It is good to see you.
    The--you know, I recently had the honor to visit our 
Wyoming National Guard troops that are serving in Kosovo. The C 
Company, 1st Battalion, 297th Infantry is stationed in northern 
Kosovo, near the Serbian border. There is the camp up there. I 
had a chance to fly up, helicopter, and visit with them and 
share a meal and thank them for what they are doing for all of 
us. The--they are part of the NATO-led peacekeeping mission to 
promote stability and security in the region. NATO supervised 
the standup and the training of the multiethnic professional 
and civilian-controlled Kosovo Security Force, as you well--you 
are well aware.
    You know, in December 2018, Kosovo passed legislation to 
transition the force into a NATO interoperability military 
posture to support international peacekeeping and contingency 
operations. So, what U.S. security assistance do you think is 
going to be needed as part of this initiative?
    Mr. Palmer. Thank you for that question, Senator.
    Let me also underscore what a fabulous job the Wyoming 
National Guard is doing in Kosovo. They are really, just, 
providing tremendous support for that country in a difficult 
time, and we are grateful for it.
    In terms of what it is that Kosovo is going to need from 
the United States through this process of transition, it will 
be considerable support, Senator, in that we are working with 
the government in Kosovo, we are working with the Kosovo 
Security Force on a plan to help transition that force. That 
plan will play out over the course of a decade. So, this is not 
something that happens over the course of a couple of months or 
even over a couple of years; it is a long-term transition. We 
are looking for a force that is the equivalent of a light 
infantry brigade, one that is equipped largely with defensive 
capabilities, but that is also capable of participating in 
international peacekeeping operations. And they will require 
training and equipment and assistance from the United States 
for quite some time.
    Senator Barrasso. So, those are all the challenges that 
Kosovo is going to face in standing up its own operational 
army. Are there NATO allies that really--that oppose the move 
to an operational army in Kosovo, do you know?
    Mr. Palmer. Yes, Senator. There are a number of NATO allies 
that have expressed profound concern about the decision of--by 
the Kosovo Government to make this transition, concern about 
the transition, itself, and the possibility that the transition 
could heighten tensions with Serbia, concerns, in particular, 
on the part of those members of NATO who are not recognizers of 
Kosovo--Spain, I think, first and foremost among them, that has 
expressed some deep reservations about this. And it has 
complicated Kosovo's relationship with the alliance.
    Senator Barrasso. The--do you know if Kosovo is actively 
recruiting ethnic minorities into the security force?
    Mr. Palmer. Yes, they are, Senator.
    Senator Barrasso. Okay.
    I want to just turn to something that I think Senator 
Johnson briefly mentioned, in terms of energy and power. And 
when I was in Kosovo, I learned that the key--one of the key 
barriers to economic growth in the country is energy security. 
The--Kosovo relies on two aging lignite power plants. I had a 
chance to see one of them while heading up to the northern part 
of the country. About 95 percent of its electricity generation 
is from those two plants. Kosovo has very large lignite 
resources. I had to--I was able to see that, as well, from the 
air. Totally, I think 12-and-a-half-billion tons, which is the 
second largest in Europe, one of the largest in the world. 
Their energy strategy includes building a new 500-megawatt 
modern coal-fired power plant. Despite its previous 
commitments, the World Bank informed Kosovo, in October a year 
ago, that it would not help finance it. And I had to disagree 
with the decision by the World Bank. You know, we should be 
helping, I believe, countries like Kosovo use the abundant 
energy resources that they have that can provide affordable, 
reliable, dependable supplies of energy. So, how has this 
unreliable supply of energy that can be used impacted the 
economic growth and development that we see in Kosovo?
    Mr. Palmer. Well, Senator, it is an excellent question. I 
would argue that it is almost certainly discouraging investment 
in Kosovo from business interests who might otherwise be 
amenable to taking a chance and investing in Kosovo. A couple 
of things that will discourage that kind of business and 
commercial investment. One of them would be the uncertainty of 
the legal environment, the enforceability of contracts, there 
is too much cronyism. These are all issues that need to be 
addressed, and can be addressed, by the next Government of 
Kosovo. But, anything that adds to that uncertainty, including 
something like the uncertainty of the reliability of the energy 
supply, is going to be something that companies are going to 
have to factor into their decision-making on potential 
investment. So, the administration, the U.S. Government, has 
strongly supported the Kosova e Re power plant project. There 
are issues not just with arranging the financing of the plant, 
itself, but there are issues with the environmental standards 
associated with the mine that will be feeding that plant that 
will need to be addressed. And here, there is some 
responsibility on the part of the Kosovo institutions, Kosovo 
ministries, Kosovo government authorities, and things that they 
will need to do in order to pave the way for a successful 
program and project.
    Senator Barrasso. Are there specific requests that the 
Government of Kosovo has asked of us, the United States, 
regarding assistance in their energy sector?
    Mr. Palmer. To work to use our influence to help with the 
IFIs and arranging the financing for the plant. That is 
something that the Government of Kosovo has asked for our 
assistance with. There have been some challenges with this. It 
is especially difficult to secure multinational international 
support for financing a power plant that is a coal-based plant. 
That has been a challenge with the World Bank, as you are 
familiar with, Senator. It has been a problem with the--or a 
challenge with European banks. It is one that we are working to 
overcome, working in partnership with ContourGlobal, an 
American company that is interested in making this investment, 
managing this plant. But, we also need to encourage and put a 
little bit of pressure on the Government of Kosovo to do its 
part to ensure that there are no shortcomings in the project 
that would make it harder to secure that kind of international 
financing.
    Senator Barrasso. Well, thank you very much. And thanks for 
your service.
    Thank you, Mr. Chairman.
    Mr. Palmer. Thank you, Senator.
    Senator Johnson. Thank you, Senator Barrasso.
    I am going to ask you the same question on four different 
countries or regions.
    In your testimony, you talked about Russia and China 
influence into the Western Balkans. I would like you to--I 
would like you to state what you think the overall objective, 
the overall goal of these entities interested in the Balkans, 
and what specifically they are doing.
    But, let us start with Europe, because we talked about the 
Serbia/Kosovo dialogue. You mentioned, correctly, that that is 
basically being led by the EU. Representatives of both Serbia 
and Kosovo have really been asking the U.S. to get more--you 
know, more engaged. So, just in general--and not just with 
Kosovo and Serbia, but talk about the EU's goals and objective 
as it relates to the Western Balkans, and what, specifically, 
they are doing.
    Mr. Palmer. In principle, Mr. Chairman, the goals of the 
European Union collectively, the goals of the individual EU 
member states individually, are the same as those of the United 
States, are the same as those of the countries of the region, 
which is to pursue a reform agenda that will make it possible 
for the countries of the Western Balkans to qualify for 
membership in European and Euro-Atlantic institutions. That 
means, for all the countries of the Western Balkans, membership 
in the European Union, and for all who aspire to it, which 
formally at this point is all except Serbia, membership in the 
North Atlantic Treaty Organization. Progress has been made. 
Montenegro's accession to NATO, Albania's accession to NATO, 
the opening of a clear path for North Macedonia to become the 
30th member of the alliance, that is all well and good. The EU 
path is harder, it is steeper, it is rockier, it is more 
difficult. Montenegro is probably widely considered the 
frontrunner at this point, but it still has a lot of work to 
do, including, in particular, on media freedom. And we have 
been very specific with our Montenegrin friends and partners 
about what it is that we would like to see on that front.
    Europe is challenged on this issue, in that the opening of 
the European path is--requires consensus. And in the meeting 
last week of the European Council, that consensus was not 
there. And here, I think it is important to underscore that the 
vast majority of member states in the European Union supported 
the opening of accession negotiations with both Skopje and 
Tirana, and it was really France, with marginal support from 
the Netherlands, that prevented, that blocked consensus. I 
think it is also important to underscore that the European 
Council did not say no, they did not say, ``We will not open 
negotiations.'' They did not establish new conditions for the 
opening of negotiations. They simply noted that, ``We were 
unable to secure a consensus.'' That is largely, Senator, in 
our view, for reasons that have nothing to do with the 
countries in question. It was not about North Macedonia, it was 
not about Albania. It was about concerns and questions that the 
French, in particular, had about the process of enlargement and 
how the process needed to be changed, reformed, and adapted.
    Senator Johnson. And I would say those are probably 
legitimate concerns, so I am hoping this is a pause, a 
reevaluation, that--and can look forward to future progress.
    Mr. Palmer. We share that hope.
    Senator Johnson. We have--I have limited time. I want to 
talk about Russia. I want to talk about China. I do not know 
that you can do that quickly. But, I also want to talk about 
Turkey. Again, what are their objectives, what are their goals, 
you know, what are their current activities in the Western 
Balkans?
    Mr. Palmer. Sure. In a nutshell, Mr. Chairman, I would 
argue that Russia's primary objective in the Western Balkans is 
to prevent that region from integrating into the European and 
Euro-Atlantic family of nations, to keep the region fractious, 
divided against itself, weak, and dependent on Russian 
political support and on Russian gas, in particular. So, the 
Russian system has an interest in preventing exactly the things 
that we are trying to achieve: the agreement between Serbia and 
Kosovo on normalization; a deal in Bosnia and Herzegovina that 
helps Bosnia and Herzegovina become more functional and that 
opens up a European path for Bosnia and Herzegovina, as well; 
Montenegro's accession to the European Union; North Macedonia's 
accession, as the 30th member of NATO. Russia opposes all of 
this.
    Senator Johnson. Great player, are they not?
    What about China? What about Turkey?
    Mr. Palmer. China, I think, is a relative newcomer to the 
scene. And I am not entirely persuaded, Senator, that China 
thinks about the Balkans in the same way as we do, as a single 
coherent space. The point of entry for China into the region is 
less engagement in the Western Balkans as the Western Balkans 
and more through the ``17+1''. So, the Balkans here is a subset 
of Chinese engagement with Central and Eastern Europe. This is 
the terminus of the One Belt, One Road Initiative. China is 
looking to build influence, make inroads. In part, it is 
commercial interests that China is looking as--to this region 
as an area where they can win contracts and make money. China 
is also looking to build-up political influence, although I 
think there is some uncertainty, maybe even on the part of the 
Chinese themselves, about how they would intend to use that 
influence, other than in a very transactional way, to be able 
to divide Europe against itself and prevent consensus on issues 
that the Chinese would consider central to their own security. 
Here, I am thinking of things like Xinjiang or the South China 
Sea or what is going on in Hong Kong, where influence with a 
number of member states may be sufficient to block consensus on 
a position that China would find at odds with its own 
interests.
    Senator Johnson. Okay. Talk about Turkey.
    Mr. Palmer. Turkey has significant interest in the Western 
Balkans. They look at this, in many ways, as being their 
backyard. They are interested in developing partnerships; in 
particular, with the Federation in Bosnia-Herzegovina, with 
Albania, with Kosovo. They have put a lot of priority, in their 
engagement in the Western Balkans, in identifying individuals 
that they consider affiliated with Gulenist institutions and 
putting pressure on the governments in the Balkans to extradite 
those individuals to Turkey. There is Turkish money that is 
going into religious institutions, madrassas and jamiyahs, that 
is developing long-term relationships. I think Turkey sees the 
Western Balkans as an area where Turkey should be expected to 
play a significant, or even an outsized, role. So, I expect 
Turkish interest in the Balkans to only increase over time.
    Senator Johnson. Chairman Risch.
    The Chairman. I am going to pass, Mr. Chairman.
    Senator Johnson. Okay.
    The Chairman. I just came by to make sure that Mr. Palmer 
had gone home overnight, and came back, instead of staying 
here.
    [Laughter.]
    Senator Johnson. He looks well-rested.
    Mr. Palmer. Thank you for that, Senator. It is very 
considerate.
    Senator Johnson. Senator Shaheen, do you have any further 
questions?
    Senator Shaheen. I do.
    I worked to include language, in the State and Foreign 
Operations appropriations bill, instructing the State 
Department and USAID to define ways in which the U.S. 
Government can help empower youth and be used to promote the 
growth of small- and medium-sized businesses in Bosnia-
Herzegovina. One of the things that has distressed me most 
about the challenges that Bosnia-Herzegovina faces is the 
disaffection of its young people, and their interest in leaving 
the country, and not seeing any future there. So, can you talk 
about any existing programs that might further that goal, and 
what is being done already with the State Department and USAID 
to address some of the economic challenges in Bosnia-
Herzegovina?
    Mr. Palmer. Absolutely, Senator.
    There are a number of programs and projects that we have in 
place looking to promote economic growth, looking to create 
opportunities for young people. I do believe, though, that, 
among the more significant things that we can to do help 
accelerate the creation of opportunities is to support, at the 
political level, privatization of state-owned and parastatal 
institutions. These are inefficient, bloated bureaucracies that 
hold Bosnia-Herzegovina back. We would like to see much more 
effort put into privatizing these--some of these dinosaur 
institutions, creating a little bit of economic dynamism.
    I think it is also important, Senator, to underscore that 
one of the things that you will see in Bosnia-Herzegovina that 
is pretty striking is that you will see young people leaving 
Bosnia-Herzegovina who actually have good jobs and solid 
economic prospects. They are leaving because they feel the 
political climate is not one that lends itself to a positive 
future for them and their children. And even though they have a 
good job and they have an apartment and they have a stable 
economic foundation, they are still looking for opportunities 
to move to Frankfurt or London or New York in order to pursue a 
life that is more predictable and that is more secure. And it 
is this sense of insecurity, as much on the political level as 
it is on the economic level, that is driving people to look for 
alternatives.
    Senator Shaheen. Which I appreciate. I think one analysis 
that I have, personally, is that what we did with the Dayton 
Accords was not just stop the fighting, but we put in place a 
permanent structure that it was going to--was going to make it 
very difficult to get over the ethnic divisions within Bosnia-
Herzegovina, and that that continues to be one of the major 
stumbling blocks to the ability in the country to put together 
a government that offers that long-term stability that the 
people are looking for. So, what are we doing to address the 
current challenges with the governmental structure that exists 
there now? And how are we trying to work to encourage the 
people of the country to take a look at that structure and 
think about how they might do things differently?
    Mr. Palmer. That is an excellent question, Senator.
    I think, really, the only answer that I have for you, 
fundamentally, is incrementally, that we are trying to move 
things along slowly. There have been a couple of efforts over 
the years to do the big-bang reforms in Bosnia-Herzegovina. 
There was the--something called the April Package, another 
thing called the Butmir Process. And both were unsuccessful. 
They were unsuccessful for the fundamental reason that the 
people who are in position, the ones who need to drive the 
reform efforts, by definition are the ones who benefit from the 
current structure. They have done ``pretty well, thank you very 
much,'' by the existing system, and are not invested in the 
kind of change that we would like to see. So, we are trying to 
press for incremental change, incremental progress. Electoral 
reform is one area where there is opportunity to try and move 
things forward. We are, right now, working to promote a 
compromise that would make it possible to form the Council of 
Ministers, effectively the government at the state level, while 
also opening up a path for Bosnia to submit the first ANP to 
NATO. The challenge here, frankly, is Milorad Dodik and Milorad 
Dodik's lack of interest in doing anything that would seem to 
imply a future for Bosnia-Herzegovina within NATO. The ANP 
decision, of course, is not a decision on NATO membership; it 
is an opportunity for Bosnia-Herzegovina to engage with the 
alliance to reform and strengthen the defense and security 
sector of the country. It is one that would add value for the 
people of Bosnia and Herzegovina, in terms of what it is that 
they can get out of their relationship with government. Milorad 
Dodik is more interested in shoring up and securing his 
position in Republika Srpska than he is helping Bosnia and 
Herzegovina. So, we are also looking to identify the next 
generation of leaders, young up-and-comers, at the cantonal 
level or the municipal level, who may be having a better and a 
more modern understanding of the relationship between political 
leaders and those who entrust them with power and 
responsibility. What is happening in Sarajevo Canton is very 
interesting, something that deserves support, civic parties 
rather than ethnic parties that are running the cantonal-level 
government. This is something that is--that merits attention 
and support and a little bit of energy and investment on the 
part of the international community.
    Senator Shaheen. And so, are we doing that?
    Mr. Palmer. Yes, ma'am.
    Senator Shaheen. Just to go back to the issue with Serbia 
and Kosovo briefly. Again, I would just caution that the 
potential for there to be mixed signals and miscommunication if 
there are two people who are working on trying to address the 
potential future of those two countries, I think, is very high. 
And so, I hope you will keep that in mind and, as you are 
working with Ambassador Grenell, that the two of you will look 
at ways that you can ensure that that does not happen.
    Mr. Palmer. Yes, Senator. I agree with that. Absolutely.
    Senator Shaheen. Thank you, Mr. Chairman.
    Senator Johnson. Thank you, Senator Shaheen.
    I guess I would just add, as well, is--you saw there is a 
fair amount of interest. A number of us have made multiple 
trips over there. So, I just spoke with Ambassador Grenell 
yesterday. I can see you two are on the same page, in terms of 
the steps forward. I completely agree with those. And I would 
just make--just ask you to keep us completely informed, and we 
certainly will when we are making trips over there, so that we 
are--as, you know, representatives of the United States, we are 
on the same page. Because I think we do--we do have an 
opportunity, but the window does not stay open forever.
    Mr. Palmer. Absolutely, Senator. And I know you travel to 
the region frequently, and we are grateful for that.
    Senator Johnson. But, again, I want to thank you for, first 
of all, your service, your future service, your time and 
testimony here today.
    And we do have a vote called. So, what I will do right now 
is, we will recess, go take a vote, and then we will reconvene 
with our second panel.
    Mr. Palmer. Thank you, Senator.
    Senator Johnson. Senator Murphy, did you want to ask Mr. 
Palmer some questions before I actually recess?
    Senator Murphy. Yes, if I----
    Senator Johnson. Okay. We are not recessing quite yet, 
then.
    Senator Murphy.--if I could.
    Good to see you. Thank you very much for sticking around 
for another moment.
    I do not know if this has--I am sorry that I am just coming 
in--I do not know if this has been discussed, but one of the 
questions that I had for you was, there has been some question 
as to the personnel authority right now over the region. I do 
not know if this is something that has been discussed as of 
yet. So, you were appointed as Special Representative for the 
Balkans on August 30th while you were still serving as the DAS 
for Southeast Europe. And then, on October 4th, the White House 
appointed Ambassador Rick Grenell as the Special Envoy for 
Serbia and Kosovo. This came as a surprise to the State 
Department and the leaders in the region. Prime Minister Vucic 
gave some fairly candid remarks about his lack of awareness 
regarding Mr. Grenell's appointment. What can you tell us about 
how the responsibilities are going to be divided in the region, 
moving forward? And how does Ambassador Grenell do both jobs at 
once? Being Ambassador to Germany is a pretty significant 
responsibility in and of itself. And I do not know that this 
committee would find it really attractive to have Ambassadors 
to major NATO nations spending half of their time out of 
country working on really complex problems in other regions.
    Mr. Palmer. Sure. No, I appreciate that question, Senator.
    It is not an unfamiliar model. I lived, for a number of 
years, in Cyprus, working at our Embassy there, at which point 
there was a Special Representative for Cyprus, Tom Weston, and 
a Special Presidential Envoy for Cyprus, Al Moses. It was a 
model that worked pretty well.
    What I think you see right now in the Western Balkans, with 
both my appointment by Secretary Pompeo and Ambassador 
Grenell's appointment by the President, is a commitment on the 
part of the administration, a commitment on the part of the 
United States, to raise our profile in the region, to 
demonstrate to the region that we are there and we are 
partnering with them and we are ready to put political capital, 
effort, and energy into helping the countries of the Western 
Balkans move forward.
    I think it is terrific, frankly, that Ambassador Grenell is 
there to work as the President's Special Envoy specific to the 
Serbia-Kosovo dialogue. I think only good things can come of 
that. My mandate is a little bit broader, covers the whole 
region. My focus may be a little bit longer-term. I know that 
Ambassador Grenell is interested in trying to push the parties 
forward, on an urgent basis, to address challenges immediately 
and to identify areas of cooperation that can be put in place 
urgently. And so, I think that his role and my role will 
actually be quite complementary. I look forward to working with 
him. He certainly is someone that can bring the full weight and 
heft of the White House to this problem set. I think that is 
welcome. It is our responsibility to work well and closely 
together, and to coordinate carefully to ensure that we are 
staying on message.
    Senator Murphy. One of the things that Senator Johnson and 
I heard when we were in the region, about a month ago, was--and 
maybe I will speak for myself, here--but, the concern that, for 
the first time, both Pristina and Belgrade were hearing 
different messages from the United States and from Europe. They 
felt that we were simply not coordinated in the way that we 
used to be. And I know some questions were asked earlier about 
land swaps. This is amongst the concerns that they had. Have 
you heard this concern, as well? And what are the steps that 
can be taken to try to make sure that we are delivering a 
similar, if not very well coordinated, message with the 
Europeans on our expectations of the two parties?
    Mr. Palmer. Thank you for that question, Senator.
    I would actually, maybe, frame it in a slightly different 
way. I think that what the region was picking up was not so 
much differences between the United States and Europe, as such, 
but differences amongst member states of the European Union and 
between the organizing institutions of the European Union and 
certain member states. So, I think there was, maybe, different 
messages that were coming from different European capitals to 
Belgrade and Pristina. Some of those messages were more closely 
aligned with the position of the United States than others. The 
relationship between the United States and the European Union's 
External Action Service, Mogherini and her team, who were 
leading the negotiating process, was always very much in 
lockstep. I do know that there were some different messages 
coming out of different capitals in Europe that I think may 
have been fuzzing the message some. And yes, I agree entirely 
that we need to work to ensure coherent messaging from the 
United States, from European institutions headquartered in 
Brussels, and from EU member state capitals.
    Senator Murphy. Yes, I think it is harder to coordinate 
with the European Union on these questions when we have sent an 
Ambassador there who reportedly told the Europeans, upon his 
arrival, that he is there to destroy the European Union. But, I 
appreciate your recognition that this is a challenge we have to 
overcome.
    I think the region gets mixed messages from our 
administration, as well, because, while you have been 
appointed, and somebody who was appointed to layer on top of 
you, the budget that the President has submitted to us is a 
massive disinvestment in the region. It cuts in half the 
funding that we send to Kosovo. It cuts by two-thirds the 
numbers for North Macedonia, similar very big decreases. I 
mean, we have seen the incredible impact that relatively small 
amounts of U.S. aid has on the region. Every time I go, 
Ambassadors tell us the enormous reward and payback we get for 
relatively small sums. But, they also sort of see this 
withdrawal of American interest in the region. We have 
personnel that are committed to the region. I do not doubt you 
are. But, it is really hard for you to carry that message 
effectively when you have Presidential budget after 
Presidential budget that tells the Balkan region they do not 
matter, at least from a funding standpoint.
    Do you believe that U.S. foreign assistance can make a 
difference in the Balkans? And what do you say to the 
representatives there, who, no doubt, complain to you that 
these numbers seem to be perpetually decreasing, at least from 
the President's proposed budget?
    Mr. Palmer. You know, Senator, it is interesting, but no 
Balkan leader has ever complained to me about that. I have 
never gotten a complaint that was based on the trajectory of 
U.S. budget numbers. The complaints I get are about access. 
What they want is people. What they want is time and attention. 
What they want are meetings. What they want are visitors. What 
they want is the appointment of a Special Representative or 
Special Envoy. What they want is to know that they have our 
attention. And I would argue that my appointment by Secretary 
Pompeo, Ambassador Grenell's appointment by the President, is 
part of delivering that message.
    Yes, foreign assistance is a vital tool. We can put it to 
good use. We have put it to good use in the Balkans. And we 
will continue to do so. But, I have never had a Balkan leader 
complain to me about budgets.
    Senator Murphy. You may do different meetings that I do. 
But, I hear, maybe more frequently, from our Embassy staff 
there. I mean, I remember my first visit to Belgrade in which 
then-Ambassador Kirby talked about the incredible impact that 
exchange programs had had. You know, he could point to, you 
know, a cross-section of leadership in Serbia that was 
sympathetic to U.S. asks and concerns, in part because they had 
spent part of their life studying or doing business in the 
United States, thanks to programs that facilitated exchanges. 
And yet, those programs were being largely shut down or 
dramatically pared back. And so, I have heard it from Balkan 
leaders, but I have also, maybe, heard it more often from our 
personnel, who are in charge of representing U.S. interests, 
who see their ability to get our case heard, often connected to 
our ability to run smart programming.
    But, I appreciate your work in the region. Thanks for 
sticking around for my questions.
    Senator Johnson. Thank you, Senator Murphy.
    So, the committee will stay in recess until we reconvene 
after the vote, probably about 15 minutes.
    Mr. Palmer. Thank you, Mr. Chairman. Thank you, Senators.
    [Recess.]
    Senator Johnson. Good afternoon again. Reconvene our 
hearing. And welcome and thank our two witnesses.
    I guess we will start out with Mr. Janusz Bugajski. Mr. 
Bugajski is a Senior Fellow at the Center for European Policy 
Analysis and host of the New Bugajski Hour--I am terrible at 
names, sorry--television show broadcast in the Balkans. 
Previously, he was Director of the New European Democracy 
Program at the Center for Strategic International Studies. He 
has authored 20 books on Europe, Russia, and transatlantic 
relations, and is a columnist for several media outlets.
    Mr. Bugajski.

    STATEMENT OF JANUSZ BUGAJSKI, SENIOR FELLOW, CENTER FOR 
        EUROPEAN POLICY ANALYSIS (CEPA), WASHINGTON, DC

    Mr. Bugajski: Thank you very much, Senator. Chairman 
Johnson, Ranking Member Shaheen, and members of the 
subcommittee, thank you for the opportunity to speak with you 
today about both the successes, but also, more importantly, I 
would say, the unfinished business in the Western Balkans.
    And let me begin by underscoring that the United States 
commands enormous respect throughout the region, not only for 
saving lives during the NATO intervention, but for expanding 
the umbrella of security. We may not fully understand Balkan 
history, but we certainly understand Balkan geography. And, 
without a final resolution of the outstanding regional 
disputes, we give ground to radicals, criminals, and menacing 
foreign influences that can pull the United States into another 
war. It is in America's national and security interests to help 
resolve the remaining Balkan feuds and develop stable and 
cooperative states in the region similar to the Baltics and 
Central Europe.
    My written testimony provides a list of regional successes, 
so I am not going to repeat all of them, except to highlight a 
few: Dayton Accords for Bosnia-Herzegovina, NATO membership for 
Slovenia, Croatia, Albania, Montenegro, and, very soon, for 
North Macedonia; European Union membership for Slovenia and 
Croatia; independence for Kosovo; the Prespa Accords between 
Greece and North Macedonia; and the Brussels Agreement between 
Serbia and Kosovo.
    But, despite significant progress in the past 25 years, the 
region cannot be considered fully secured until at least four 
obstacles are handled. The two main disputes involve Bosnia-
Herzegovina and Serbia-Kosovo. Majda is focusing more on 
Bosnia, so I would only add two words about Bosnia. I would say 
Bosnia is less a multiethnic country than an association of 
three ethnic fiefdoms in which nationalist parties maintain the 
status quo to protect their spoils. It has no effective central 
government. The Serbian entity persistently threatens to 
secede. Croatian nationalists increasingly demand a third 
entity. And Bosniaks are trapped, frustrated, in the middle. 
This precarious status quo cannot be maintained indefinitely, 
especially if economic conditions further deteriorate.
    In the Kosovo-Serbia dispute, I would say that failure to 
reach a bilateral agreement heightens prospects for radicalism 
and regional instability. Hence, I fully agree with the 
appointment of two Special Envoys. I would add, actually, it 
would be good to have another Envoy for Bosnia, but that is a 
side question, for now.
    The revived talks have to be based on two clear principles. 
First, Kosovo's final status was settled over a decade ago, 
when it declared independence, and cannot be revisited without 
sparking chaos and conflict. Second, Serbia and Kosovo need 
cooperative relations to promote their own self-interests in 
moving into key multinational organizations.
    In an ideal scenario, Serbia recognizes Kosovo as an 
independent State, but this seems highly unlikely in the near 
future. One viable strategy, which I outlined in my written 
testimony, is for both sides to undertake a number of important 
steps within a normalization package. I will not go into this 
here, but if you ask me, I can lay out a few of these points.
    The two region-wide problems are EU blockages and Russian 
and Chinese subversion. The EU blockage, has already been 
discussed, as Matt was talking about this earlier. I would say 
that the decision last week at the EU Summit not to allow 
accession talks to begin for North Macedonia and Albania not 
only damages EU credibility, but it can undermine the reform 
programs in these countries, encourage nationalists and 
irredentists, weaken efforts at conflict resolution, and 
provide openings for hostile foreign interference.
    And my last word is on Russia. The Kremlin views the 
Balkans as Europe's weakest flank, where it can undermine 
Western cohesion. Russia promotes local nationalisms to weaken 
support for NATO, the United States, and the EU. It corrupts 
national politicians and businessmen to favor Russian economic 
and geopolitical interests. It fosters energy dependence to 
gain political leverage. It engages in propaganda offensives 
through local media and social networks to undermine Western 
values and institutions. And it pursues numerous inter-societal 
connections that increase Moscow's influence, whether through 
orthodox churches, political parties, or cultural 
organizations.
    The Kremlin benefits from frozen conflicts and frozen 
states. In Bosnia, it encourages the Serbian entity to keep the 
country divided and question its future as a single state. In 
Kosovo, it undermines statehood and raises the specter of 
partition or reabsorption by Serbia. And I believe Moscow will 
seek to derail any new American initiative that generates 
regional stability. It is worth remembering that the only 
successful accords in the region are those where Moscow played 
no role.
    Thank you very much.
    [The prepared statement of Mr. Bugajski follows:]

               Prepared Statement of Mr. Janusz Bugajski

    Chairman Johnson, Ranking Member Shaheen, and members of the U.S. 
Senate Foreign Relations Subcommittee on Europe and Regional Security 
Cooperation, thank you for the opportunity to speak with you today 
about the successes as well as the unfinished business in the Western 
Balkans.
    I will begin with the recent successes and then outline the 
remaining problems. But first a few words why the Western Balkans are 
important for the United States. The United States expended substantial 
diplomatic, political, economic, and military capital in ending the 
wars of Yugoslav succession in the 1990's. Halting these anti-civilian 
wars was not simply a humanitarian mission it was a trans-Atlantic 
security operation. Without American leadership at that critical time, 
NATO would have become redundant through inaction, armed conflicts 
could have spread outside the former Yugoslavia and embroiled several 
neighboring States, and potential hotbeds of political and religious 
radicalism, nurtured by outside powers, would have indefinitely 
undermined European security.
    America commands enormous respect throughout South East Europe not 
only for saving lives but for expanding the umbrella of security. We 
may not fully understand Balkan history, but we certainly understand 
Balkan geography. Without a final resolution of the outstanding 
regional disputes we unwittingly give ground to radicals, criminals, 
and menacing foreign influences, whether Russia's Chekist and military 
intelligence operatives, jihadist terrorists, Chinese economic state 
actors, or international smugglers. An unstable South East Europe will 
reverberate negatively through nearby countries and regions and in the 
worst-case scenario may pull the United States into another future war 
to douse the flames. It is in America's national and security interests 
to help resolve the outstanding feuds in the Western Balkans and 
thereby help develop stable states in a cooperative region similar to 
the Baltics or Central Europe.
                           regional successes
    NATO intervention in the West Balkans in the late 1990's, an 
enduring although reduced Allied military presence until the present 
day, and lasting U.S. and EU diplomatic engagement has led to a long 
list of regional successes.

    1. The Dayton accords (1995) for Bosnia-Herzegovina helped to end 
the war, forged a political agreement between the three major ethno-
national groups, and ensured the recognition of a single state.
    2. NATO membership for Slovenia (2004), Croatia (2009), Albania 
(2009), Montenegro (2017), and North Macedonia (accession due in 2020) 
strengthened the security of each state and deepened bilateral 
relations with other members.
    3. European Union membership for Slovenia (2004) and Croatia (2013) 
ensured substantial economic and structural benefits. EU entry 
underscored that these States had constructed stable democratic systems 
and market economies. Serbia and Montenegro have begun EU accession 
talks, Albania and North Macedonia have EU candidacy status, while 
Bosnia-Herzegovina and Kosova have EU Stabilization and Association 
Agreements.
    4. State independence for Kosova (2008) removed uncertainties over 
its final status, reassured its majority population that had been 
subject to mass murders and expulsions, and led to recognition by all 
but four NATO States as well as 115 countries worldwide. Kosova began 
to make progress toward entry into several international institutions.
    5. The Ohrid Framework Agreement (2001) helped to stabilize the 
country by ensuring greater integration of the Albanian population into 
Macedonia's political system and governing structures at both national 
and local levels.
    6. The Prespa Accords (2018) resolved the name dispute between 
Athens and Skopje, whereby Macedonia agreed to rename itself as North 
Macedonia and Greece no longer blocked its progress toward NATO and EU 
membership.
    7. Regional cooperation has been enhanced through trade agreements, 
greater energy diversification, improved cross-border transportation 
networks, and the settling of several border questions, including 
Slovenia-Croatia, Croatia-Montenegro, Kosova-Montenegro, and North-
Macedonia-Kosova.
    8. The Brussels Agreement (2013) initiated constructive talks 
between Serbia and Kosova and ensured progress in resolving several 
outstanding disputes over property, energy, telecom, and other 
practical issues. Its intent was to more closely integrate the Serbian 
community into Kosova's State institutions and to develop cooperative 
relations between Serbia and Kosova.
    Much of this regional progress has been driven by a consistent U.S. 
policy to bring the entire peninsula under the umbrella of a secure 
Western alliance. It was accomplished through close policy coordination 
with European Union representatives seeking to bring the entire region 
into the EU.
                    unfinished west balkan business
    Despite significant progress in the past 25 years, much of the West 
Balkan region cannot be considered comprehensively secured until 
several obstacles are removed. The lack of resolution compounds the 
region's problems, visible in economic stagnation, official corruption, 
social instability, ethnic tensions, and population outflows. 
International attention needs to focus on the following disputes and 
problem areas:

    1. Dysfunctional Bosnia-Herzegovina: Bosnia-Herzegovina is a 
politically frozen state veering toward renewed ethnic conflict. Dayton 
created a complex administrative structure in which ethnic balancing 
predominates and layers of governmental bureaucracy contributes to 
inefficiency and budgetary burdens. This system has obstructed 
effective decision-making, where ethno-national interests predominate 
over civil-state interests. Bosnia is not a multi-ethnic country but an 
association of ethnic fiefdoms, in which nationalist parties maintain 
the status quo to protect their spoils and patronage networks.
    Bosnia-Herzegovina has no effective central government, the Serbian 
entity persistently threatens to secede, Croatian nationalists 
increasingly demand a third entity, and Bosniaks are trapped frustrated 
in the middle. Bosnian Serb leader Milorad Dodik has threatened to 
torpedo a number of state-wide reforms, including the formation of 
joint armed forces, a state court, and police agency, while questioning 
other competencies transferred from the two entities to state level. In 
this climate of state paralysis, the Serbian entity has steadily moved 
from autonomy toward sovereignty and its leaders, with Moscow's 
financial and political support, has raised the prospect of separation 
and unification with Serbia. This has tempted some Bosnian Croat 
politicians to call for a third entity and the partition of the Bosnian 
Federation. Meanwhile, Bosniak Muslim leaders have warned about a new 
war as they are committed to defending Bosnia's territorial and 
constitutional integrity.
    The precarious status quo cannot be maintained indefinitely 
especially if economic conditions further deteriorate. Economic 
decline, state bankruptcy, and social desperation will further 
exacerbate nationalist radicalization, while ethno-nationalist leaders 
will have fewer resources to offer citizens. This can exacerbate turf 
battles in which a unified government will prove even more difficult to 
forge and the separatist option will become more appealing.
    A durable solution requires more intense involvement by 
international actors, especially by the United States which has 
substantial credibility as an honest broker. The results of such 
mediation would necessitate an overhaul of the constitution to limit or 
eliminate entity vetoes and ethnic voting. Bosnia's ethno-politics has 
stymied the development of state citizenship, programmatic pluralism, 
individual rights, and a competitive democracy. International actors 
who continue to dispense funds to Bosnia must also more effectively 
tackle endemic official corruption, inadequate rule of law, and 
authoritarian tendencies among leaders of all three national groups. 
Politicians seeking a more cohesive state that guarantees equal 
citizenship regardless of ethnicity should no longer be sidelined.

    2. Kosova-Serbia Dispute: The frozen talks between Serbia and 
Kosova need to be revived if both countries are to make any progress 
into international institutions. The persistent failures to reach an 
agreement on bilateral normalization are heightening fears of political 
radicalism and regional instability. And without a more prominent 
American role, the EU looks incapable of making any significant 
progress. Hence, the appointment of two U.S. envoys is an important 
step forward. The revived talks have to be based on two clear 
principles. First, Kosova's final status was settled over a decade ago 
when it declared independence and cannot be revisited without sparking 
chaos and conflict. Second, Serbia and Kosova need cooperative 
bilateral relations to promote their own self-interests in moving into 
key multi-national organizations.
    In an ideal scenario, ``normalization'' would mean Serbia formally 
recognizing Kosova as an independent State and establishing full 
diplomatic relations. This is unlikely to occur any time soon even if 
Serbia would benefit from extensive international support for such a 
constructive initiative. The easier bilateral deals within the 2013 
Brussels Agreement have already been achieved and without tackling the 
more difficult problems Serbia-Kosova relations will come to a 
standstill. The new American envoys may be open to land swaps or the 
exchange of Kosova's northern municipalities containing Serbian 
majorities for Belgrade's recognition of Kosova's statehood. However, 
they are likely to face significant political obstacles, as the new 
government in Prishtina could lose much of its public support if it 
surrenders territory to Belgrade. Similarly, the Serbian government is 
unlikely to yield or exchange any territory in the Presevo valley, 
which contains Albanian majorities, especially with parliamentary 
elections looming in April 2020.
    The one viable strategy is for both sides to undertake a number of 
important steps toward each other that would be part of a 
``normalization package.'' This would entail ending the current 
bilateral negatives and implementing several positives.
    For Prishtina, ending negatives would mean lifting the burdensome 
tariffs on Serbian goods and agreeing not to block visits by Serbian 
officials to northern Kosova if Prishtina is notified in advance. The 
positives can include reaffirming the importance of Serbian Orthodox 
religious sites and even providing them with a special status as 
internationally protected shrines. It can also mean implementing the 
agreement on the Association of Serbian Municipalities, while making 
sure this structure has no centralized executive functions that would 
promote territorial autonomy and paralyze the State. Bosnia-Herzegovina 
must not be replicated.
    For Serbia, ending negatives would entail unblocking opposition to 
Kosova's entry into international institutions such as Interpol, 
UNESCO, or the Council of Europe. It can also cease pursuing Kosova's 
de-recognition by foreign governments susceptible to bribery. The most 
important positive, short of outright recognition, would be for Serbia 
to drop its objections to Kosova gaining a seat in the United Nations 
General Assembly. This step could help convince the five remaining EU 
states to recognize Kosova. It would also demonstrate Serbia's 
independence from Russia, which uses its blocking tactics in the U.N. 
as leverage over Belgrade. Simultaneously, Prishtina can play a 
positive role by declaring that the progress made in the 
``normalization package'' should certify Serbia's compliance with 
Chapter 35 in its EU accession agenda. This display of bilateral 
goodwill grounded in self-interest would hasten Belgrade's progress 
toward meeting the criteria for EU entry.
    Washington must be closely involved throughout the normalization 
process and the appointment of two special envoys, Ambassador Richard 
Grenell for the Kosovo-Serbia dialogue, and Matt Palmer, Deputy 
Assistant Secretary of State, for the broader region, indicates that 
Washington seeks new momentum to normalize relations between the two 
states. Given the standstill over the past year, it is doubtful that 
Belgrade and Prishtina would hammer out an agreement without renewed 
American involvement.

    3. EU Blockage: EU accession remains an ambition in much of the 
region because of the benefits that this provides new members, 
including accession funds and investments. Although several countries 
are candidates for the Union, progress has been stalled because the EU 
is preoccupied with internal problems. The EU summit in Brussels on 
October 18, 2019 failed to announce the start of accession talks for 
North Macedonia and Albania. This is despite the fact that the European 
Commission declared in May 2019 that both countries had made sufficient 
progress in their reforms as EU ``candidate states.'' Such decisions 
have several negative repercussions. They damage EU credibility; 
disillusion citizens; nurture the notion that the EU is complicit in 
upholding corrupt governments in exchange for a measure of stability; 
contribute to domestic political polarization; undermine state reform 
programs; encourage nationalists, populists, separatists, and 
irredentists; and provide more openings to hostile foreign 
interference. Paradoxically, a negative decision on accession talks and 
further enlargement will ultimately rebound negatively on the security 
of the European Union itself.

    4. Russia's and China's Subversion: The Balkan peninsula remains 
NATO's internal frontier where Moscow can challenge U.S. and European 
interests and project its Eurasian agenda. The Kremlin views the 
Western Balkans as Europe's weakest flank and a subversion zone where 
competition with NATO and the U.S. can be increased, latent conflicts 
manipulated, potential new allies found, and economic opportunities 
exploited. Russia pursues five main inroads in the region:
    First, it promotes local nationalisms to undermine support for 
NATO, the U.S., and the EU and stir conflicts between rival nationalist 
projects. Second, it corrupts national politicians and local 
businessmen to favor Russian economic interests, support Moscow's 
foreign agenda, and oppose Western policies such as sanctions against 
Russia for its invasion of Ukraine. Third, it fosters energy dependence 
by tying Balkan countries into Russian supplies and pipelines in order 
to gain political leverage. Fourth, it engages in propaganda offensives 
through local media, internet, and social networks to enhance Russia's 
stature and undermine Western values and institutions. And fifth, it 
pursues numerous inter-societal connections that increase Moscow's 
influences, including Orthodox Churches, political parties, cultural 
organizations, historical societies, and sports clubs.
    The Kremlin benefits from frozen conflicts and frozen states. In 
Bosnia-Herzegovina it encourages the Serbian entity to keep the country 
divided and question its future as a single State. In Kosova, Russian 
officials claim the Serbian population is repressed in order to 
undermine Kosova's independence and raise the specter of partition or 
re-absorption by Serbia. Kosova is blocked from entering the U.N. 
primarily by Russia's opposition. Unresolved conflicts and disputed 
states also enable the Kremlin to claim that NATO has failed to 
stabilize the region and to slow down West Balkan progress toward EU 
integration.
    Moscow will calculate how it can derail any new American initiative 
if this is intended to culminate in Kosova's U.N. membership and 
recognition by Serbia. Putin's Kremlin does not welcome agreements that 
generate stability in the region and enhance prospects for NATO and EU 
integration. Moscow may even appoint its own Balkan envoy or demand an 
equal voice in the upcoming negotiations. However, it is worth 
remembering that the only successful agreements implemented in the 
region are those where Moscow played no role, including Dayton, Ohrid, 
and Prespa. Any durable accord between Kosova and Serbia must remain 
free from Kremlin interference.
    The Chinese regime has no design to capture territory or impose its 
system of government on States outside its immediate sphere of 
influence. Instead, it has three main goals toward southeast Europe. 
First, it seeks to expand China's economic reach through trade and 
investment. Beijing's Belt and Road Initiative linking China with 
Europe envisages the Balkan Peninsula as a focal point for maritime and 
overland routes into Europe. Chinese companies purchase cargo terminals 
and finance roads and railways throughout southeast Europe and its 
loans and export credits become debt traps. Although Balkan governments 
welcome investments that rescue declining industries, they are 
vulnerable to predatory lending and the surrender of national 
infrastructure.
    Second, Beijing leverages economic penetration into political 
influence. In exchange for financial investments, Beijing seeks Balkan 
and European diplomatic support for its policies or to mute criticism 
of China in international institutions. And third, China aims to 
diminish U.S. political influences. It has developed significant 
convergence with Moscow in such areas as anti-democracy promotion, 
diplomatic offensives, and anti-American disinformation campaigns.
    While seeking to resolve the outstanding disputes in the Western 
Balkans, U.S. policymakers cannot lose sight of the growing dangers to 
regional security and Western integration from both Russia and China. 
Russia's subversion in particular can only be reversed through an 
extensive strategic offensive. Moscow's presence is not simply malign; 
it is destabilizing and dangerous and could unravel much of what has 
been accomplished in the region during the last 20 years. I am 
submitting to the Committee a recent report I published with the Baltic 
Defense University on conducting a multi-pronged offensive against 
Moscow rather than simply playing a static defense. Entitled ``Winning 
the Shadow War with Russia'' it details six major arenas for action: 
Exposing Influence Operations; Countering Informational Offensives; 
Cyber Defense and Counter-Attack; Economic and Financial Penalties; 
Military and Security Instruments; and Managing Russia's Dissolution.

    Senator Johnson. Thank you, Mr. Bugajski.
    Our next witness is Dr. Majda Ruge. Dr. Ruge is a Fellow at 
the Foreign Policy Institute at Johns Hopkins University, 
School of Advanced International Studies. Previously, she was a 
research fellow at the Gulf Research Center, and worked as an 
Advisor for the Delegation of the European Commission and the 
OSCE Mission to Bosnia-Herzegovina.
    Dr. Ruge.

  STATEMENT OF MAJDA RUGE, FELLOW, FOREIGN POLICY INSTITUTE, 
            JOHNS HOPKINS UNIVERSITY, WASHINGTON, DC

    Dr. Ruge. Thank you, Mr. Chairman and Ranking Member Jeanne 
Shaheen. It is a great honor to be back to testify before this 
committee.
    Along with many others, I am deeply grateful to this 
subcommittee for their ongoing attention and commitment to the 
region. This hearing comes at a critical point of time.
    First, the French veto and the start of EU accession 
negotiations with North Macedonia and Albania has produced 
profound uncertainty and disillusionment of citizens across the 
region regarding the future of their countries. It has taken 
away key incentive and shattered a narrative that has 
undermined democratic reforms in the region. It has undermined 
reformists, like the Prime Minister of North Macedonia, Zoran 
Zaev, while emboldening obstructionists, and endangering 
ongoing reforms such as the reform of the judiciary in Albania.
    There is no doubt that, as you mentioned previously, 
Russia, China, and Turkey will capitalize it--on this major 
European mistake. What is more, in addition, that it will 
likely reinforce the exodus of the population from the region. 
In the last 5 years alone, Bosnia has lost 5 percent of its 
population. It is, therefore, a great relief the Senate 
approved North Macedonia's NATO accession protocol yesterday. 
The signal you are sending is crucial importance for the people 
of the region, who feel abandoned by the West.
    Second point. In Bosnia, we will soon mark the 25th 
anniversary of the Dayton Peace Agreement. That is a quarter of 
a century of peace brokered under American leadership. And 
incidentally, I was in Bosnia when the invitation to testify 
for this committee arrived. The mood there is one of optimism 
in small pockets of the country where reformist actors are 
trying to shake up things at the local level, such as Jarevo 
Canton. But, there is also a great deal of anxiety that 
American disengagement from North Syria and the recent talk of 
border swaps will be interpreted by nationalists as a signal 
that the peace in Bosnia is up for grabs.
    So, I flew in from Europe last night to remind this 
committee to pay greater attention to Bosnia. American 
engagement on security, as well as political and economic 
engagement, is needed not just to protect, but also to improve 
one of its most important and, I underline, bipartisan legacies 
in the region.
    Third, with regard to Serbia and Kosovo, there is need to 
move forward and resolve the outstanding issues, especially 
those affecting the lives of ordinary citizens. However, I 
would urge caution with the proposition that they can be quick 
fixes on offer. Moving ahead too quickly and without full 
coordination with key European allies puts at risk fundamental 
policies and principles that were upheld by successive U.S. 
administrations from both parties. Maintaining territorial 
integrity and inviolability of borders remains crucial for the 
stability of the region. Any approach involving border changes 
risks producing unintended consequences and emboldening those 
promoting secessionist agendas, such as Milorad Dodik and 
Republika Srpska.
    And in this context, I would like to remind this committee 
that across the region, the single most important cause of 
political instability is not ethnic tensions. Instability in 
the region is largely top-down phenomenon. A recent opinion 
poll conducted by International Republican Institute showed 
that over 50 percent of citizens in Bosnia from all ethnic 
groups identify organized crime and corruption as the number-
one security threat, rather than the members of other ethnic 
groups.
    And here are the measures that U.S. Government, including 
Congress, could take to secure peace and stability and to 
protect past U.S. investments in the region:
    Urge the administration to move ahead with NATO accession 
protocol of the North Macedonia as a matter of urgency. Work 
with European allies to press forward with regard to Bosnia, 
finally adopting NATO's Annual National Program. Bosnia is the 
strategic center of the region, but progress has been blocked 
by Milorad Dodik, who is acting as Russia's proxy.
    Engage France and Netherlands robustly to urge them to 
honor the EU's promise to allow the accession process to begin.
    Remind the administration that the policy of successive 
bipartisan U.S. administrations of more than two decades is 
founded on territorial integrity and inviolability of borders 
in the Balkans.
    Given that the corruption is one of the primary obstacles, 
encourage the administration to hold corrupt Balkan politicians 
accountable, including through sanctions, and to continue State 
Department and Department of Justice programs fighting 
corruption and organized crimes.
    And finally, congressional views on Western Balkans should 
be communicated strongly and directly by bipartisan CO-
delegations visiting capitals in the Balkans, as well as 
Brussels, Berlin, and Paris. Congressional voices do matter. 
But, when you visit the Balkan capitals, publicly support and 
regularly meet with constructive actors, including civil 
society, independent thinkers, and elected officials at 
subnational level, where a lot of good work is being done.
    In closing, let me underline that citizens in the region 
continue to have overwhelmingly positive views of the U.S. and 
the EU. People are not lining up in front of Russian and 
Chinese consulates. And the reason for this is that they are 
not leaving just for economic reasons, but because they want to 
live in democratic societies. The West remains attractive 
model, and it is the membership to Western institutions that 
citizens aspire. And they want you to stay engaged.
    Thank you.
    [The prepared statement of Dr. Ruge follows:]

                  Prepared Statement of Dr. Majda Ruge

      Thank you Mr. Chairman and Ranking Member Senator 
Shaheen.
      My name is Majda Ruge, I'm a fellow at the Foreign Policy 
Institute of the School of Advanced International Studies, Johns 
Hopkins University. It's a great honor to be back to testify before 
this committee.
      Along with many others, I'm deeply grateful to the 
members of this subcommittee for their ongoing attention and commitment 
to the region.
      Maintaining peace and stability in the Western Balkans 
remains a key strategic interest of the United States. That is because 
instability in the Balkans carries grave risks to member states of NATO 
and the EU.
      This hearing comes at a critical point in time:
      First, the French veto on the start of EU accession talks 
with North Macedonia & Albania has produced profound uncertainty in the 
region and skepticism about honesty and commitment of the EU and 
France.
      It has taken away a key incentive and shattered the 
narrative that underpinned democratic reforms in the region. It has 
undermined reformists like PM of North Macedonia Zoran Zaev whose 
government showed great courage and leadership by signing the Prespa 
Agreement. In doing so it has endangered the survival of one truly 
reformist government in the region which in less than 2 years turned a 
previously captured state on the brink of conflict into a regional 
frontrunner.
      Meanwhile, the French veto has emboldened obstructionists 
across the region and endangered ongoing reforms such as those in the 
judicial sector in Albania. No doubt Russia and China will capitalize 
on this major European mistake.
      I was glad to see that the Senate approved North 
Macedonia's NATO accession protocol yesterday. The signal you are 
sending is of crucial importance since the vacuum created by the French 
veto is one that other external actors will seek to use to their 
advantage.
      Secondly, in Bosnia, we'll soon mark the 25th anniversary 
of the Dayton Peace Agreement. A quarter of a century of peace in 
Bosnia brokered under American leadership. A peace that ended genocide 
and the most brutal conflict on European soil since the world war two. 
Twenty-five years with practically no episodes of interethnic violence 
or retributions.
      Incidentally, I was in Bosnia when the invitation to 
testify for this committee arrived. The mood there is one of optimism 
in small pockets of the country where reformist actors are shaking up 
things at the local level. But there is also a great deal of anxiety 
that American disengagement from northern Syria will be interpreted by 
nationalist opportunists, some backed by Kremlin, that the peace in 
Bosnia is up for grabs.
      So I flew in from Europe last night to remind this 
committee to pay greater attention to Bosnia. American engagement on 
security, as well as political and economic engagement is needed there 
to protect--and improve--one of its most important bipartisan legacies 
in the region.
      Thirdly, with regard to Serbia and Kosovo there is a need 
to move forward and resolve outstanding issues especially those 
affecting the lives of ordinary citizens. However one should be 
cautious not to create unrealistic expectations that quick fixes are on 
offer.
      Moving ahead too quickly and without full coordination 
with European allies puts at risk fundamental policies and principles 
upheld by successive U.S. administrations from both parties:
      Maintaining territorial integrity and the inviolability 
of borders remains crucial for the stability of the region. Any 
approach involving border changes risks producing unintended 
consequences. Even mere talk about such possibility by the U.S. 
officials is dangerous because it encourages those promoting 
secessionist agendas such as Milorad Dodik and the Republika Srpska.
      In that context I'd like to remind this committee that 
across the region the single most important cause of political 
instability is NOT ethnic tensions. A recent opinion poll conducted the 
International Republican Institute showed that over 50 percent of 
citizens in Bosnia from all ethnic groups identify organized crime as 
the number one security threat rather than the members of other ethnic 
groups.
      Indeed, instability in the region is largely a top-down 
phenomenon. And it is directly correlated to poor governance and 
nepotism of actors whose political survival depends on increasing 
ethnic tensions as means of staying popular without being accountable.
      Here are a number of measures the U.S. government, 
including Congress, could take to secure peace and stability in the 
Western Balkans and to protect past U.S. investments in the region:

    1. Now that the Senate ratification of NATO accession protocol of 
North Macedonia is completed, urge the administration to move ahead as 
a matter of urgency. The U.S. should also work with European allies to 
press forward with regard to Bosnia finally adopting NATO's Annual 
National Prorgamme. Bosnia is the strategic center of the region, much 
of the legal architecture is already in place, but progress is being 
blocked by Milorad Dodik, who is acting as Russia's proxy.
    2. Engage France robustly and urge them to honor the EU's promise 
to begin the accession process.
    3. Remind the administration of the policy of successive U.S. 
bipartisan U.S. administrations of more than two decades with regard to 
territorial integrity and the inviolability of borders in the Balkans.
    4. Given the nature of corruption related challenges in the region, 
encourage the administration to build stronger cooperation between 
State Department and the Department of Justice, which has been doing 
excellent work on corruption and organized crime across the region.
    5. Support and regularly meet with constructive actors including 
civil society, independent thinkers, and elected officials at sub-
national level where a lot of good work is being done.
    6. Finally, congressional views on Western Balkans should be 
communicated strongly and directly by bipartisan CODEL's visiting 
capitals in the Balkans as well as Brussels, and Paris.
    In closing, let me underline that citizens in the region continue 
to have overwhelmingly positive views of the U.S. and EU. People are 
not lining up in front of Russian and Chinese consulates. For citizens 
of the Western Balkans, the West remains the attractive model and it is 
to membership in Western institutions that they aspire.
    However, if the West leaves a vacuum, others will enter, not least 
China. Actors such as Russia and China may not have the ability to set 
the agenda and reshape the entire region. But they do have the 
potential to reinforce negative trends and undermine Western interests.
    As noted at the outset, strategic U.S. interests are at stake in 
the Western Balkans. The U.S. remains ``the indispensable nation'' in 
that region, not least because the EU is failing to live up to its 
role. Congressional voices matter.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Senator Johnson. Thank you, Dr. Ruge.
    Let me, first, start with both of you and ask a very 
general question. Dr. Ruge, I think you used the word 
``optimism.'' How optimistic are you today versus, let us say, 
10, 15, 20 years ago, for the region in general?
    Dr. Ruge. Much less----
    Senator Johnson. Much less optimistic?
    Dr. Ruge. Much less optimistic. Ten-fifteen years ago, I 
was actually working on programs on the ground in Bosnia, on--
basically, not just implementing Dayton, but consolidating key 
institutions that were divided following the end of the 
conflict, merging customs and tax services, merging police, 
merging defense forces, intelligence services, creating state 
border service. And it was a time when the U.S. was heavily 
engaged, but also when the U.S. and its key European allies 
pulled together in the same direction, and results were very 
visible. There is not much of that dynamic that we see on the 
ground today, unfortunately.
    Senator Johnson. So, is that the primary reason your 
shift--is just lack of U.S.-European cooperation, coordination, 
and engagement, and involvement?
    Dr. Ruge. Lack of--I would say, first of all, lack of high-
level political interest, lack of engagement, relatively 
speaking, compared to, say, 2002 to 2006, increasing 
disengagement toward other foreign policy and security issues, 
and yes, much less cooperation than we saw in that time.
    Senator Johnson. Mr. Bugajski, what is your evaluation?
    Mr. Bugajski: I would agree, up to a point. It is always a 
question of ups and downs in the Balkans. You have to look at 
the bigger picture and this is why I have outlined some of the 
positive things that have been achieved.
    For instance, the Prespa Accords between Athens and Skopje, 
last year, which was--if you looked at it 5 years ago--
completely unexpected, and it looked as though they would be 
stuck over the name question for generations.
    I do agree, though, that there are increasingly pessimistic 
indicators in the region. And I would add a couple more, which 
were not there 10-15 years ago, which is the degree of Russian 
subversion and increasing Chinese involvement in the region, 
and sometimes negative Turkish influence. Turkey has, of 
course, its own agenda, but it is not a neo-imperial 
revisionist agenda like Russia's in terms of trying to regain 
greater influence in the region, greater control in the region. 
However, all three countries do contribute to the instability, 
they contribute to polarization, they contribute, in some 
respects, to religious radicalism. I have seen this, in 
particular, in North Macedonia. And they subvert politicians. 
In other words, particularly, I would say, Russia and China, 
the kind of policies they apply goes directly against the kind 
of systems, politics, market economies that we would like to 
see in these countries.
    Senator Johnson. Okay. So, let me kind of ask you the same 
question I asked Mr. Palmer, then. Country by country--Russia, 
China, Turkey--what is their overall goal and objective? And 
specifically, what are they doing?
    Mr. Bugajski: Russia, I would say, is the more immediate 
danger and the bigger danger. China is a longer-term threat. 
Turkey is a less of a danger, but it is involved right now.
    Russia has never given up on undermining stability in the 
Balkans, to keep the Balkans out of Western institutions, and 
to reduce the American role. They play on nationalism, they 
play on religion, they play on ethnicity, and on pan-Slavic 
question, in order to further their goals. They are also 
looking for new allies, not necessarily like in Soviet times, 
but allies that will support them on the international arena, 
countries that will not go along with the sanctions regime for 
their invasion of Ukraine. They also have economic interests. 
The oligarchs and the government are closely intertwined in 
Russia. If oligarchs benefit, the state benefits. Oligarchs, in 
a way, express Russian imperialism through the economic arena. 
Disinformation, contacts with orthodox churches, cultural 
organizations. Russia is penetrating the region and trying to 
push out the United States. What they say about us is that we 
are the imperial power, that we are trying to diminish Balkan 
independence, we are creating the problems for them. The exact 
opposite of what is actually happening.
    Senator Johnson. So, Russia's just playing the big 
geopolitical game--anti-American, pro-Russian. Okay. So, that 
is--but, what about China?
    Mr. Bugajski: China does not have territorial or imperial 
ambitions toward the region. The Balkans, with China, is more a 
question of access into Europe, along the Belt and Road 
Initiative. It is part of their way to invest through southern 
Europe into the European mainstream. Of course, their economic 
practices do not follow the lines of genuine competition. They 
corrupt governments, they in-debt governments heavily, 
governments that are often crying out for investments, even EU 
governments, including the Greek government. The amount of 
Chinese investment, for instance, in Piraeus was a result of 
Greece's inability to raise alternative investment for the 
port. So, China plays on economic weaknesses in order to inject 
its influences. In the future, though, the question is whether 
that economic clout translates into political influence? Will 
Beijing increasingly use that as leverage to capture more 
political influence in Europe?
    Senator Johnson. Then Turkey.
    Mr. Bugajski: Turkey, I would say, does not have the clout 
either of Russia or China. It does not have the same ambition. 
Obviously, Turkey is a NATO member and is not--has generally 
been a good ally, despite of what is happening at the moment in 
Syria. However, I would say that it is more the political and 
religious influences emanating from the ruling party which have 
treated some of the Balkan States as former colonies in which 
Turkey insists on extraditing opposition figures or people that 
they think, or the government thinks, is linked with the 
opposition, particularly Fethullah Gulen. And we have had 
cases, for instance, in Kosovo, the kidnapping and not proper 
formal extradition, but capture and evacuation of Turkish 
nationals to Turkey, which led to the resignation of Kosova's 
Interior Minister and a mini-crisis in the government. So, it 
is that sort of political pressure rather than any kind of 
revisionist or economic agenda.
    Senator Johnson. So, Dr. Ruge, while we are on this kind of 
train of thought, do you have anything you want to add or 
disagree with?
    Dr. Ruge. So, I can say I agree with all of the points, but 
I would like to add couple of them.
    On Russia, first of all, it is Moscow's key policy in the 
region to prevent NATO accession of Bosnia and Serbia. I think, 
with Macedonia, they have probably given up, but there are two 
more countries. And Bosnia, especially, has, until 2006, signed 
on almost every step in the NATO accession process, but it is 
since the Americans and Europeans have started to disengage 
that Russian-backed Milorad Dodik has started obstructing every 
single step on the NATO implementation, on, basically, 
obligations toward NATO in Bosnia.
    Secondly, all of the ties which Mr. Bugajski has mentioned 
are very important. What is also important is to say that 
Russia's main basis for political influence in Bosnia is the 
Peace Implementation Council, and then U.N. Security Council. 
And Russia backs both Republika Srpska leadership and--in its 
increasingly antagonistic relationship with the West on 
building the State and maintaining Bosnian State.
    However, there is something that we really need to be 
cautious about when talking about the role in Russia, and that 
is to avoid confusing and--confusing Russian influence with 
what is actually the responsibility of local political elites 
for nepotism and corruption. So, what case of North Macedonia 
has shown under Zaev's government is that impact of Moscow's 
influence is directly proportional to the level of corruption 
of the ruling political elite. Once you have reformist 
government power that is actually committed to transparency and 
rule of law, Russian influence subsides.
    On China, what is really interesting on China is whether it 
does have a strategy, or not, in the region. It--to borrow a 
term from a colleague at the Belgrade Security Conference, 
China acts like performance-enhancing drug, which brings out 
given government's natural tendencies. And most states in the 
region suffer from poor governance, low transparency and 
accountability, and poor regulatory framework. China tends to 
reinforce these weaknesses.
    Loans are provided without mechanism of transparency or 
oversight over procurement procedures or implementation of the 
project. So, just to give you one interesting example, 
Montenegro's highway construction by Chinese Road and Bridge 
Corporation, where the government has borrowed about 1.3 
billion to construct the highway that EU did not want finance 
because it was judged not to have any sort of potential to 
compensate for cost of investment. It has increased country's 
debt from 63 percent of GDP in 2012 to 80 percent in 2019. What 
also happens is that in--because of the weakness of the 
government, the contract that was signed with the Chinese Road 
and Bridge Corporation, basically, really, very--in a very 
untransparent matter, stated that if Montenegro could not repay 
its debt within specific timeframe, the EXIM Bank would have 
the right to some of its territory.
    And so, what is happening is that these countries are 
really getting into debt traps. And the problems that the 
Western countries are trying to address, which is governance 
and rule of law, are just being reinforced and strengthened. 
So, I would say that this is one of the key dangers of China's 
influence.
    Serbia has become the poster child of Chinese involvement. 
It signed agreements with China worth more than 3 billion last 
year, including Chinese investment in Serbian infrastructure, 
steel production, and Serbia's purchase of Chinese military 
equipment. Worryingly, Serbia has also purchased more than 
1,000 facial-recognition cameras to implement a project that is 
first of its kind across Europe.
    I could carry on with Chinese constructing the Peljesac 
bridge in Croatia to facilitate traffic between the two parts 
of Croatia across the sea for about 420 million euros, 85 of 
which is financed by the EU. And that is another interesting 
phenomena of EU procurement procedures not really containing 
that element to monitor how the companies that receive state 
aid can win the contracts.
    Final mention on Turkey, its role is more complicated. 
Traditionally, Turkey has kind of been part of the 
institutional infrastructure of the West. It is also part of 
the Peace Implementation Council. It is the second- or third-
largest contributor of troops to EUFOR in Bosnia, which is now 
tasked with securing safe environment. And generally, it has, 
traditionally in the past, supported the integration of the 
region in EU and NATO. Its role has been changing over the 
last, say, decade, where, as has been pointed out, the AKP 
fight against Gulen networks has brought in that element of 
foreign policy, and really the question with what happens to 
Turkey and NATO, kind of in a global context, is going to also 
determine how Turkey acts in Western Balkans, whether it goes 
closer to Russia or stays supportive of Western objectives.
    Thank you.
    Senator Johnson. Senator Shaheen.
    Senator Shaheen. So, I pretty much agree with everything 
both of you have said. And I guess the question, for me and, I 
think, this subcommittee--Senator Johnson and I and other 
members of the subcommittee, are very committed to trying to 
encourage continued engagement at all levels in the Western 
Balkans. So, the question really is, what are the priorities 
and the most important things we can do to help address the 
current situation?
    Based on the discussion to date, I guess I would think 
moving as swiftly as possible to get the Republic of North 
Macedonia into NATO is one of those things, so that that sends 
a clear message that that is still an option for countries like 
Bosnia, and trying to engage with France and the Netherlands 
and the EU to ensure that accession for entrance into the EU is 
still a possibility for North Macedonia and Albania.
    What else do you think is important that we think about, 
recognizing that we probably cannot do everything we would like 
to do, but what else is on that--if you were going to name one 
or two other priorities that we need to think about, what are 
they?
    Mr. Bugajski: Well, those would be the priorities. And the 
two major questions, which I talk about in my testimony, 
Bosnia-Herzegovina, which Majda has talked about and Kosovo-
Serbia.
    Senator Shaheen. Right.
    Mr. Bugajski:--In the Kosovo-Serbia case, I do think the 
appointment of a new Special Envoy is extremely vital for 
restarting the talks. Remember, the talks have been stalled for 
the past year. Both sides, of course, face elections. Kosovo 
just had them, Serbia is about to have them, in April. But, I 
think it is a good time--with a new government in Prishtina, 
and Serbia will have a new coalition government after April--to 
try and get the sides together. Where is the common ground? 
What common ground can be found? What is it that Kosovo can do? 
It needs to remove some of the negatives that are in place, 
like the tariffs on Serbian imporys, greater protection for 
Orthodox shrines, allowing Serbian officials to visit, maybe 
revisiting the Serbian municipality association, the Zajednica 
question, that was within the Brussels Agreement.
    For the Serbian side, it is also very important to press 
them to undo things that are negative for Kosovo's interests. 
In other words, blocking of membership of international 
organizations such as INTERPOL or UNESCO. The campaign of 
derecognition that Belgrade engages in, it also needs to desist 
from that as it creates a lot of damage. It undermines not only 
relations between the two countries, but other countries look 
at them and say, ``Well, this is not a very stable region if 
there is a major dispute, here.''
    Senator Shaheen. Well, can--I am sorry to interrupt, but it 
has been suggested to me that part of the issue with Serbia is 
that Vucic--the Vucic government is not really interested, 
ultimately, in negotiating with Kosovo and reaching a 
settlement. Do you agree with that?
    Mr. Bugajski: I would put it this way, that Vucic was 
surprised when the new U.S. Special Envoy was appointed. And I 
think the reason for that is that Belgrade has become very 
comfortable with the European Union, which seemed to muddle 
along, no decisions were made, Serbia was not pushed to do 
anything, they could sit on their hands, basically, on the 
Kosovo question, they were proceeding with these chapters in 
the Acquis Communautaire progress in the accession process. 
That has all changed suddenly. A Special Envoy has been 
appointed by the White House specifically on this question. The 
EU itself looks as though it is not just blocking North 
Macedonia and Albania into accession talks, it looks as though 
the French and others are obstructing the whole idea of 
enlargement until there is a major reform of the process. What 
does that mean for Serbia? They can close all the chapters and 
still not get in.
    So, it is a sort of desperate times, I would say. It is in 
a way, a very good time to get both sides together. I do not 
necessarily think that Vucic wants to make any major 
compromises, but if he has no other choices, if this is what 
America and the European Union, hopefully working together, 
push him, and also push Kosovo on certain questions, that there 
has to be agreement if you are to make any progress into any 
institutions.
    Senator Shaheen. Dr. Ruge, do you agree with that?
    Dr. Ruge. On which point? Because there were two--kind of 
two separate issues. One was what other priorities should be, 
and then the other is this whole question on Kosovo-Serbia, 
which is, I think, separate.
    Senator Shaheen. Well, I guess I was asking if you agreed 
with the premise that the Vucic government does not want to, 
ultimately, negotiate away anything to reaching agreement with 
Kosovo. But, also, are there other priorities that you think we 
should consider in the region?
    Dr. Ruge. So, just starting on--because----
    Senator Shaheen. Beyond those that----
    Dr. Ruge. Beyond----
    Senator Shaheen.--you have both clearly stated.
    Dr. Ruge. Stated.
    Just maybe to start on the question of Vucic's government 
in Serbia and Kosovo. There is a sense of urgency that has been 
imposed, in the last year or two, to come up with some new 
deal. And there are at least 23 existing agreements which have 
not yet been--four of them may--have been fully implemented, 
the rest has not--which focus on different topics, such as 
energy, telecom, diploma recognition, freedom of movement, law 
enforcement, regulations of commerce. All of these affect lives 
of ordinary citizens in enormous manner, and also affect 
economy.
    From the point of view of Serbia, it--you just wonder where 
did the sense of urgency suddenly come from. One says because 
of the European Union. In the best-case scenario, Serbia 
cannot--and now it is even questionable whether that would be 
the date, but would not accede to the European Union before 
2025. And the part with resolving relations with Kosovo, and 
recognition is basically a part of the chapter 35, which is the 
last chapter.
    And so, in terms of prioritization, you wonder why sudden 
focus to get some sort of a new deal that reportedly also 
involves border change, when so many of the existing agreements 
have not been implemented? Will the citizens of Kosovo and 
North Kosovo wait until--and for another 6 years to even start 
thinking about the implementation of the agreements, which----
    Senator Shaheen. So, do you have a theory?
    Dr. Ruge. Sorry?
    Senator Shaheen. So, do you have a theory about why?
    Dr. Ruge. I think that it is very untransparent, and I can 
only speculate. The whole process has been kind of, I would 
say, driven by influences from the region. I think that 
probably President Vucic and Thaci have found some sort of a 
common interest as to why to push in this direction, but 
neglecting, really, the implementation of all of the existing 
agreements that have impact on the lives of their citizens. 
And--I mean, going back to the first question of Senator 
Johnson is, What is the--kind of, how is the situation changing 
on the ground, and how is the new Government of Kosovo going to 
address the dialogue? Well, the likely new Prime Minister, 
Albin Kurti, has, in fact, said precisely that, that he is 
going to focus on substance over speed, and that he is going to 
focus on really implementing the existing agreements to--you 
know, to improve governance, improve economy, to remove the 
hurdles that citizens of especially North Kosovo, but also 
elsewhere, face.
    We talked about energy earlier. Serbia still controls 
Kosovo energy transmission lines. And it blocks it from 
importing energy from Albania, which is abundant on hydropower 
energy.
    So, you know, these are things that I think should 
talking--we should be talking about.
    Senator Shaheen. I would like to change the subject, 
because there are two other areas that I am very concerned 
about. When I first visited the Balkans in 2010, one of the 
things that impressed me was the vibrant press and media that 
existed in all of the countries that we visited--Serbia, 
Bosnia-Herzegovina--Kosovo, even. And we are certainly seeing a 
change in Serbia, at least, with respect to the availability of 
a real free press in that country. And we have seen Russia come 
in and by--really take over media outlets in Serbia and become 
the dominant media outlet in the country. So, are there things 
that you all think we should be thinking about with respect to 
maintaining a free press that would help? Because, I think, as 
in the United States, ensuring democratic government definitely 
involves a free and open media.
    Mr. Bugajski: Absolutely, Senator. This is something that 
we should focus in on regionwide, not just in Serbia, because, 
in many countries--it is not just Russian influence, which is--
--
    Senator Shaheen. Right.
    Mr. Bugajski:--bad enough, but it is also political 
influences, it is businesses influences that control media, 
self-censorship that journalists engage in not to offend a 
politician or a judge or a prosecutor or some businessman who 
owns a paper and wants certain things said. So, this needs to 
be covered across the region. I think we need a more vigorous, 
NGO-funded campaign for media freedoms. Because I think 
actually we assume that each generation acquires the knowledge 
from a previous generation. Oftentimes, you have to be taught 
from scratch, what is a free media? What is free speech? What 
is disinformation? What is propaganda that is not really 
checked? Russia, unfortunately, is playing the exact opposite 
role. It likes to have the media in control of specific 
political parties, because then they inject themselves through 
that media to control those parties or control politicians. So, 
a lot needs to be done, I think, on media education, on free 
media, on discerning--public discerning between real journalism 
and fake journalism.
    Senator Shaheen. Finally, one of the things that we have 
heard some concerns about is terrorism and terrorists in the 
Balkans. It is destabilizing, not just for the Balkan 
countries, but also poses a threat to Europe and to the United 
States. How concerned do you think we should be about 
terrorists--either ISIS terrorists coming back into the Balkans 
or other terrorists coming from other parts of Russia, Europe, 
wherever?
    Dr. Ruge. I think I could almost have two answers to this 
question. We should be concerned, of course, in terms of--but, 
there is kind of different--I would say, two different parts of 
the answer. One is, how much should we be concerned about 
terrorism within--in the region, in these countries? And, you 
know, comparatively speaking, especially when compared to 
France and Belgium and other States of the EU, with the Muslim 
population--Muslim population in Western Balkans has produced 
smaller percentage of foreign fighters than, for example, 
France. There have been no major terrorist attacks in the 
region. That is not to say that we should not be concerned, but 
we should be concerned about two different types of extremism.
    There is about--both in, kind of--in--on the Islamist side, 
but also on the side of Christian orthodox radicalization. And 
so, there is--the estimates are very unreliable, because the 
intelligence is not readily available, but, from open sources, 
there is about 70 to 200 estimated Serbian volunteers who have 
departed to fight in Donbass area of Eastern Ukraine on the 
side of pro-Russian forces. So, that is one cause of concern.
    The other one is, of course, returning foreign fighters 
from----
    Senator Shaheen. Right.
    Dr. Ruge.--Syria, and especially also now in the Kurdish 
territories in northern Syria.
    And I have some data on Kosovo and Bosnia. In Kosovo, about 
110 of the--of its citizens from the Syrian conflict zone have 
returned. Others were left behind in the camps. And in Bosnia, 
we have also not such reliable information, but about 100 men 
still remain in the camps in Syria, all--about 200 have left 
altogether. And so far, Bosnian courts have sentenced 25 
persons who have returned, to a total of 47 years, but--47 
years. Now, that is just some statistics.
    But, when it comes to returns and danger, not just in--not 
just in the region, but especially to the EU and the NATO 
allies, of transition of foreign fighters to Europe, I would 
say what we should be concerned with is, again, institutional 
weaknesses in the region and the existence of smuggling 
corridors that facilitate unchecked travel from--through the 
Western Balkan region. And here again, we come back to the 
issue of governance structures, institutional capacities, and 
accountability. So, yes, that should be a concern.
    Senator Shaheen. Thank you.
    Thank you, Mr. Chairman.
    Senator Johnson. So, I really have, just, basically, two 
remaining areas.
    Dr. Ruge, I think you talked about--we need to engage in 
Bosnia. My assumption, right or wrong, has always been, Okay, 
we got the agreement between Montenegro and Kosovo on their 
border dispute, then we got the Prespa Agreement, we are 
looking at--probably the next possible dispute resolution would 
be between Kosovo and Serbia. And the really snarly one is in 
Bosnia. So, in what way should we be engaging with Bosnia at 
this point in time? And it is a question for both of you.
    Mr. Bugajski: Do you want to start, Majda? Or shall I 
start?
    You are right, Bosnia, I think, is the tougher nut to 
crack. Let us put it this way. Between Kosovo and Serbia, I do 
not think there is any possibility or prospect, at this point, 
of armed conflict. In other words, the conflict is being 
contained by NATO, by the U.S., by the American military 
presence, by the NATO presence, by the borders, and by the 
recognition of two states. Bosnia continues to be a contested 
state. And, as has been pointed out--I think Majda pointed out, 
it is not only the Serbian side, the Serbian entity, Dodik and 
his people, that are pushing, let us say, toying with this idea 
of secession to see what our reaction is, but it is now the 
Croats--Croat nationalists are becoming increasingly involved 
in pushing for a third entity.
    I think maybe we do need another Envoy, or at least one of 
the Envoys that has already been appointed, to focus more on 
Bosnia. Looking at where we have tried and failed--I think Matt 
mentioned Butmir and the April Agreements and so forth, 
constitutional changes that we wanted--there has to be some 
sort of breakthrough, at some point, in which a civic party 
enters government and starts to push, not just at local level, 
but at national level, and starts to push away some of the 
ethnic quotas, the entity blocking, all the accouterments 
within Dayton that are no longer successful and promote state 
failure.
    Senator Johnson. So, let me, quick, ask. Are you amazed 
that Dayton is still, basically, in place after so many years? 
And is it--I mean, it is well overdue to be replaced by a 
permanent deal, but----
    Mr. Bugajski: Yes, absolutely.
    Senator Johnson.--I mean, is it really fraying around the 
edges, and is it going--you know, can we expect it to go on 
much longer?
    Mr. Bugajski: No, I have been calling for the end of Dayton 
since soon after it was applied, because I saw Dayton as, 
basically, stabilizing an internal partition into ethnic 
fiefdoms. And that is exactly what happened. I can send you an 
article I did about 25 years ago. Not much has moved, 
unfortunately. We need either a new Dayton or a complete 
reformulation of the principles of this State.
    Senator Johnson. So, again, a Special Envoy to really 
concentrate on it would an initial first step.
    Mr. Bugajski: Getting the three national sides together 
with some of the civic party organization, civic parties, 
NGO's, and others to learn, ``What is it that you want in 
Bosnia? What will work? What is it that can keep citizens here? 
What is it that you need from the international community? What 
role can the U.S. play?'' I think such a solution has been 
pushed to the edges, and we now need to concentrate on it.
    Senator Johnson. Because it is hard.
    Dr. Ruge, do you have anything to add to that?
    Dr. Ruge. I would say, really, it all depends on how much 
political capital we are willing to invest. I think this 
question cannot be answered, apart, separately, because if we 
commit fully, not neglecting other areas, because not that much 
is needed in the Balkans, but what is needed is focus, time, 
close monitoring, and commitment, then America has enough clout 
to do Kosovo, Serbia, and Bosnia simultaneously. And I would 
like to remind the committee that these countries and the 
issues are very much interconnected. I have been arguing, for 
the past year, that the idea that we need to focus on Kosovo 
and Serbia, and leave Bosnia for after this issue is solved, is 
really a misguided policy, because (a) there is no fix--quick 
fix in Kosovo and Serbia, but (b) we cannot wait with Bosnia 
while we deal with Serbia and Kosovo. So, again, if there is 
political commitment, time, focus, cooperation with key EU 
allies on the ground--because we are not doing this alone, and 
we are not doing this for the first time. We have been on the 
ground for the past 25 years. There is plenty of ideas, policy 
proposals, people that can be included. But, basically, what is 
really needed is political commitment. And, in that regard, you 
know, first of all, I think, while dealing with Kosovo and 
Serbia, there needs to be a clear red line that Bosnia and 
territorial integrity is not going to be touched. And that is 
really key American interest, and it is also key interest of 
the region.
    Secondly--and I have here a little document, which is the 
EU enlargement package and Commission opinion on Bosnia's 
readiness for membership, which is full of policy 
recommendations and priorities on what needs to be done to 
improve functionality of Bosnian State. Unfortunately, this has 
now kind of been undermined with the events in Brussels last 
week. But, still, all of the actors are still on the ground. No 
one has left. The key European Embassies are still the major 
actors, because Europe is the major trading partner of these 
countries. European Commission and EUSR, they are still there. 
American Embassy and capable diplomats and Ambassador, they all 
know how to pull in the same direction, work on this agenda. 
And I think what is really needed from Washington and from the 
capitals in the EU is to empower these actors, to give them 
political backing, to say, ``We are all pulling in the same 
direction.'' But, these voices and support from Washington need 
to be heard more loudly.
    Senator Johnson. So, you are saying you need an overall 
solution, you cannot just pick and choose, in terms of Serbia-
Kosovo, and then turn your attention. You really need to do the 
whole thing.
    Dr. Ruge. You----
    Senator Johnson.--would you agree with that?
    Mr. Bugajski: Yes, I would agree with that. I mean, it is 
not one package, let us say, all in one piece, but they are 
interlinked.
    Senator Johnson. Do you----
    Mr. Bugajski: If we made a bad decision over Kosovo, this 
will affect Bosnia. If for instance, we allow for a partition 
of Kosovo, unilateral, in return for Serbia allowing Kosovo to 
enter international institutions, Serbia would then use this as 
a precedent, as a pretext for Republika Srpska. And I think 
that is what some in the Serbian government are aiming for.
    Senator Johnson. So, the last thing I want to talk about is 
organized crime. In my chairmanship of Homeland Security, you 
go down to Central America, for example, and your eyes are 
opened. You know, our insatiable demand for drugs has given 
rise to the drug cartels, their untouchables. That creates a 
level of impunity. But, you find out it is very difficult for 
law enforcement, because you are a new sheriff in town, and you 
get a DVD from the drug cartels showing your family going into 
church, going into schools.
    Went with Senator Murphy, and we visited Ukraine, met with 
the new prosecutor generator, who, I think, had to have both 
arms twisted off to accept that position, which I actually 
found very encouraging, but you got a very good primer, in 
terms of the overall corruption within that prosecution--within 
those prosecutors then--in Ukraine.
    So, can you describe, with that kind of granularity, the 
type of organized crime we are talking about in the Western 
Balkans? And again, I am not assuming it is common between all 
the nations there, but can you describe what we are--what you 
are talking about?
    Mr. Bugajski: Yes, I would say, Senator, that the Balkans 
are both a generator of organized crime, but also a transit 
route for organized crime, between the Middle East and Europe, 
even between South America and Europe, for some of the cocaine 
that comes in to ports on the Adriatic Sea.
    In terms of internal generation, there is, unfortunately, 
because of the lack of rule of law, lack of judicial reform, 
connections between politicians and criminals, which exists 
throughout the region--I would not single out any particular 
country--this not only corrupts the political system, it also 
generates revenue for criminals, it means that borders are 
porous for criminals, and then into Europe--a lot of the drugs, 
people-smuggling, weapon-smuggling go through the region.
    Senator Johnson. So, it needs to be all of the above. It 
is----
    Mr. Bugajski: All of the above.
    Senator Johnson.--drugs, human and sex trafficking, it is--
--
    Mr. Bugajski: Exactly. Exactly.
    Senator Johnson. Okay.
    Mr. Bugajski: One thing I would say, though, and I would 
not give up on this. Some moves have been made to try and 
tackle this problem. And this is precisely where we should be 
supporting any new government that pledges itself to really 
tackling corruption, because corruption and crime are often 
interlinked. And this is why it is worth watching--we mentioned 
Kosovo--the new government, the new ``Prime Minister in 
waiting,'' Albin Kurti, has actually said--and he is not 
implicated in any criminal behavior; he has never been in 
government, so he has not been involved or been tempted by 
corruption, even, at this point--he has said that we need an 
Elliott Ness in Kosovo, we need somebody that actually deals 
with these criminals within our institutions, or linked with 
our institutions, and try them, convict them, and imprison 
them. That has not happened in the region.
    Senator Johnson. Is it as brutal as you see in Central 
America?
    Mr. Bugajski: I do not know Central America well, I do not 
know South America that well. I was in Central America many 
years ago. There were Communist insurgencies going on at the 
time. Organized crime is not as brutal, in the sense of what I 
see going on in places like Mexico and Colombia. I do not think 
it is as intrinsic to those societies as it has become in 
certain Latin American countries.
    Senator Johnson. Thank you.
    Senator Shaheen, do you have anything further?
    Senator Shaheen. No.
    Senator Johnson. Dr. Ruge, did you want to add anything to 
that?
    Dr. Ruge. On organized crime?
    Senator Johnson. Sure. Or anything else. Because I think we 
are about ready to close out the hearing, then.
    Dr. Ruge. On organized crime, I would just remind how 
tightly related organized crime is to ethnic politicians and 
existing structures, which are either Dayton peace agreements 
constitution in Bosnia, which produces an enormous amount of 
overlapping competencies, fragmented institutions, et cetera, 
that reduce possibilities for oversight and accountability.
    It is an inheritance of a conflict, where, in fact, 
criminal combatants, smuggling groups, and ethnic leaders were 
connected in one network, and it survived in the aftermath of 
the conflict. And I think it is important, both in--from the 
point of view of security and economy, but it is also important 
to keep this in mind when negotiating any solutions for fixing 
either Dayton Peace Agreement, electoral law, structures in 
Bosnia, or coming to a solution in northern Kosovo, where we 
have an enormous amount of legal loopholes that facilitate 
smuggling, tax--obviously, tax evasion that facilitate all 
sorts of organized crime. And so, you know, if I would have one 
recommendation to Special--to Special Representatives that we 
have is to really understand to what extent criminality is 
interlinked with the issues that we are discussing under the 
pretext of protection of ethnic interests.
    Senator Johnson. Okay.
    Dr. Ruge. If there is one point I would like you to leave 
with it is that on.
    My final thank you--and this is--basically, ties to my 
final point, is--I cannot overemphasize how important it is to 
give political support to your career professionals on the 
ground who are--who have, you know, institutional memory, who 
know what is happening, and who are really trying to push back 
against everything that we have identified in this testimony.
    And, just as an anecdote, to quote a name of a person who 
has actually helped me come here, is your Consular Officer, 
Anthony Bronson, in Berlin, who has gone beyond the call of 
duty and turned up in the Consulate at 5:30 a.m. in Berlin to 
issue me a visa so that I could actually make my plane and come 
to Washington.
    So, I will leave you with that.
    Thank you.
    Senator Johnson. Again, I appreciate you giving him a 
shout-out.
    Senator Shaheen?
    Senator Shaheen. Well, yes, I was going to say that. I 
think we very much appreciate the expertise, the experience, 
and the commitment of our dedicated Foreign Service 
professionals, and I appreciate your pointing that out and 
recognizing just what a difference they make.
    Thank you both very much for your testimony.
    Senator Johnson. So, you guys--you seem like you want to 
say something.
    Mr. Bugajski: No, just thank you, at this point.
    Senator Johnson. Okay.
    Well, again, I want to thank both you witnesses. I have, 
personally, found this hearing to be very informative, which is 
the point of----
    Senator Shaheen. Not always the case.
    Senator Johnson. Well, it is the point of hearings. So, 
again, thank you very much.
    The hearing record will remain open, for the submission of 
statements or question, until the close of business on Friday, 
October 25th.
    This hearing is adjourned.
    [Whereupon, at 4:40 p.m., the hearing was adjourned.]
                              
                              ----------                              


              Additional Material Submitted for the Record


Responses of Deputy Assistant Secretary Matthew A. Palmer to Questions 
              Submitted by Ranking Member Robert Menendez

    Question. The appointment of U.S. Ambassador to Germany Richard 
Grenell as Special Presidential Envoy for Serbia and Kosovo Peace 
Negotiations only a month after you were appointed as Special 
Representative for the Western Balkans raises many questions about the 
decision-making process around this appointment:
    Ahead of Ambassador Grenell's appointment, did the State Department 
request or recommend the appointment of a Special Presidential Envoy 
for Serbia and Kosovo Peace Negotiations in addition to the already-
created Special Representative for the Western Balkans?

    Answer. The State Department and White House consulted on the 
appointment, and the Department welcomed Ambassador Grenell's 
appointment as Special Presidential Envoy for Serbia and Kosovo Peace 
Negotiations. Along with my appointment by Secretary Pompeo as Special 
Representative for the Western Balkans, Ambassador Grenell's role 
underscores the sustained commitment of the United States to the region 
and the importance we place on the normalization of relations between 
Kosovo and Serbia.

    Question. Did the White house ask for the State Department's input 
before appointing Ambassador Grenell to this additional role? Did the 
White House notify you or the State Department before publicly 
announcing Ambassador Grenell's appointment on October 3rd?

    Answer. The White House consulted directly with the State 
Department on Ambassador Grenell's appointment.

    Question. How much of his time is Ambassador Grenell dedicating to 
this envoy position? What impact has the time Ambassador Grenell spends 
on his additional role had on Embassy Berlin's ability to conduct 
diplomatic engagements with the German government? In your response, 
please do not refer us to Ambassador Grenell or Embassy Berlin.

    Answer. Ambassador Grenell has energetically engaged on Kosovo and 
Serbia, in addition to his duties in Berlin. Like the late Ambassador 
Richard Holbrooke, who worked to advance peace in Bosnia and 
Herzegovina during his tenure as U.S. Ambassador to Germany, Ambassador 
Grenell is encouraging a durable peace in Kosovo and Serbia while 
simultaneously engaging his German counterparts and advancing U.S. 
interests in Germany. The Germans, too, are very interested in peace 
talks between Kosovo and Serbia.

    Question. The process of creating multiple overlapping positions 
within such a short timeframe seems to have taken Serbia's government 
aback, with President Vucic commenting that ``This was surprising news 
to us. You know we have talks and negotiations under the auspices of 
the European Union, and we already had in mind the special envoy, 
Palmer; we have a fair relationship with him. Now, apparently, 
President Trump has appointed a new man as a special envoy.''
    Were the governments of Serbia and Kosovo notified of Ambassador 
Grenell's appointment ahead of the public announcement on October 3d, 
and who notified them? How has the confusion around Ambassador 
Grenell's appointment impacted his ability to work with the Serbian 
government? How has it impacted your work?

    Answer. The State Department had no communication with the 
governments of Kosovo or Serbia on the announcement before October 3. 
Leaders in both Belgrade and Pristina welcomed Ambassador Grenell's 
appointment, which underscores the attention the United States is 
devoting to supporting efforts to reach a locally-owned agreement on 
the normalization of relations. On October 4, Serbian President Vucic 
publicly stated that Grenell is, ``A serious and responsible person, a 
person with the trust of the American President.'' Ambassador Grenell 
spoke by phone with Kosovo President Thaci and Serbian President Vucic 
shortly after his appointment and met with leaders and business 
officials in both countries during October 8-9 visits to Pristina and 
Belgrade. Ambassador Grenell and I closely coordinate our activities, 
which are mutually reinforcing. I will continue to be a regular visitor 
to both Pristina and Belgrade where I will meet with a wide range of 
public officials and civil society actors to advance U.S. interests.

    Question. During the hearing you described your relationship with 
Ambassador Grenell as more of a partnership than a division of 
responsibilities, but going forward I am concerned that having multiple 
officials with overlapping responsibilities will create unclear lines 
of communication for our international partners:
    If you do not have divided responsibilities and are simply 
coordinating on the portfolios, what is the point of having two 
positions that basically do the same thing? How do you and Ambassador 
Grenell divide up serving as the main contact for the governments of 
Serbia and Kosovo as well as other international partners and by whom 
was it communicated? On what issues do foreign governments reach out to 
you as the primary point of contact and on what issues do they reach 
out to Ambassador Grenell?

    Answer. This is not the first time there have been multiple U.S. 
Government representatives to the Western Balkans. During the Clinton 
Administration, both Ambassador Holbrooke and Ambassador Gelbard were 
involved in seeking to mediate peace between the Milosevic regime and 
Kosovo officials, including the Kosovo Liberation Army.
    Today, in addition to our Chiefs of Mission in the region, having a 
Presidential Special Envoy for Serbia and Kosovo Peace Negotiations and 
a Special Representative of the Secretary of State for the Western 
Balkans underscores the importance we place on this region. Ambassador 
Grenell, our Embassies in Belgrade and Pristina, and I work closely 
together toward a common objective--normalization of Kosovo-Serbia 
relations. Our interlocutors in the region and throughout Europe 
understand that the United States is focused on facilitating a positive 
outcome and they can engage any appropriate U.S. Government official 
and receive a coordinated response on U.S. policy.

    Question. How frequently does Ambassador Grenell talk to personnel 
at the White House about Serbia-Kosovo negotiations? With whom at the 
White House does he discuss the negotiations? Do you or other State 
Department officials participate in conversations that Ambassador 
Grenell has with the White House? If not, does he provide you and the 
State Department with readouts of the conversations afterwards? Do you 
or other State Department officials help Ambassador Grenell prepare for 
those conversations? In your response, please do not refer us to 
Ambassador Grenell, Embassy Berlin, or the White House.

    Answer. Ambassador Grenell, the staff of the National Security 
Council, our Ambassadors in the field, and I are in regular 
communication to advance U.S. interests in the Western Balkans, which 
includes reinvigorating Kosovo-Serbia negotiations. The State 
Department has provided Ambassador Grenell with regular briefings, and 
he has participated in briefings held in Berlin by European leaders. 
There is frequent coordination on these issues at both senior and 
working levels to support the governments in Pristina and Belgrade as 
they work toward a locally owned agreement that is durable, 
implementable, and advances regional stability and prosperity.

    Question. In your testimony, you stated that Ambassador Grenell is 
someone who can bring ``the full weight and heft of the White House to 
this problem set.'' You also work for the U.S. government. Do you not 
feel that you can bring ``the full weight and heft of the White House 
to this problem set''? If not, why not?

    Answer. Ambassador Grenell's direct access to the President and 
ability to act on his behalf ensures we can play a pivotal role and 
underscores the political capital we are investing into U.S. engagement 
in support of progress on Serbia-Kosovo. Ambassador Grenell has had 
regular discussions with President Trump on these issues. His work is 
complemented and reinforced by the Secretary of State's attention to 
this vital region, as evidenced by my appointment as his Special 
Representative. The United States is committed to helping the region 
succeed and, as part of this, places tremendous importance on the 
normalization of relations between Kosovo and Serbia, a crucial element 
of the Western Balkans' integration into the West.

    Question. I share your disappointment with the EU's failure to open 
accession talks with North Macedonia and Albania and am concerned about 
how that will impact the Balkans' trajectory. Please provide a detailed 
list of engagements the State Department has had with the French 
government and any other governments State believes were involved in 
blocking the opening of talks regarding this issue, including who was 
involved in the engagements and when they occurred. Please provide 
copies of cable traffic describing U.S. diplomatic efforts on this 
problem. Your answer can be provided in classified format if necessary.

    Answer. The State Department engaged extensively in support of 
North Macedonia and Albania's EU accession with all EU member states 
and EU institutions and will continue to do so.
    The State Department demarched all 28 EU member states in support 
of North Macedonia and Albania's EU accession three times from March to 
October, 2019. In advance of the October European Council decision, 
U.S. Ambassadors to France and Germany spoke with senior foreign 
government officials to encourage consensus decisions at the European 
Council in support of North Macedonia and Albania. I personally 
traveled in early October to Paris, The Hague, and Berlin, to reiterate 
and underscore this message to senior government officials in those 
capitals. Senior State Department officials, including Secretary 
Pompeo, Deputy Secretary Sullivan, Under Secretary Hale, and Acting 
Assistant Secretary Reeker regularly pressed the issue in bilateral 
meetings and multilateral fora involving European leaders.

    Question. I am deeply concerned that USAID is moving to reduce its 
presence in Albania, especially as China ramps up its own presence. As 
you stated in response to Senator Murphy, what your counterparts in the 
Balkans want ``is people, what they want is time and attention, what 
they want are meetings . . . what they want is to know they have our 
attention.'' This USAID reduction in presence move is precisely the 
opposite of what you said our Balkan partners want.
    What have Albanian officials said to you regarding the planned 
reduction of USAID personnel? How does State assess this drawdown will 
impact U.S. influence in Albania and the Albanian government's and 
people's perceptions of the U.S.? What message do you believe this 
reduction sends to Albania and to the Balkans as a whole regarding U.S. 
commitment to the region?

    Answer. Reaction from the Government of Albania to USAID's 
transition plan has been mixed. USAID reports that their Albanian 
counterparts understand that USAID intends its transition as an 
indication of the United States' confidence in the GOA's commitment and 
capacity to become a more self-reliant country, able and willing to 
lead in solving its own development challenges. Albanian officials have 
sought assurances from the U.S. Embassy in Tirana that we will continue 
supporting programs aimed at bolstering democratic institutions, 
strengthening good governance, and improving transparency and 
accountability.
    Over the next 2 years, USAID will narrow the focus of its programs 
to target the priority sectors of countering corruption and economic 
growth. By 2021, USAID anticipates the launch of a new legacy 
initiative to continue important work in these sectors. USAID's 
transition plan calls for a gradual reduction of its presence in 
Albania. By the end of CY2021 USAID will be led by a Senior Development 
Advisor (SDA) and supported by two Foreign Service National (FSN) 
staff. The SDA will consult with key GOA officials, other donors, civil 
society, and the U.S. interagency on priority development issues, and 
engage with the private sector and relevant business associations to 
develop new investments. USAID currently has a staff of one U.S. Direct 
Hire and eight FSNs.
    Albania is a strategic NATO ally and partner. The State Department 
will continue to support Albania's Euro-Atlantic integration with other 
foreign assistance programs, including programs funded through the 
Bureau of International Narcotics and Law Enforcement (INL) and U.S. 
Embassy Tirana's Public Affairs Section (PAS), to strengthen the 
justice sector, promote freedom of expression, combat organized crime 
and violent extremism, and improve border security. This continued, 
strong commitment to helping Albania achieve its desired Western 
integration reflects the United States' broader, enduring commitment to 
the region overall.

    Question. How will the presence of S-400's in Serbia impact any 
U.S. or NATO exercises running concurrently or any U.S. or NATO troops 
who would be there at the same time? How will Serbia's decision to 
conduct an exercise with Russia and S-400's impact future U.S. and NATO 
exercises and other interactions with Serbia? Is Serbia looking to 
purchase S-400's in the future? Your answer can be provided in 
classified format if necessary. In your response, please do not refer 
us to the Department of Defense.

    Answer. Serbia hosted a joint military exercise with Russia, known 
as ``Slavic Shield 2019,'' October 23-29, 2019. According to the 
Russian and Serbian Ministries of Defense, Russia deployed S-400 and 
Pantsir-S systems for use during the exercise. During the time these 
systems were there, there were no U.S. or NATO exercises in Serbia. 
While we respect Serbia's right to host exercises on its own territory 
with military partners, we have urged the Government to make decisions 
that reflect the value it places on its partnership with both NATO and 
the United States. The State Department is not aware of plans by Serbia 
to purchase S-400's.

    Question. In response to a question for the record on Russian 
military equipment deliveries to Serbia, Ambassador Godfrey (then a 
nominee) stated that ``Press reports indicate that Russia has agreed to 
supply Serbia with additional military equipment, but reports differ on 
the numbers and types. Equipment recently reported in the press 
includes 20 additional BRDM-2Ms armored wheeled vehicles, 30 used T-72 
main battle tanks, and Pantsir-S1 air defense systems.''
    Has any of this equipment been delivered? Please provide an updated 
list of deliveries of Russian military equipment to Serbia since July 
2019 and an updated list of reported future deliveries of Russian 
military equipment to Serbia, including whether Serbia has signed a 
contract for those deliveries and delivery dates are planned. Answer 
can be provided in classified format if necessary.

    Answer. President Vucic told the press that on July 19, 2019, 
Serbia received 10 BRDM-2MS armored scout cars from Russia--an upgraded 
variant of a vehicle long in Serbia's inventory. The Serbian government 
has not released any information on costs or payments for transport or 
upgrades. These vehicle donations reportedly were part of a larger deal 
with Russia announced in 2016 that included six MiG-29s delivered in 
2017; 20 additional BRDM-2MS vehicles still pending delivery; and 30 T-
72 main battle tanks also still pending delivery. On October 16, the 
Serbian government received three new Mi-17V5 military transport 
helicopters that it purchased from Russia. Press reported that the 
helicopters were delivered to Serbia by Russian military aircraft. 
According to press and the Serbian Ambassador to Russia, four Mi-35M 
attack helicopters, also purchased from Russia, will arrive soon. On 
October 22, components of a Russian military-operated S-400 (SA-21 
GROWLER) arrived in Serbia via Russian military aircraft to participate 
in a joint Russian-Serbian air defense exercise. On October 23, two 
Pantsir S (SA-22 GREYHOUND) arrived in Serbia to participate in the 
same exercise. President Vucic publicly stated on October 25 that 
Serbia had ``ordered'' and ``paid for'' the Pantsir system. It is 
unclear if the systems delivered by Russia to Serbia on October 23 
would then transfer to the Serbian armed forces. On October 26, the 
Serbian minister of defense said that ``Pantsir is now becoming a part 
of the armed forces of Serbia.''

    Question. You testified that the difficulties in arranging 
international finance for the Kosova e Re plant were due more to a 
general disinclination to fund new coal plants more than any particular 
objections to this specific plant. However, when announcing that they 
would not fund the project the World Bank said ``We are required by our 
by-laws to go with the lowest cost option and renewables have now come 
below the cost of coal.'' Several independent assessments have reached 
similar conclusions:
    In light of the fact that the economics of Kosovo's energy options 
have changed considerably with the plummeting costs of renewables, when 
did the State Department last update its economic assessment of this 
project? Can you please share with the committee the State Department's 
most recent economic analysis that demonstrates that the World Bank is 
wrong, and that coal remains the least cost solution?

    Answer. USAID funded a June 2019 study of electricity supply 
options, based on the Government of Kosovo's energy strategy. The study 
found the costs of implementing a generation mix that included coal and 
renewables--as established by the Kosovo energy strategy--were on par 
with the costs of other power supply scenarios. Further, a number of 
shortcomings in the World Bank's study were identified: among the most 
critical was its analysis of Kosovo's electricity sector as an 
isolated, single system, disregarding the regional electricity market's 
value in providing potential electricity trading and import/export 
opportunities. The World Bank report also made no allowance for the 
importance of energy security in a region beset with grievances from 
past conflicts.
    In addition to cost considerations, Kosovo's long-term national 
security depends on securing a robust and reliable supply of energy. At 
present, Kosovo relies on two of the region's oldest and most polluting 
power plants--Kosovo A and B--for 97 percent of domestic electricity 
generation. In addition, Kosovo's ability to secure regional market 
access to imports on commercial terms is severely hampered by the fact 
that Serbia currently controls its energy connections to the European 
Grid. Kosova e Re will rely on proven domestic resources and 
incorporate the latest environmental technology that will reduce dust, 
sulfur, and emissions of dangerous gases including sulphur oxides, 
nitrogen dioxide, and carbon dioxide from their current levels.
    If this project fails, Kosovo may be forced to consider 
alternatives that include Russian-sourced energy. Many Balkan nations 
and much of southeast Europe are either directly or indirectly affected 
by Russian energy policies and supply; those that are gasified rely 
almost exclusively on Russia as a supplier. In order to maintain its 
energy independence, Kosovo needs new generation, and Kosova e Re is 
the most practical, most efficient, and most feasible option. 
Supporting this project is squarely in the U.S. national interest.

    Question. The European Bank for Reconstruction and Development 
(EBRD) is already funding renewable projects in Kosovo, EBRD is helping 
the government organize a renewable energy procurement tender, and both 
EBRD and the International Finance Corporation (IFC) are considering 
funding additional solar and wind projects:
    Does the State Department support these efforts by IFC and EBRD? 
Why or why not? How will the reduced capacity factor of the coal plant 
caused by these projects coming on line affect (1) the economics of the 
proposed coal plant and (2) the electricity rates for Kosovo's 
households and businesses? Please provide State's most recent analysis 
of that effect.

    Answer. The State Department enthusiastically supports renewable 
projects in Kosovo and around the world. Kosova e Re, as currently 
planned, would add a negligible amount of net capacity to Kosovo's 
overall generation capacity, because it would replace approximately 
600MW of current coal-fired generation capacity. For this reason, 
Kosova e Re and renewables are complementary and equally necessary. The 
renewable projects will not reduce the capacity factor of the coal 
plant, and will not be the only factor impacting electricity rates for 
Kosovo's consumers. Given that current electricity generation comes 
from fully-depreciated assets, any new generation is likely to result 
in changes to energy costs that will be reflected in energy tariffs 
that have yet to be determined by the energy regulatory authority.

    Question. Will the State Department commit to refraining from 
exerting any political influence over the Development Finance 
Corporation's deliberations and decision-making processes regarding 
consideration of providing support for the Kosova e Re project 
proposal--a process that, as outlined in the BUILD Act, must be made on 
basis of a project's merit and delivery of wide-ranging and inclusive 
development outcomes?

    Answer. The State Department commits to following all appropriate 
requirements pertaining to the Development Finance Corporation.

    Question. Independent analysis has shown that the Kosova e Re 
project would create an enormous financial burden for the Government of 
Kosovo. ContourGlobal expects the project to cost =1.3 billion, seventy 
percent of which will be financed with debt, and 30 percent with 
equity. Under the PPA, all of the fixed costs--including the equity 
return and the debt payments--must be covered by Kosovo, and Kosovo 
will also absorb significant additional operational costs. This is a 
huge burden to bear for a country with a GDP of U.S. $7.25 billion:
    Please provide State's most recent assessment of the financial and 
economic risks this agreement poses to the Government of Kosovo. How do 
these risks compare to those of the renewable alternatives that the 
World Bank preferred and are currently being pursued by EBRD and IFC? 
Is the State Department concerned that such a large single investment 
will crowd out the Government's ability to finance projects and 
programs to achieve other important public priorities? If not, why not?

    Answer. The State Department acknowledges the inherent risks in 
large-scale infrastructure projects. However, IMF statistics show 
Kosovo's debt load to be consistently under 20 percent of GDP. This is 
considerably lower than in other countries in the region where debt 
burdens range from 38 percent in Bosnia and Herzegovina to 74 percent 
in Montenegro.
    Today, Kosovo's economy loses $350-$400 million annually due to its 
persistent power outages. The Kosova e Re project is the largest and 
most economically important investment ever attempted by Kosovo, and it 
is vital to the country's economic future. Certainly these were some of 
the judgments that led the government of Kosovo to make the Kosova e Re 
project the cornerstone of its energy policy. The State Department 
supports the Kosovo government's pursuit of its energy objectives.

    Question. At the time the contract to build the plant was awarded, 
Kosovo law required that a minimum of two bidders must tender bids for 
a bid to be legally accepted. However, only ContourGlobal submitted a 
bid for the project:
    Given the concerns you raised in your testimony about how cronyism 
and rule of law concerns adversely affect the business environment for 
foreign investors, how should the incoming government address the fact 
that the procurement process violated Kosovo law?

    Answer. The initial planning and procurement for this project began 
approximately 13 years ago. In the first round of bidding, in 2006, 
four out of six interested firms prequalified. There were four more 
bidding rounds between 2010 and 2015, each generating less interest. In 
2015, only ContourGlobal (which had bid in every preceding round) 
remained interested.
    The procurement process in 2015 was led by the Government of Kosovo 
Ministry of Economic Development (MED) Project Implementation Unit with 
assistance from IFC transaction advisors, and conducted according to 
World Bank standards. At its conclusion, no objections or appeals were 
filed--including from international financial institutions.

    Question. The European Energy Community is now considering whether 
the provisions of the contract between ContourGlobal and Kosovo are 
compliant with the Energy Community State Aid requirements. The 
Secretariat of the European Energy Community made a preliminary 
determination that the Agreement may violate state-aid prohibitions by 
allocating project risks ``entirely in favor of ContourGlobal,'' and by 
shielding ContourGlobal from virtually all of the risks associated with 
operating a power plant:
    Is this the kind of cronyism that you testified the State 
Department is working to end? If Kosovo is found to be in violation of 
its treaty obligations, how will it affect the goals of creating closer 
ties between Kosovo and the EU, EU ascension, and regional economic 
integration? Does this arrangement affect U.S. interests in promoting 
an open and competitive business environment in Kosovo, and our 
interest in being seen to do so consistently and credibly?

    Answer. The Energy Community's prohibition on state aid includes an 
exception for new generation necessary to achieve security of supply. 
To our knowledge, no case on state aid to date has been opened against 
Kosovo. In the event one is filed, we understand the Government of 
Kosovo believes it has well-founded legal arguments.
    Given the investment climate in Kosovo, a fixed power purchase 
agreement was considered necessary to provide guarantees to potential 
investors. If Kosovo were to be found in violation of its treaty 
obligations, the U.S. would expect the affected parties to negotiate a 
solution in good faith.

    Question. You testified that it was not only financing that was 
holding up this project; that there were things that Government 
ministries and officials needed to do if this project is to be 
implemented:
    Please elaborate on what, specifically, you believe the Government 
of Kosovo must accomplish or do differently to get this project 
started. Is part of this related to environmental assessment and public 
consultation? Please explain any steps that you believe the Government 
must take to address these issues.

    Answer. While ground breaking is many months away and project 
commissioning is not expected until mid-2024, substantial progress has 
been made on technical, environmental, and financial tasks since the 
contract was signed in December 2017. There are several outstanding 
tasks necessary to reach financial closure and move forward with 
construction. Some will be challenging for the Government of Kosovo to 
complete. The most critical tasks at the moment are obtaining 
legislative approval of the state guaranty, securing authorization for 
tax incentives incorporated into the contract, completing the power 
purchase agreements (PPA), finalizing and beginning implementation of 
the mine development plan, and eventually acquiring any necessary 
approvals on State Aid issues from the Energy Community.

    Question. Completion of a new 500 MW coal plant will also make it 
extremely difficult--if not impossible for Kosovo to meet its 
commitment under the Energy Community Treaty to reach 25 percent of its 
total final energy consumption from renewable energy sources by 2020, 
let alone the more stringent targets the Energy Community is expected 
to adopt for 2030:
    How do you believe that Kosovo should factor these treaty 
commitments into its energy sector planning?

    Answer. Kosovo is committed to achieving its renewable energy 
target of 25 percent by 2020. These commitments are written into law, 
and Kosovo is poised to meet them, most likely in 2021. According to 
Eurostat, 24.6 percent of Kosovo's total energy consumption comes from 
renewables. This data has also been validated by the Energy Community 
Secretariat. Support for the KRPP project does not adversely affect 
this commitment. In fact, renewable energy continues to benefit from 
priority dispatch and thus is arguably better positioned in the market 
than other generation.

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