BALKAN REGIONAL PROFILE:

I. INTRODUCTION

Four major tendencies continued to characterize the evolution of the regional situation in Southeastern Europe in July 2002:

The first tendency is seen in the social shifts in various spheres and countries, induced by the drive to join the EU.

Second is the clear prioritizing of NATO accession by three of the six Balkan candidates (Bulgaria, Romania, and Slovenia), motivated by the upcoming November summit of the alliance in Prague.

The third tendency is the intensification of Russian efforts to return as an influential political factor in the Balkans, and, in particular occasions, in multilateral great-power settings too.

The fourth is growing importance of the fight against terrorism plays for the integration of individual Balkan actors – regionally as well as on a European and global scale.

1) The perspective of EU membership is a driving force of change and progress in the candidate countries already negotiating for accession with the EU – in countries implementing their Stabilization and Association Agreements (SAA) as well the few that are preparing to launch the negotiation process for signing SAAs. The EU already has a functioning strategic political toolbox for the Balkans that provide it with adequate active and reactive approaches to the variety of issues the region is still grappling with. For example, EU High Representative for Foreign and Security Policy Javier Solana visited Belgrade to try to accommodate the diverging positions of Serbia and Montenegro on the constitutional basis of the new loose federation of Serbia and Montenegro; the EU foreign ministers urged the former Yugoslav states to accelerate the return of refugees; the Stability Pact for Southeastern Europe highlighted the deficiencies of project drafting in the recipient countries, etc. It is only a question of time when the Balkan states will become more effective and will accelerate their integration capabilities, which are expected to match the EU’s own expansion matrix.

2) The upcoming summit of NATO in Prague is a solid motivation to press on the reforms that are indispensable to allow NATO to invite Bulgaria, Romania, and Slovenia to join the organization. There are two types of tasks that the three hopefuls for the Prague summit are expected to solve: tasks that must be solved by November, and tasks that are part of a longer process that has to continue at the highest possible rate until November and beyond. If any issues in this area remain open, according to ISIS, these would be issues related to adapting to the interim period after Prague and the full integration in NATO. The ratification processes in the individual countries will pose challenges to the new invitees, as will NATO on specific topics. The sooner the three candidates start thinking of these new tasks, the sooner full membership will be realized.

3) Russia is restoring its traditional influence in the Balkans through various channels. After Russia recently joined the NATO Council and the G-8 group and signed strategic agreements with the US, Russian President Putin declared Russia once again to be a global power. This claim has clear implications for the Balkan region as well: Russia is a strategic energy supplier for all states in the region; Moscow continues to sell arms to Greece; Russian economic subjects are receiving substantial support from the state to join the privatization processes in different Balkan countries. Where necessary, Russia deals with other great powers in multilateral settings concerning certain problems in the Western Balkans.

4) During the past month, one of the oldest existing terrorist organizations in the world, “17 November”, was broken up by Greek counter-terrorist forces and police, in cooperation with US and British experts. The leader of November 17 and his deputy were arrested, and the organization is expected to be completely neutralized well before the 2004 Olympics in Athens. The arrest of some terrorists is said to have prevented an attack on NATO peacekeepers on their way from Thessalonica to the Former Yugoslav Republic of Macedonia (FYROM) and Kosovo. FYROM decided to join the International Security Assistance Force (ISAF) in Afghanistan as part of the Bulgarian contingent. It also plans to participate in the Turkish contingent with a small FYROM unit at a later date. Romania increased the number of its troops in ISAF this month.

The response of the EU and most of its individual members to the current global security situation has been informed by the fact that Europeans have lived for long with the perception of an unavoidable vulnerability, including from terrorist acts. Considering the present terrorist threat in Europe, ISIS concludes that Europeans have not yet developed a perception of a ‘European Homeland’. On one hand, the EU’s present vision reflects an inadequate level of integration of Europe, but on the other hand, it is also evidence of an under-estimation of the real danger terrorism poses on the world. If the goal of terrorism is to spread terror and Europe is an easier target than the US, terrorists will not miss the chance to bring their ‘terror potential’ to bear in Europe too. What seems to be required is a more encompassing concept of European security from terrorism than the one presently cherished by EU states.

In July, a major dispute about the new International Criminal Court (ICC) and its authority to prosecute US war crimes led to dramatic discussions in the UN Security Council that threatened the future of the peacekeeping mission in Bosnia and Herzegovina. Analysts noticed that in the end of June the US Administration extended for one more year the state of national security emergency in connection with the Western Balkans. A clear US commitment to be a leader in stabilizing the region, including Bosnia and Herzegovina, was the reading of this decision. The US position at the UN Security Council meeting dealing with the ICC was not new, but in practical terms it made the withdrawal of the US forces from Bosnia and Herzegovina very probable. A final compromise was reached that excluded the possibility of US soldiers being arraigned before the ICC, and the stability in Bosnia and Herzegovina was preserved.

Some Balkan countries experienced domestic political crises in July: in Croatia, the government had to resign after disagreements between the ruling coalition parties; in Serbia the ruling coalition also demonstrated lack of cohesion, and the Constitutional Court has been involved in the political fight between the Yugoslav president and the Serbian prime minister; in Turkey, the government crisis led to the dissolution of the ruling coalition and to a call for early elections in November In Albania, a significant consensus decision was reached by the parliament that led to the election of the country’s president.

The bilateral relations were rather active and added to the evolving regional fabric of cooperation. The trilateral links between the former Yugoslav republics of Croatia, Bosnia and Herzegovina, and Serbia promise to accelerate of the return of refugees – an unfulfilled promise and an issue that is largely criticized by the EU. The Stability Pact for Southeastern Europe sent a troubling signal that inadequate preparation of the projects proposed by the Balkan countries still prevents the donors from providing some promised €5 billion.

The last meeting of the Vilnius Ten candidates for membership in NATO before the Prague summit focused on practical issues that remain to be tackled in the next months. Bulgaria, Romania, and Slovenia are very close to receiving an invitation to join NATO. An annual PfP navy exercise was organized near the Black Sea coast of Bulgaria.

Of the major world powers, the US continued to be the region’s most active political and strategic partner, but Russia also demonstrated a growing interest in the Balkan region – both economic and political. China also exhibits a low-profile interest in developing its position in the region.

II. SECURITY THREATS, CONFLICTS AND POST-CONFLICT DEVELOPMENTS IN THE BALKANS

1. Security Threats: Terrorism

a) Romania
As of 15 July, 405 Romanian troops were stationed in Afghanistan. During their six-month tour of duty, they will be providing escorts and guarding potential targets, as well as executing combat missions 120km from Kabul. The Romanian soldiers are participating on a voluntary basis. The battalion they come from has been participating in peacekeeping missions in Angola, Albania, Kosovo, and Bosnia and Herzegovina.

b) US
The US State Department announced on 2 July that the administration was going to block the assets of three more people who have provided leadership or material support to armed insurgents in the western Balkans, thus threatening the international stabilization efforts in the region. The sanctioned individuals are Gafur Adili, Nevzat Halili, and Kastriot Haxhirexha. The repeated occurrence of armed insurgency is a highly suitable milieu for terrorist activity in the western Balkans.

c) Greece
After discovering guns, ammunition, and rocket launchers in an Athens apartment that could be a hideout of 17 November, the most elusive urban guerrilla group in Europe, investigators have begun undertaking ballistic tests. 17 November emerged with the killing of the US CIA station chief in Athens, Richard Welch, in 1975. The last confirmed hit by the group was the murder of British military attaché Stephen Saunders in June 2000. The guerrilla group takes its name from a bloody 1973 student uprising against a military junta then ruling Greece. 23 killings are blamed on the group; among the assassinated were diplomats, business executives, and military personnel.

After days of persistent work, the Greek police and counter-terrorist forces dealt a major blow to the terrorist organization by arresting more than a dozen of its members, including the leader, 58-year-old Professor Alexandros Giotopoulos and the second-in-command, Pavlos Serifis. The police also found a flag bearing the organization’s device. A second terrorist weapons cache was also found. Intelligence sources in Greece alleged there was a link between the first 17 November member that was arrested, Sawas Xiros, and the Muslim extremist group Muslim Brotherhood.

The successful work of the Greek police has been largely supported by British Scotland Yard investigators and US FBI agents. A resolute battle against terrorism in Greece is indispensable on the eve of the upcoming 2004 Olympic Games that will be held in Greece. Greek Prime Minister Kostas Simitis said his country would be healed from the 27-year old plague of terrorism and would arrest all members of the group. The arrest of alleged 17 November members is alleged to have prevented a planned attack on a convoy of NATO peacekeepers driving from the Greek port city of Thessalonica to FYROM and Kosovo. The highway on which the troops were to drive had been scouted and plans prepared to attack the convoy with rockets and car bombs.

d) FYROM
The Macedonian press disclosed on 23 July that Macedonian soldiers would join the Bulgarian ISAF contingent in Afghanistan. Skopje also plans to support the Turkish contingent in Afghanistan with a small detachment of soldiers.

e)The “Europe Homeland” and the Fight Against Terrorism: An Opinion of ISIS
It is time to start thinking in broader terms of Europe’s vulnerability preparedness:
First, the European countries of Bosnia and Herzegovina, Kosovo, and Chechnya were already testing grounds for Islamic terrorism, apart from terrorist activists in Spain, Corsica, Northern Ireland, and Greece, etc.
Second, many aspects of the 9/11 attacks were prepared in Europe (France, Germany, etc.).
Third, an unknown number of men, women, and children have been trained in terrorist camps and schools to serve as potential suicide bombs, i.e. there are enough “weapons” for this kind of terrorist activity.
Fourth, Muslim and non-Muslim anti-Semitism may easily blow into terrorist acts Europe-wide.
Fifth, it is getting harder for terrorists to enter US territory, and Europe remains a more easily accessible target for spectacular acts of horror and destruction.
Sixth, one should never forget that terrorist masterminds are using foreign policy and geopolitical considerations very opportunistically and would hardly differentiate between the ‘Great Satan’, the US, and Europe, the old colonizer, if a demonstration of horrific destruction and death were needed for their cause.

A broader concept of reacting to terrorism from the point of view of effective policing and intelligence efforts is needed to protect the “European Homeland” from the terrorist danger. Accelerating European integration as a needed reaction to the negative repercussions of globalization as terrorism is, could be the framework effort.

2. The Conflict in FYROM and Post-Conflict Issues in Kosovo, Southern Serbia and Bosnia-Herzegovina

a) FYROM
On 4 July, the Macedonian parliament formally decided to hold general elections on 15 September. At the end of June, NATO Secretary-General Lord George Robertson visited Skopje for one day and called on the political leaders there to hold a peaceful campaign for the scheduled parliamentary elections. Robertson’s concern was prompted by the ethnic fragility of the country . He reminded the country’s leaders of the importance of the implementation of the Ohrid Agreement of August 2001 for the stability and peace. He emphasized that this was the key to the country’s stability and future integration in a united Europe. Ethnic divisions in individual countries are no longer acceptable in Europe.

b) Kosovo
On 11 July, the spokesperson of the US troops in Kosovo, Major Mark Ballesteros, said that by the end of this year, the US military would reduce its presence in Kosovo by about 1’000 troops, or 20 per cent. The reduction is part of the NATO plan to reduce peacekeeping forces in the Balkans by 4’800 to 33’200 troops. The reduction, decided by NATO in May, is a reflection of the progress Kosovo has made in the last three years. The announcement concerning the reduction plans came as US forces began a rapid-deployment exercise in eastern Kosovo, which is under the control of US troops. 200 soldiers from the US Army Southern European Task Force in Vicenza, Italy, parachuted into a training area 30 miles east of Pristina on 11 July. They were joined for the training and peacekeeping exercise by 200 US Marines. The exercise included 1’000 soldiers and was especially important considering the reductions. It trains US soldiers and demonstrates that they can be rapidly deployed to Kosovo if required.

c) Bosnia and Herzegovina
After a prolonged dispute in the UN Security Council between the US and the other 14 member-states over the new International Criminal Court (ICC) launched on 1 July, a decision was finally made to exempt US soldiers from prosecution for war crimes after a procedure in the UNSC each year. The US government threatened to withdraw its 2’500-strong contingent from the 18’000 SFOR troops and to stop paying 25 per cent of the UN peacekeeping bill if its troops were not excluded from these provisions of the Court’s Charter. The US fears its citizens and soldiers may be left vulnerable to frivolous or politically motivated prosecutions for war crimes. The compromise decision rescued the SFOR mission and alleviated Bosnian concerns that the situation could become destabilized. A withdrawal of US troops would have been a real disaster for the security in this country and the broader region. Bulgaria, the only Balkan country in the UNSC, abstained during the voting in the beginning of the dispute, though it is a signatory to the ICT agreement. The Bulgarian position is motivated by the need to achieve consensus and prevent the US withdrawing from SFOR. Preserving the stability in Southeastern Europe has always been a responsible position and has required various extraordinary decisions and initiatives at various times throughout the 1990s. During the deliberations in the UNSC, the UK and France were discussing contingency plans if the US withdrew its troops.

III. THE NATIONAL PERSPECTIVES OF THE BALKAN COUNTRIES: SPECIFIC ISSUES

1. Bulgaria
(1) In the last days of June, the National Assembly approved a report on the state of the country's defense and armed forces in 2001. The government approved the Bulgarian military strategy. It is purely defensive and is based on sustained defense capability, compatibility, operational partnership, modernization, and restructuring of the armed forces. (2) Smugglers have begun avoiding the Balkan heroin channel to Central Europe due to the effective measures taken by the Bulgarian official institutions. This was announced in the press on 5 July by leading Bulgarian anti-drug agencies. During the last two years, almost 50 per cent of all illegal drugs confiscated in Europe were intercepted at the Bulgarian borders.

2. Croatia
A political crisis led to the resignation of the government of Prime Minister Ivica Racan. He will continue to carry out his duties until the Croatian parliament decides about the composition of the new cabinet. It is very probable that Racan will head a new coalition government until the next elections in 2004.

3. Turkey
After weeks of political conflict, the leaders of the three parties of the ruling coalition agreed on 16 July to hold early parliamentary elections on 3 November. This follows the loss of the parliamentary majority by the government of Prime Minister Bulent Ecevit. Many members of parliament of his Democratic Left Party left the ruling parliamentary majority. This political crisis adds to the enormous economic and financial problems Turkey has been facing for years. This new element of instability is negatively reflected in the significant role Turkey plays in that part of the world.

4. Serbia and Montenegro
(1) The Financial Times reported on 25 July that Yugoslav companies laundered US$4 billion through the second-largest bank in Cyprus during the sanctions regime against the Former Republic of Yugoslavia. The transactions were imposed in 1992-94 and have been under the control of Slobodan Milosevic. (2) The parliament of Serbia decided to stage presidential elections in the country on 29 September. Yugoslav President Vojislav Kostunica and Deputy Prime Minister Miroljub Labus, a pro-Western economic reformer, have hinted they will compete for the position of Serbian President Milan Milutinovic when he vacates the position. (3) Kostunica’s Democratic Party was excluded on 27 July from the ruling coalition of 18 parties led by the prime minister of Serbia, Zoran Djindjic. The two leaders disagree strongly on the arrest of Slobodan Milosevic and his prosecution by the ICTY in The Hague. Kostunica continues to believe the release of Milosevic to the ICTY was a mistake and an illegal act. (4) The views of the Serbian and Yugoslav presidents on the one side, and of the Montenegrin leader on the other, continue to diverge. The drafting commission for the constitution was joined in the second half of July by EU High Representative for Foreign and Security Policy Javier Solana, who pressed for agreement on and stability of the new entity replacing the Yugoslav federation. While the Serbian leadership perceives the new constitution as an opportunity to solidify the federal character of a new single state, the Montenegrin leaders underline the need for new institutions that would reflect the diverging interests of Serbia and Montenegro.

5. Albania
On 24 July the new Albanian president, Alfred Moisiu (73), was sworn in a month after his election by parliament. He was elected by 97 out of 134 votes. He is the first Albanian president to enjoy the support of both the ruling party and the opposition. The former defense minister pledged to be the president of all Albanians and to bring his country closer to EU and NATO membership. Another major task will be to fight corruption and organized crime.

IV. THE BILATERAL AND MULTILATERAL RELATIONS IN THE BALKANS. THE STATE OF THE REGIONAL INITIATIVES

1. Bilateral Relations

a) Croatia-Bulgaria
Bulgarian President Georgi Parvanov visited Croatia from 4-7 July at the invitation of President Stipe Mesic. The two leaders signed agreements on visa-free border regime. They pledged to step up the cleaning of the Danube and the construction of the Sofia-Belgrade-Zagreb highway. President Parvanov met with the speaker of the Croatian parliament, Zlatko Tomic, Deputy Foreign Minister Vesna Tsvetkovic-Kurelez, and representatives of the Bulgarian community in Croatia.

b) Bulgaria-Turkey
The Defense Minister of Turkey, Sabahattin Cakmakoglu, visited Bulgaria from 8-9 July and met with his counterpart, Nikolay Svinarov. The Turkish minister confirmed his country's support for Bulgaria's and Romania's future membership in NATO. He said this would contribute to the balance of security in Europe.

c) Romania-Slovenia
On 8 July, Slovenian Foreign Minister Dimitrij Rupel visited Romania and met with his counterpart, Mircea Geoana. They agreed on cooperation between the two countries on their way to NATO and EU integration, and vowed to increase the present level of commercial exchange of only US$140 million. The two ministers were in agreement on the need to improve their cooperation with those Southeastern European states that would not be included in the integration processes with the EU and NATO soon.

d) Greece-Turkey
On 25 July Greece announced it would continue its moratorium on naval exercises in the Aegean Sea until the end of the summer. This diplomatic move aims at reducing tensions in Greek-Turkish relations. The two countries dispute the delimitation of the Aegean Sea.

e) Bulgaria-Serbia and Montenegro
Yugoslav Foreign Minister Goran Svilanovic visited Sofia from 25-26 July for official talks with his counterpart, Solomon Passy, as well as President Georgi Parvanov, Speaker of the Parliament Ognyan Gerdzhikov, and Deputy Prime Minister Nikolay Vassilev. The foreign ministers decided to reach an agreement by the end of this year on the parameters of free trade between the two countries. The Bulgarian minister of energy, Milko Kovatchev, and Svilanovic discussed the possibility of extending the natural gas pipeline from Bulgaria to Serbia by 100km. The two foreign ministers discussed the future of the long-planned highway between Sofia and Nis, part of a longer highway to Zagreb. The project faces financial difficulties, and the Stability Pact is no great help in improving the limited transportation links between Bulgaria and Serbia.

2. Multilateral Relations: Turkey-Greece-Bulgaria-Romania

Herzegovina-Serbia and Montenegro
The presidents of the three abovementioned former Yugoslav countries met on 15 July in Sarajevo, their first meeting since Dayton in 1995. President Stipe Mesic of Croatia, President Vojislav Kostunica of Serbia and Montenegro, and the three members of Bosnia's collective presidency, Beriz Belkic, Zivko Radisic, and Jozo Krizanovic, discussed property rights, the return of refugees, trade, and the fight against terrorism and organized crime, and signed an agreement that pledged full cooperation with the ICTY in The Hague. They also made a commitment to the return of refugees. The Bosnians called on their neighbors not to support the separation of institutions and systems needed for the normal functioning of the state - communications, the energy system, education, the intelligence services, and the army. If European and Euro-Atlantic integration is what the future holds for the three countries, it will not be enough to be faithful to the formal requirement of recognizing the sovereign Bosnian state and the existence of three nations and two entities, as Vojislav Kostunica said during the meeting. There are some remaining details that may cause the three countries to stumble on this road and need to be resolved.

3. Regional Initiatives: The Stability Pact for Southeastern Europe
Erhard Busek, the EU Stability Pact coordinator, said on 12 July that Western donors were unable to distribute  5 billion in aid pledged to the Balkans, because the Balkan states had failed to present viable projects. The EU, the US, Canada, Japan, and international financial institutions have pledged around  5.4 billion in 2000 and 2001, but have disbursed little of it - aid only went to projects whose progress could be verified on the ground. Busek is confident that by the end of this year,  2.4 billion will have been distributed.

V. THE ECONOMIC SITUATION OF THE BALKAN COUNTRIES AND THE REGION

1. US-Bulgaria
The Export-Import Bank of the US (Ex-Im Bank) is guaranteeing a medium-term loan that will allow completion of the 15-screen Kino Arena Multiplex in downtown Sofia. On 1 July was announced that Washington D. C.-based Somerset Investments will export the equipment to Alexandra Group Holding OOD of Sofia. Riggs Bank, N.A., Washington, D.C. is the guaranteed lender.

2. Serbia-Croatia-Romania
The three countries announced on 17 July in Belgrade they would sign a US$800 million deal in November on the construction of an oil pipeline within the EU INOGATE program. The pipeline will link the Romanian Black Sea Port of Constantia with Serbia's Pancevo refinery on the Danube river and Omisalj in Croatia. The oil is expected to come from Russia, Kazakhstan, Azerbaijan, and other Black Sea states, and will be piped to West European destinations. Internal management problems inside the Serbian refinery are still obstructing the project.3. US-Romania
The US Trade and Development Agency (TDA) announced on 18 July in Washington that it had approved a US$531'750 grant to Termoelectrica, Romania's state-owned thermal power generation company, to fund a modernization survey of nine power plants. The signing ceremony was held on that same day in Bucharest.

VI. THE PROCESS OF DIFFERENTIATED INTEGRATION OF SOUTHEASTERN EUROPE IN EU AND IN NATO

1. EU

a) EU-Countries of Former Yugoslavia
The EU foreign ministers at a meeting on 22 July in Brussels urged the countries of former Yugoslavia to speed up the return of approximately one million people still displaced by the Balkan wars of the 1990s. The ministers strongly condemned local obstruction of population return and urged the respective countries to honor their commitment to address existing legal and administrative issues. 1.5 million refugees, including more than 300'000 people from ethnic minorities, have returned to their homes in the region since the wars ended. But much more remains to be done, especially to encourage ethnic Serbs to return to their homes in Kosovo. Cooperation on the return of refugees would be a key factor in determining the pace of closer ties between the EU and the former republics of Yugoslavia on their way to joining the union.

b) EU-Bulgaria
On 29 July, Bulgaria closed its 21st accession negotiation chapter with the EU - "Customs Union". There are eight open chapters and one more is expected to be opened soon.

2. NATO

a) NATO-Vilnius 10
The ten East European candidates for NATO membership met in Riga from 5-6 July for the last time before the Prague summit. They focused on remaining issues of concern for NATO and the candidates' governments, mainly corruption, freedom of press, and anti-Semitism. Cooperation in the fight against terrorism remained high on the agenda. US President George Bush and Britain's Prime Minister Tony Blair sent video addresses. Estonia, Latvia, Lithuania, Slovakia, Bulgaria, Romania, and Slovenia have high hopes of receiving invitations to join NATO in November.

b) PfP Navy Exercise "Breeze 2002" in Bulgaria
A scheduled PfP exercise took place from 24-28 July in the Bulgarian sector of the Black Sea. Navy vessels from Bulgaria, Georgia, France, Italy, Turkey, Ukraine, and the US participated in the rescue and humanitarian assistance exercise.

VII. THE INFLUENCE OF OTHER EXTERNAL FACTORS ON THE REGION: NATIONAL GREAT POWERS AND INTERNATIONAL INSTITUTIONS

1. US

a) US-Bulgaria
The two countries confirmed their policy of engagement by vowing to dismantle Soviet-era missiles by October this year.

b) US-Western Balkans
At the end of June, the US government decided to continue for one year the national emergency with respect to the Western Balkans, because of threats to peace and international stabilization efforts in the region.

c)US-Turkey
(1) The US and Turkey exchanged memoranda of understanding on 11 July in Washington formalizing the Turkish participation in the Joint Strike Fighter (JSF) project for the next ten years with an investment of US$175 million. Turkey is the seventh country to join as a partner for JSF system development and the demonstration phase, after the UK, Canada, Denmark, the Netherlands, Norway, and Italy. (2) US Deputy Secretary of Defense Paul Wolfowitz visited Turkey from 14-15 July. He discussed issues of bilateral cooperation in coping with the persisting problems in UN relations with Iraq.

d)US-Romania
Romanian Foreign Minister Mircea Geoana began a working visit to the US on 25 July. He met with State Department officials and with representatives of Congress and international financial institutions. He also met academics and media leaders.

2. Russia

a) Russia-Greece
Russian sources said on 23 July the Greek navy will purchase five warships and other vessels from a shipbuilding company in St Petersburg. A final contract has not yet been signed.

b) Russia-Bulgaria
(1) Bulgarian diplomatic sources announced on 23 July that a new Bulgarian consular service would be opened in the Russian city of Novosibirsk. (2) The Russian Ministry of Foreign Affairs announced on 26 July it was not involved in lobbying efforts by the Russian media and interested Russian economic subjects for the privatization of one of the biggest Bulgarian companies, the 'Bulgartabac' tobacco company. (3) Bulgarian diplomatic sources announced that President Georgi Parvanov of Bulgaria would visit the Russian Federation on 18-20 September. He is expected to meet President Putin, Prime Minister Mikhail Kasyanov, and the Russian Orthodox patriarch Aleksei II.

3. China

a) China-Bulgaria
Deputy Prime Minister U Ee of China visited Bulgaria from 15-16 July. She studied business opportunities for Chinese firms in Bulgaria, including tourism.

VIII. CONCLUSIONS: THE SECURITY SITUATION AND THE REGION-BUILDING EVOLUTION
The Balkans did not generate any important security concern in July, and the continuing stability helped NATO's decision to reduce its military presence by the end of the year. The arrest in Greece of the alleged leaders of November 17, the oldest active urban guerrilla group, marked a major step in eradicating terrorism in the Balkans. Political tensions in Serbia are expected to increase in connection with the crisis of the ruling coalition and the lack of agreement on the new constitution drafted jointly by Belgrade and Podgorica. The NATO summit in Prague this coming November has been an incentive for the resolution of remaining reforms as a matter of priority for Bulgaria, Romania, and Slovenia. This month, a major deficiency in the functioning of the Stability Pact was disclosed: the inability to link available donations with projects that are verifiable and meet certain rules. An analysis of bilateral relations during the past month shows that important infrastructure projects are waiting for financial support and, if carried out, may significantly boost the economy of the individual countries as well as economic relations in the region.