Bosnia and Herzegovina: Issues for U.S. Policy
Released: 2005-02-10T00:00:00

Introduction

The 1995 Dayton Peace Accords, brokered primarily by the United States, ended three yearsof war in Bosnia and Herzegovina, which had cost hundreds of thousands of lives and created over2 million refugees and displaced persons. Under the Dayton Peace Accords, Bosnia-Herzegovinaremains an internationally recognized state within its pre-war borders. Internally, it consists of twosemi-autonomous "entities:" the (largely Bosniak and Croat) Federation of Bosnia-Herzegovina andthe (Bosnian Serb-dominated) Republika Srpska (RS). Under the accords, the Bosnian Federationreceived roughly 51% of the territory of Bosnia-Herzegovina, while the Republika Srpska receivedabout 49%.

Each of the entities has its own parliament and government with wide-ranging

powers, as well as its own armed forces. Each entity may establish "special parallel relationshipswith neighboring states consistent with the sovereignty and territorial integrity" ofBosnia-Herzegovina. Most powers are vested in the entities; the central government hasresponsibility for foreign policy, foreign trade and customs policy, monetary policy and a few otherareas. Central government decisions are nominally taken by a majority, but any of the three mainethnic groups can block any decision if it views it as against its vital interests. The Federation isfurther divided into ten cantons, each of which has control of policy in key areas such as policing andeducation.

The Dayton Peace Accords also resulted in the deployment of a NATO-led peacekeepingforce which has been charged with providing a secure environment for the implementation of thepeace agreement. A U.N.-appointed High Representative, created by the Dayton accords, overseesthe civilian peace implementation efforts. Since 1997, this official has had the power to fire and takeother actions against local leaders and parties as well as to impose legislation in order to implementthe peace agreement and more generally bring unity and reform to Bosnia. The current holder of thispost is Paddy Ashdown of Great Britain. Ashdown also holds the post of the European Union'sSpecial Representative in Bosnia. (1)

Figure 1. Map of Bosnia and Herzegovina

In the more than nine years since the accords, the United States and other countries havescored significant achievements in Bosnia, including sharply reduced inter-ethnic violence, restoredfreedom of movement, and the return of many refugees and displaced persons to their homes. Theinternational community has also helped Bosnia hold largely free and fair elections and set up manyof the institutions of a modern democratic state. However, these successes in some areas have notadded up to the accomplishment of the overall goal of international efforts in Bosnia: the creationof a stable, united Bosnia, able to continue reforms on its own and integrate with Euro-Atlanticinstitutions. Almost all progress on reforms and on promoting greater unity in Bosnia continues torequire direct or indirect intervention by Ashdown and other representatives of the internationalcommunity. Reform efforts continue to be met by obstructionism or passivity by the nationalistparties which control Bosnian governments at all levels. Some observers also assert that thecumbersome institutions set up by the Dayton Peace Accords are unworkable.

According to critics of current international policy on Bosnia, international interventionismhas led to dependency and irresponsibility among local elites. This problem is all the more seriousas the international commitment to Bosnia in troops and funding has decreased in recent years. Inaddition, the infringement of Bosnia's sovereignty represented by Office of the High Representative(OHR) may also prove to be an obstacle in the country's path toward European integration, accordingto some observers. Critics ask how a country lacking all the attributes of sovereignty can hope tojoin NATO or the EU one day, or, in the near term, participate meaningfully in such programs asNATO's Partnership for Peace program. They wonder if Bosnia can or should continue to operateindefinitely as a ward of the international community, as the rest of the region moves, howeverslowly in some cases, toward European integration.

Another important issue is whether Bosnia is still important to U.S. interests, particularlygiven perhaps more pressing U.S. commitments in other countries and regions. The United Stateshas invested substantial sums to stabilize Bosnia. From FY1991 through FY2004, the United Statesspent over $13.6 billion in incremental military costs in Bosnia, mainly for the U.S. peacekeepingcontingent. (2) U.S. aid toBosnia over the same period amounted to more than $1.5 billion. (3) Some observers believe thatthe European Union is now capable of dealing with Bosnia's remaining problems on its own. Indeed,the EU already provides the bulk of financial aid and political guidance to Bosnia, and took over themilitary mission there from NATO in December 2004. However, many observers believe that theUnited States still has a stake in Bosnia's stability, as part of building a Europe "whole and free," theoverarching U.S. objective in the region. Continued U.S. involvement in Bosnia may be needed toarrest indicted war criminals, as well as to make sure that Bosnia is not used as a haven for organizedcrime or terrorists.

Successes and Remaining Challenges

Bosnia has achieved progress on some issues since 1995, but continues to fall short in manyothers. One relative success story has been the restoration of freedom of movement within Bosniaand the gradual return of refugees to their homes. According to the U.N. High Commissioner forRefugees (UNHCR), by October 2004, over 1 million of the 2.2 million refugees and displacedpersons had returned to their homes, including over 447,000 who returned to areas in which they arean ethnic minority. Over 92 percent of the legal claims of persons wanting to have their homesreturned to them have been resolved. (4)

While ethnic relations are sometimes tense, and some acts of violence do occur, the mainobstacle to refugee returns is economic. The war often had the effect of destroying local industries,along with the jobs that made communities viable. Many returnees are elderly. Many young peoplewant to leave Bosnia for better opportunities elsewhere, up to two-thirds of them, according to somepolls. (5) At the end of2003, OHR handed over responsibility for refugee issues to the Bosnian human rights and minoritiesministry.

A key focus of international efforts in Bosnia is to strengthen the rule of law. The rule of lawis particularly important in order to break down the parallel structures connecting nationalist politicalparties, certain enterprises and organized crime. Widespread corruption also retards economicdevelopment. According to an opinion poll commissioned by Transparency International, Bosniansview corruption as the second most serious problem the country faces, after unemployment. (6)

High Representative Ashdown has undertaken several steps to promote the rule of law inBosnia. He pushed through a new criminal code and a criminal procedure code in 2003, and put intoplace a High Judicial and Prosecutorial Council (HJPC) which has vetted Bosnia's judges andprosecutors for integrity and professional competence, with ethnic representation proportionate tothe 1991 pre-war Bosnian census. The HJPC is also responsible for disciplinary actions as well asfor appointing new judges and prosecutors. Ashdown also forced the creation of the Bosnian StateCourt, with special panels dealing with organized crime. This court has both Bosnian andinternational judges and prosecutors.

Until January 2003, police training was conducted by a U.N. police mission in Bosnia. Themission vetted policemen for their professional qualifications and participation in war crimes orillegal activity. An EU police mission, which replaced the UN mission, is continuing the advisoryand training functions of the U.N. mission. Ashdown successfully pushed for the establishment ofnew central government law enforcement institutions, including a Ministry of Justice, a Ministry ofSecurity, and a State Information and Protection Agency (SIPA), charged with dealing with issuessuch as money laundering and organized crime, as well as terrorism. In December 2004, a PoliceRestructuring Commission, composed of Bosnian and international officials, issued a report callingfor Bosnian central government institutions to take over responsibility for all police matters. Ashdown has also called for the elimination of entity Interior Ministries. Such proposals, ifimplemented, would mark a dramatic blow to the power of the entities within Bosnia, which hadpreviously controlled most police functions, and have been strongly resisted by Bosnian Serb leaders.

However, it should be noted the implementation of these reforms has been slow. Theseinstitutions often do not function effectively, as they lack resources and sufficient staffing. However,there have been a few successes in the area of rule of law. Courts in both entities have prosecutedseveral cases against organized crime figures. In March 2004, the Bosnian State Court handed downa guilty verdict in Bosnia's biggest human trafficking case.

Another area key to Bosnia's future stability is economic reform and poverty reduction. Hereagain, the situation is mixed. The International Monetary Fund has praised Bosnia for its successin establishing macroeconomic stability, including low inflation and a stable currency, due to acurrency board system that pegs the konvertibilna marka (KM) to the Euro. International officialshave pushed through laws to establish an Indirect Taxation Authority and a value added tax inBosnia. Rationalizing Bosnia's tax system is necessary in order to stimulate economic growth, aswell as to provide resources for Bosnia's underfunded central government institutions, as well as toassist Bosnia's EU integration. The international community is pressing Bosnian leaders to cut backthe size and expense of entity and lower level governments, as the central government's rule isstrengthened.

However, severe economic problems remain. Bosnia is one of the poorest countries inEurope, with Gross Domestic Product (GDP) about 60% of the pre-war level. About half of thepopulation lives close to or below the poverty line. (7) According to some experts, Bosnia's economy may be on the vergeof crisis. Many of Bosnia's main pre-war industries, including military industries, have collapsed,and new businesses to replace these lost jobs have not materialized. According to this view, asubstantial part of the economy is dependent on government spending on oversized governmentbureaucracies (in part a legacy of the complicated government structures created by the DaytonPeace Accords) as well as residual international funding. Government spending accounts for over50% of the country's GDP. (8)

Efforts to stimulate the economy to produce jobs and foreign investment have only beenpartially successful. Ashdown established a "Bulldozer Committee" composed of OHR officials andBosnian businessmen to develop specific proposals to cut through red tape and take other steps toimprove the business climate in Bosnia. Nevertheless, Bosnia still lacks many elements of a suitablelegal framework to encourage domestic and international investors. Moreover, the privatizationprocess, which is in the hands of the entity governments, remains slow and plagued by endemicadministrative and legal shortcomings, according to the international officials. Foreign directinvestment (FDI) is increasing, in part due to Ashdown's efforts, but from a very low base. FDImade up only 5% of GDP in 2003, one of the lowest percentages in the region. (9)

Prospects for Stability and Self-Sustaining Reforms

A major concern for international policymakers is the long-term impact on Bosnia ofdeclining international attention and resources. As noted above, most of the modest reformsuccesses in Bosnia have been initiated and pushed forward by the international community. International aid has played an important role in keeping the economy afloat. The nationalist partiesin power have often reacted passively on reform issues, or even engaged in overt or covertobstructionism. Local leaders often concentrate on political maneuvering and securing resources forpolitical patronage. Efforts to promote Bosnia's unity through the strengthening of state-levelinstitutions have also met with indifference or opposition. Under international pressure, newinstitutions have proliferated, often without the funding or staffing to make them effective.

Analysts have therefore expressed concern about the sustainability of Bosnia's reforms andthe country's long-term unity. According to some analysts, part of the problem is due to theshortcomings of the Dayton constitution. They say the governing structures set up by Dayton are toocomplex, with too many layers of government that are too expensive and not accountable to thepeople. Various proposals have been made for simplifying the structure, including eliminating theentities to create a unitary state, or a system of cantons within a more conventional federation. (10)

Another problem is that while Bosniaks overwhelmingly favor a united Bosnia, Serbs, andto a lesser extent Croats, do not. For example, a State Department-sponsored opinion poll in theRepublika Srpska (RS) in 2003 found that 69% favored RS independence from Bosnia. Another pollfrom the same source found that former Bosnian Serb leader and indicted war criminal RadovanKaradzic is the most popular politician in the RS. On the other hand, 55% of Bosnian Serbs expectthat, notwithstanding their wishes, Bosnia will remain a single state. The poll found that 41% ofBosnian Croats favor remaining part of Bosnia, while 54% favor independence or union withCroatia. Interestingly, Bosnian Croat support for Bosnia has sharply increased since 1999, at thesame time as Croatian governments have publicly renounced territorial claims on Bosnia. (11)

Ashdown and previous High Representatives have tried to exhort local leaders to take"ownership" of reforms, without much success. The international community also tried to influencethe domestic political scene by helping non-nationalist parties win elections and form governmentcoalitions. However, these efforts were not very successful, due to the heterogeneity of the coalitionsand the continued popularity of nationalist groups, which successfully play on the fears of peopleand still have effective patronage networks.

After the victory of the three major nationalist parties in the October 2002 general elections,Ashdown has tried to work with the new nationalist leaders on reform issues, but has also jumpedinto the middle of the Bosnian political system himself, campaigning under the slogan "Jobs andJustice." He has intervened actively in the making of laws and continues to fire and take otheractions against obstructionist politicians and parties. His moves have angered Bosnian leaders attimes, but there has been little public protest against his actions. Indeed, an October 2003 StateDepartment-sponsored opinion poll indicated little public awareness of the "Jobs and Justice"program. According to the same poll, Ashdown is supported by two-thirds of Bosniaks, but isopposed by two-thirds of Bosnian Croats and 94% of Serbs. (12)

Bosnian critics of Ashdown charge that he has neglected the non-nationalist opposition,which could have been his natural allies. Now, they charge, he is at a political dead-end -- partneredwith ruling nationalist elites with little interest in reform, and an opposition too weak anddisenchanted to serve as a viable alternative. (13) Ashdown has replied that he has had to work with whomeverthe Bosnian people elect as their leaders. Some analysts support Ashdown's actions, saying thathowever paradoxical it may seem, interventionism is needed in the short term to provide the basisfor a self-sustaining Bosnia. (14) On the other hand, other experts are concerned that localinstitutions cannot develop as long as OHR continues its active, and some critics say undemocratic,intervention in Bosnian affairs. They suggest that the development of responsible democratic localinstitutions should take priority, and that OHR's use of its powers should be more limited and moreaccountable to the Bosnian people. (15)

Possibly acting in the international community's favor in the long run is the slowly increasingrealization of Bosnian politicians that it is in their own interest to promote Bosnia's integration intothe European Union. The 2003 EU summit in Thessaloniki, Greece, held out the prospect of Bosniaand other countries in the region joining the EU when they are ready. The problem with possible EUmembership as a motivating factor is that it may be too distant to have as powerful an effect as it hashad in Central Europe. As of early 2005, Bosnia continued to fall short in implementing the 16measures set by an EU feasibility study before it can begin negotiations on a Stabilization andAssociation agreement, a first step in the long road to EU membership. Bosnia's central governmenthas set a goal of EU membership by 2009, although most observers view this goal as unrealistic atpresent.

What would be the impact of reduced international intervention in Bosnia's political systemand a decrease in economic assistance, particularly if reforms are slowed as a result? It appearsunlikely that the situation could explode into conflict again in the near future, perhaps mostimportantly because the geopolitical situation in the region has changed. Bosnia's civil war was inpart the playing out of the designs of nationalist leaders in Croatia and Serbia on Bosnian territory. According to a State Department sponsored opinion poll, about a third to slightly less than one-halfof the three main ethnic groups believes that a return to fighting could occur within the next fewyears. Only about one-tenth are "very concerned" about such an outcome. (16)

The downfall of nationalist regimes in Serbia and Croatia in 2000 reduced concerns abouta partition of Bosnia, as new democratic regimes in both countries put domestic reforms andimproving relations with the West over past nationalist projects to redraw borders. The comebackof the nationalist HDZ party in Croatia and nationalist forces in Serbia in 2003 have caused someconcern. However, the HDZ government has shown no interest in carving up Bosnia again, knowingthat to do so would put an end to achieving its main foreign policy goal, joining Euro-Atlanticinstitutions. Similar views are held by leaders in Serbia, although some voices have raised thepossibility of a partition of Bosnia if Kosovo is permitted to become independent from Serbia. TheSerbian political scene remains unsettled, and a victory by the ultranationalist Radical Party in futureelections could conceivably pose a danger to Bosnia's future.

On the other hand, even if a poor, disunited, unreformed Bosnia could be nominally stable,it still might also present problems. The weakness of its institutions could provide an environmentconducive to organized crime activities such as trafficking in weapons, drugs and persons, as wellas the operations of terrorist groups, which could threaten U.S. and European interests.

U.S. Policy Issues

SFOR and Partnership for Peace

Due in part to the improving security situation in Bosnia and the need to shift troops to thewar on terrorism and other responsibilities, the NATO-led SFOR has undergone deep reductions inrecent years. In December 2004, The European Union took over peacekeeping duties. The EU force(EUFOR) of about 7,000 troops uses NATO's planning capabilities and other assets, under what isknown as the "Berlin Plus" formula. Fewer than 200 U.S. military personnel remain in Bosnia aspart of a small NATO contingent to assist Bosnian defense reform, search for indicted war criminals,and fight terrorism.

It is unclear whether the EU successor force will have the credibility that SFOR enjoyedpartly due to the U.S. presence. Bosniaks in particular have viewed the United States as their bestally among leading Western nations, dating back to the perceived U.S. role in helping to put an endto the war by permitting the Bosniaks to arm themselves. In contrast, European countries are viewedless favorably, in part due to the perceived failures of the European-led U.N. Protection Force(UNPROFOR) during the war. Some observers claim that many European troops in KFOR weremuch less effective than U.S. troops during the March 2004 riots in Kosovo, due at least in part tothe restrictive rules of engagement they had received from their governments. (17)

An important focus of U.S. and international efforts in Bosnia is to promote defense reformsthat will permit Bosnia to join NATO's Partnership for Peace (PFP) program. Bosnia and Serbia andMontenegro are the only two European countries that are not members of PFP. SFOR, OHR andWestern governments have pressed Bosnia to undertake defense reforms that will permit Bosnia tobe admitted as a PFP member. These reforms include the unification of Bosnia's two armies undera single command structure, including a Minister of Defense and Chief of Staff. The army wouldnot be unified at lower levels, however. It would eventually comprise three 4,000-man brigades. One brigade would be Bosniak, another would be Serb, and the third Croat. (18) The supreme commandof this force would be held by Bosnia's collective presidency, which also is composed of oneBosniak, one Serb and one Croat.

The Bosnian parliament has passed the legislation needed to create the new commandstructure. It approved a new defense minister in March 2004, after two previous BosnianSerb-nominated candidates for Defense Minister were rejected by Ashdown due to their questionableconduct during the war. Reforms that are needed include staffing state-level defense institutionswith qualified personnel, providing these institutions with adequate funding and premises, andeliminating the entity Defense Ministries. (19)

War Crimes and Cooperation with the ICTY

The most important factor hindering Bosnia's membership in PFP and opening talks on aStabilization and Association agreement with the EU is Bosnia's lack of cooperation with theInternational Criminal Tribunal for the former Yugoslavia (ICTY). An important focus of currentU.S. and international efforts in Bosnia is to apprehend indicted war crimes suspects and transferthem to the ICTY, particularly former Bosnian Serb leader Radovan Karadzic and former army chiefRatko Mladic. The Bosnian government and the two entity governments are required by the DaytonPeace Agreement to fully cooperate with the ICTY. According to ICTY chief prosecutor Carla DelPonte, the Federation has largely cooperated with the ICTY, but the RS has not. RS officials havenot arrested a single war criminal indicted by the ICTY since the peace accords were signed. (20) Indeed, some of them haveallegedly assisted indictees to evade capture. Therefore, the transfer of war criminals thought to behiding in the RS to the ICTY has been left almost entirely to voluntary surrenders of suspects, as wellas action by international peacekeepers and agents of Western governments.

The United States and its allies are motivated in their search for war criminals by a desire forjustice as well as a belief that the arrest and transfer of these two men and other war criminals woulddeal a serious blow to those forces obstructing reforms in Bosnia. According to press reports, bothMladic and Karadzic move within Bosnia and between Bosnia and Serbia and Montenegro. BothEUFOR and the remaining NATO presence in Bosnia participate in developing intelligence for thepossible seizure of war crimes suspects, although the actual seizures themselves, if they occurred,would likely be carried out by specially-trained teams based outside of Bosnia.

High Representative Ashdown has tried to weaken the support network for the war criminals. He has removed many RS officials from their posts, including high-ranking Bosnian Serb policeofficers, and Mirko Sarovic, a senior official of the Serbian Democratic Party, formerly headed byKaradzic and now a ruling party in the Republika Srpska. Ashdown has frozen the assets of theseand other persons suspected of helping war criminals, as has the European Union. The United Stateshas also added these people to a list of persons who are barred entry into the United States and whoseU.S. assets are frozen. In April 2004, Ashdown blocked state funding to the nationalist SerbianDemocratic Party (SDS), charging that the SDS had helped to finance Karadzic's efforts to avoidarrest. Skeptics have noted that most SDS funding does not come from the state, but fromstate-owned firms run by SDS supporters. (21)

In December 2004, in a further move to punish the Republika Srpska for its non-complianceon war crimes issues, Ashdown removed nine Bosnian Serb officials of the State Border Service, theIntelligence and Security Service, and the RS Interior Ministry. Ashdown also announced plans toabolish entity Interior and Defense Ministries by fall 2005, leaving only central governmentministries for these functions. Ashdown warned that he will take further steps against the assets andinstitutions of the RS if Bosnian Serb leaders continued to block Bosnia's PFP membership by failingto cooperation with the ICTY. In taking such moves, Ashdown also may be using RS war crimesnon-compliance to weaken the RS and the whole system of ethnically-based entities set up by theDayton Accords, which some observers see as a key stumbling block to reform and Euro-Atlanticintegration.

The United States also introduced measures in December 2004 to punish the RS fornon-cooperation with the ICTY, freezing all SDS assets in the United States and imposing a visa banon all members of the SDS and the Party for Democratic Progress (PDP), a key member of the RSgovernment. A number of high level Bosnian Serb leaders in the RS and the Bosnian centralgovernment resigned their posts in protest.

The United States has offered a $5 million reward to anyone providing information leadingto the capture of Karadzic or Mladic. Del Ponte claimed that Karadzic had narrowly escaped captureduring an SFOR raid in the Bosnian Serb city of Pale in February 2004. Subsequent SFOR raidshave failed to capture Karadzic, including a raid in April 2004 that resulted in severe injuries to aSerbian Orthodox priest and his son. International critics of SFOR say that it has failed to developmuch useful intelligence on the whereabouts of war criminals and does not coordinate sufficientlywith the ICTY and other international organizations in Bosnia. (22)

In addition to pursuing Karadzic and Mladic, the United States and the internationalcommunity have promoted efforts to have war criminals tried by local courts. This policy is part ofthe international "completion strategy" for the ICTY, adopted in U.N. Security Council Resolution1503 in August 2003. The resolution calls for the ICTY to complete its investigations by 2004, itstrials by 2008, and all appeals by 2010.

In October 2003, international donors held a conference on the establishment of a war crimeschamber in the state court of Bosnia and Herzegovina. The United States contributed $5 million andsaid it would contribute an additional $5 million in 2004. However, it is unclear how effective thenew court will be. Bosnian courts have tried a few war crimes cases so far, but have been criticizedfor long delays, insufficient protection for witnesses, and ethnic bias. Recognizing this fact, thecourt will have international judges and prosecutors working with their Bosnian counterparts for thefirst few years, similar to Bosnian courts currently charged with prosecuting high-profile organizedcrime cases. However, the court will have to depend on local police forces to assist its work. Domestic war crimes prosecutions will also depend on Ashdown's efforts to improve Bosnia'sjudicial system, including by dismissing corrupt and ineffective prosecutors and judges, as well asimposing tougher criminal laws.

Terrorism

Since the September 11, 2001 terrorist attacks, the main focus of U.S. foreign policy has beenthe war on terrorism. Terrorism has also become an important focus of U.S. policy toward Bosnia,which has been a haven for Al Qaeda and other terrorist groups, although it has not played asimportant a role in this regard as other European countries such as Spain, Germany and Britain. Oneway in which Bosnia is different from other countries in Europe is the role of several thousandIslamic fundamentalist fighters during the 1992-1995 war in Bosnia. Most left Bosnia at U.S.insistence after the deployment of the NATO-led peacekeeping force in December 1995. However,a few stayed and became Bosnian citizens by marrying Bosnian women. Perhaps more troublesomehave been Al Qaeda ties among some Islamic charities and humanitarian organizations thatproliferated during and after the war. Al Qaeda used a few of them for planning attacks in Bosniaand elsewhere. Some Al Qaeda operatives in Bosnia reportedly have had connections to membersof Bosnia's intelligence service, another legacy of Bosniak wartime cooperation with Islamicmilitants. In 2003, six former Federation officials were investigated for their role in helping toestablish a terrorist training camp in Bosnia with Iran's help during the mid-1990s. (23)

The issue of terrorism has been politicized in Bosnia to some extent, as each ethnic grouphas used the label "terrorist" to define its adversaries. Some Bosnian Serb officials have alleged thatBosniaks were harboring Islamic terrorists. However, it should be stressed that Bosnian oppositionto terrorism has been remarkably broad, despite the still-deep ethnic divide in the country. TheUnited States enjoys a strong reservoir of support in Bosnia, especially among Bosniaks, for bringingpeace to the country and providing post-war aid. In addition, Bosniaks are known in the Muslimworld as particularly secular and European in outlook. This has often caused friction betweenforeign Islamic extremists and many ordinary Bosniaks. Efforts by foreign Islamists to recruit Bosniaks into their organizations have met with limited success. Some Bosniaks also fear that theterrorists will give Bosnia a bad name in Europe, thereby hindering their ability to travel there, andsetting back Bosnian efforts to join European institutions in the long run. (24)

In general, the Bosnian constitution gives domestic powers to fight terrorism to the entities,while the central government deals with international efforts to fight terror. Bosnian efforts to fightterrorism are hampered by the weakness and inefficiency of its government institutions, which havecreated an environment in which crime and corruption have flourished. One example of this corruptenvironment was the 2002 sale of arms from Bosnia to Saddam Hussein's Iraq.

Ashdown's efforts to strengthen state-level institutions and the rule of law may increase theeffectiveness of Bosnia's fight against terrorism. With help from the EU and United States, Bosniahas deployed a State Border Service throughout virtually all of the country's territory. Ashdown isalso pushing for implementation of legislation to increase the effectiveness of the State Informationand Protection Agency, which is charged with combating terrorism, organized crime, trafficking andsmuggling of weapons of mass destruction. However, as with other issues, Ashdown's efforts havebeen slowed by local politicians opposed to an increase in central government power. The 2003State Department report on Patterns of Global Terrorism said that Bosnia's commitment to the fightagainst terrorism has slowed since the victory of nationalist forces in Bosnia's October 2002elections. On the other hand, the report notes that the Federation Financial Police has continued toshut down NGOs and bank accounts linked to terrorists. (25)

The presence of SFOR and other international officials on Bosnia's territory has also helpedin the fight against terrorism. NATO troops and intelligence services can work with their Bosniancounterparts and independently track down and arrest suspected terrorists. The powerful influenceexercised by international officials in Bosnia gives the United States more freedom to arrest anddeport terrorists than in many other countries, which might object on civil liberties or other grounds. However, the delivery of five suspected terrorists in January 2002 by the Bosnian government toSFOR was criticized by some Bosnian legal experts as a violation of the rule of law. After SFOR'swithdrawal in December 2004, a NATO headquarters in Bosnia continues to play a role inanti-terrorist efforts in Bosnia, as does the EU successor force to SFOR.

U.S. Aid

U.S. aid to Bosnia has declined gradually in recent years, after an initial post-war surge todeal with urgent humanitarian and reconstruction needs. The United States is the largest bilateraldonor to Bosnia, although the European Union and the World Bank are the largest donors overall. U.S. aid has shifted to programs to help Bosnia develop democratic institutions and a free marketeconomy. From Bosnia's independence in 1992 through FY2002, the United States provided $1.56billion in aid. The United States provided $44.7 million in aid for Bosnia under the SEED programin FY2004, and an estimated $41 million for FY2005. The Administration has requested $40 millionin SEED funding for Bosnia in FY2006. U.S. aid programs focus on such issues as strengtheningthe country's legal system, supporting small and medium-sized businesses, and making refugeereturns sustainable, through infrastructure repair, strengthening utility companies and helpingrefugees become economically more self-sufficient. (26)