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Croatia: U.S. Move Against Loan Stirs Other Problems

Washington, 26 June 1997 (RFE/RL) - In an effort to force Croatia to comply fully with the Dayton Peace accords, the United States may be creating problems for itself in global financial organizations.

The U.S., with public fanfare and announcements at the State Department in Washington, said it has forced two delays in a proposed $30 million World Bank loan to help the former Yugoslav republic rebuild its investment climate.

The loan is part of a package of measures the bank put together in recent months as part of an international effort to get quick reconstruction assistance to all the nations which had been torn by the ethnic war.

It was scheduled to be approved by the bank's executive directors on Tuesday, but at the request of U.S. Executive Director Jan Piercy, the vote was postponed until today The loan was on a "fast track," which means the bank's 24 executive directors agreed in advance to be prepared to vote without any discussion.

On Tuesday, the U.S. requested a delay for technical reasons -- a normal action when any executive director has a question about a pending loan. Yesterday, the U.S. formally requested that the loan be taken off the fast track and instead be subject to a full discussion at the board meeting.

The bank's board agreed, setting the vote for next Tuesday, July 1.

State Department Spokesman John Dinger said the U.S. is dissatisfied with the Croatian government's lack of cooperation on war criminals and on protecting returning Serb refugees.

He said Croatia's poor compliance with the Dayton accords raises doubts as well that it will abide by any other international agreements, including financial ones. He added that Washington wants a longer period in which to monitor Croatia's actions.

The public announcement that the U.S. was attempting to force Croatia to obey a political committment actually violates World Bank rules, which require that votes be cast on economic considerations alone.

The U.S. does not have a veto at the World Bank. It's vote is weighted to reflect the size of its economy, but the American executive director's vote counts for 17.4 percent of the voting power of the board. So unless it can win over several other directors -- at least seven major representatives -- it cannot block the loan.

While political considerations obviously color a country's vote at the bank, and no one is arguing against compliance with the Dayton peace accords, there is a general acceptance of keeping blatant political moves out of the bank's boardroom.

Two state department announcements on this loan -- and an earlier public blast attempting to delay an International Finance Corporation (IFC) loan to a European company to rebuild a cement plant in Croatia -- have prompted some other executive directors to complain that the U.S. is playing a dangerous game when it starts injecting its foreign policy concerns into World Bank loans.

Sources at the bank say no other directors have spoken out against the American action yet, partly because the bank's staff has said there are some "logical issues of bad governence" in Croatia that could provide the necessary economic justification for opposing the loan.

Another concern that bank officials are now going to have to deal with is that by postponing the board's vote to next Tuesday, the bank will have moved into its 1998 fiscal year. Since the loan was planned under the bank's 1997 financial year, putting it into the next one could cause some problems.

Bank sources say that if the U.S. attempts to postpone the vote again on Tuesday, it may be outvoted and see the loan approved over its objections. In any event, they note, it could stir up feelings of resentment among other executive directors -- feelings that could backfire when the U.S. seeks support from other nations.