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Federation of Bosnia and Herzegovina – A Parallel Crisis
Federation of Bosnia and Herzegovina – A Parallel Crisis
Table of Contents
  1. Executive Summary
Bosnia and Herzegovina: Deterring Disintegration
Bosnia and Herzegovina: Deterring Disintegration
Report 209 / Europe & Central Asia

Federation of Bosnia and Herzegovina – A Parallel Crisis

Whether the Federation – the mostly Bosniak and Croat part of Bosnia and Herzegovina – can solve its government crisis after 3 October elections will go a long way to determining whether the country can survive.

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Executive Summary

The Federation of Bosnia and Herzegovina (FBiH), the larger of Bosnia and Herzegovina’s two entities, is in crisis. Disputes among and between Bosniak and Croat leaders and a dysfunctional administrative system have paralysed decision-making, put the entity on the verge of bankruptcy and triggered social unrest. Much focus has been on the conflict that pits the Serb-dominated Republika Srpska (RS) against the Federation, but the parallel crisis within the Federation also deserves attention. The need for overhaul of the FBiH has been ignored because of belief that state-wide constitutional reform would solve most of its problems, but any state-level reform seems far off. Bosnia’s challenges all have echoes at Federation level, though in simpler form. Reform in the Federation, starting with establishment of a parliamentary commission, is achievable and could give impetus to state-level reform, while improving the livelihoods of the people in Bosnia’s larger entity. If it does not happen, Bosnia, which was wracked by three and a half years of war in the 1990s, may well slide toward new political and economic ungovernability.

General elections on 3 October 2010 will likely produce more unwieldy, divided coalitions at state and Federation levels that will have to confront urgent economic and social woes. In stark contrast to RS, however, the Federation, primarily a Croat-Bosniak condominium, is highly decentralised. It is loved neither by the Bosniaks, who would like to abolish it together with RS in favour of a unitary Bosnian state, nor by the Croats, who want an entity of their own. A workable balance between majority rule and minority rights eludes the Federation. Its elaborate, internationally-designed mechanisms and quotas are easily circumvented and subverted.

The Federation is endowed with only a few areas of exclusive jurisdiction and shares most of its competencies in a haphazard way with lower levels of administration. The result is a dense bureaucracy, whose various parts function in competition or open conflict with one another, and a suffocating thicket of confusing and often contradictory legislation and regulation. Federation administrative bloat and disorder make Bosnia’s larger entity one of Europe’s worst places to do business and choke its people’s economic potential.

Long dominated by two large parties, the Bosniak Party for Democratic Action (Stranka demokratske akcije, SDA) and the Croatian Democratic Union (Hrvatska demokratska zajednica, HDZ), the Federation political scene has fragmented. The SDA-HDZ duopoly broke down in acrimony a number of years ago, as both lost dominance of their respective ethnic constituencies to hard-line or civic-oriented competitors. A bizarre five-party coalition of rivals, with no common platform or interests apart from retention of power and sharing economic spoils, governs the Federation but since 2009 has been unable to take basic decisions, such as the appointment of judges to the Constitutional Court. As the coalition spans the political and ethnic spectrum, however, it is hard to unseat.

Nevertheless, the Federation cannot ignore the economic crisis for long. It has resources and revenues, but they are ineffectively exploited and distributed. Big industries are beholden to party leaders. Friends in high places are indispensable to cut through complex regulations even for simple transactions. Private companies – often belonging to politicians’ families or friends – exploit the poorly-regulated natural resources for their own gain, with little benefit to local communities. Voters expect their share of benefits, too; Bosniak parties especially have bought support with costly state payouts to favoured groups – notably veterans, pensioners and persons with disabilities – who often abuse the system. International Monetary Fund (IMF) mandated cuts sparked violent demonstrations in 2009-2010. The new government will face a difficult choice; to cave in to protests and lose international financial support, which would lead to Bosnia’s financial collapse, or make long-needed budget cuts and reforms and face public wrath.

Revitalising the Federation is essential for Bosnia’s survival. A well-functioning entity would be more attractive to Bosnian Croats and Serbs and would be more convincing in negotiations with RS at the state level. There are signs of a more realistic attitude among some Croat and Bosniak leaders, a willingness to consider reforms short of their respective ideals. The Federation has much unrealised economic potential waiting to be unlocked by privatisation and regulatory reform. Its successful overhaul could turn the tide and create positive momentum for state-level compromises. On the other hand, continued worsening of relations among Bosniak, Croat and Serb leaders, compounded by a fiscal meltdown after the 2010 elections, could transform public dissatisfaction into ethnic tensions and violence.

Sarajevo/Istanbul/Brussels, 28 September 2010

Bosnia and Herzegovina: Deterring Disintegration

Trust between Bosnia and Herzegovina’s politicians has broken down following threats from Serb leader Milorad Dodik, the most serious challenge since the 1995 Dayton Accords. In this excerpt from the Watch List 2022, Crisis Group urges the EU and its member states to mediate the dispute between Bosniak and Croat leaders while supporting an inclusive constitutional reform to reduce the risk of violence.

The Dayton peace agreement that has held Bosnia and Herzegovina together since the 1991-1995 war is unravelling. For more than 25 years, that accord has united two self-governing entities – one dominated by ethnic Serbs and the other by Bosniaks (Bosnian Muslims) – in a single state. But now Serb leader Milorad Dodik is threatening to withdraw from state institutions, including the army, that are shared among the country’s three main ethnic groups, Bosniaks, Serbs and Croats, in a bid for greater autonomy that could be part of a drawn-out process of secession. His challenge to the Bosnian state is the most serious since the 1995 Dayton Accords ended the Bosnian war. It also comes at a moment of intense polarisation among the country’s three “constituent peoples”, as the constitution calls them. Trust among those communities’ politicians has almost entirely broken down, with a long-running dispute between Bosniak and Croat leaders over the country’s election law having produced a tactical alliance between Croats and Serbs – who already share a dislike of central authorities in Sarajevo.

Efforts by the European Union (EU) and member states will be key if Dodik is to be moved off his current path, which risks deepening instability. But while deterring Serb separatism is necessary to see the country through the year in one piece, it will not be sufficient for Bosnia to survive over the long term. The country’s leaders need to find a way to work together again. If the immediate crisis can be overcome, European leaders should support a process to repair Bosnia’s constitutional foundations, as Crisis Group has urged

To stop disintegration and reduce the risk of violence, the EU and its member states should:

  • Seek to mediate the dispute between Bosniak and Croat leaders by brokering a compromise to ensure that the Croats will be able to choose their representatives for national office in the October elections;
     
  • Seek to dissuade Serb separatists by making clear that the Serb entity will be isolated diplomatically and otherwise from the EU should it secede, and by threatening to impose harsh sanctions on any leaders and businesses who take major steps in the direction of secession, such as re-establishing a Bosnian Serb army or rejecting the jurisdiction of the Constitutional Court;
     
  • Make clear that following the elections European actors will support an inclusive, locally driven constitutional reform process and in this context affirm previous commitments to support ending international supervision, including by closing the Office of the High Representative and ending the role of foreign judges on the Constitutional Court;
     
  • Ensure that contingency plans to reinforce the EUFOR Althea peacekeeping mission are up to date.

Serb Separatism and the October Elections

Bosnia and Herzegovina is composed of two self-governing entities, one called the Federation of Bosnia and Herzegovina and the other named Republika Srpska (RS). RS is divided into eastern and western halves, which are joined at the centre by the Brčko autonomous region. The Bosnian state is headed by a rotating three-member presidency made up of a Bosniak, a Serb and a Croat. The Dayton Accords that established this framework also confer authority on an international overseer, called the high representative, who enjoys broad powers over local authorities as a formal matter, but whose assertion of them (a rare occurrence in recent years) has engendered controversy, especially in RS. Over the years, under pressure from the Office of the High Representative (OHR), the Bosnian state added a common army, judiciary and tax authority to its core institutions. The country hosts EUFOR Althea, a small EU-led peacekeeping mission. 

In October 2021, the governing coalition in RS, led by Dodik’s Alliance of Independent Social Democrats party, began pushing to cut the ties that bind it to the rest of the country. In practice this has meant taking back, or threatening to take back, powers once enjoyed by the two autonomous entities but subsequently transferred to the state in Sarajevo. Thus far, the authorities in Banja Luka, the de facto capital of RS, have reasserted control over medical regulation, while making moves toward assuming bigger responsibilities including for the armed forces, indirect taxation and judicial appointments. The RS leadership also rejects the jurisdiction of other Bosnian state agencies (such as the state police) as well as of the OHR. These separatist moves are a response to the previous high representative’s decision in July 2021 to impose a law criminalising genocide denial. While RS leaders acknowledge their forces committed atrocities during the war, they (along with most Serbs) deny that these amounted to genocide.

These unilateral steps are almost certain to be struck down by the country’s Constitutional Court, which may be the point. Dodik has been itching for a confrontation with the court, which has a record of past rulings unfavourable to Banja Luka. These include a September 2021 judgment striking down RS’s claim to jurisdiction over forests and other lucrative natural assets on its territory, as well as a November 2015 ruling banning the RS national holiday. The court is a good symbolic foil for Dodik because of its composition: two members from each “constituent people” and three members selected by the European Court of Human Rights who can neither be from Bosnia nor a neighbouring state. The court’s makeup means that the Bosniak judges can band together with the foreigners to outvote the four Serbs and Croats at key moments, which has happened in the past. A decision by this coalition striking down RS efforts to stake out greater autonomy could play into Dodik’s hands by inflaming secessionist sentiment among Bosnia’s Serbian population.

Serbian opposition parties agree with [Dodik’s] aim of taking back power from Sarajevo but criticise his strategy and timetable.

Thus far, Banja Luka has adopted a slow-motion approach to increasing its power, making threats and setting deadlines, then pushing them back to allow for negotiation in the hopes of winning concessions on sovereignty. Whether they are willing to stop short of secession is unclear. RS authorities could be engaging in a defensive action to reassert control over criminal justice processes (a power once exclusive to the self-governing entities but now partly transferred to Sarajevo) and ward off the potential for state prosecution of high-level corruption cases. They could be seeking to claw back other powers or pursuing other goals short of secession – or they could be seeking outright independence or union with neighbouring Serbia. Whatever the case, Dodik probably hopes that his moves will help him in the next election. Serbian opposition parties agree with his aim of taking back power from Sarajevo but criticise his strategy and timetable. They argue that RS cannot risk defying Western governments as Dodik is doing and are also reluctant to be seen following his lead in an election year.

The separatists’ approach leaves open some potential for a compromise solution. In past crises, Serbian leaders framed their demands as precursors to independence. This time, by framing their first steps in terms of return to what they call the “original Dayton” – in which two near-sovereign entities were linked by a small, weak central government – they may be aiming to force a renegotiation rather than a repudiation of Bosnian statehood.

A major impediment to any effort to achieve a negotiated settlement to the crisis, however, is that the Bosniaks and Croats are far from united in meeting the Serbs’ challenge to the Bosnian project. The majority Bosniaks are embroiled in bitter wrangling with the Croat minority over Bosnia’s electoral system, particularly as it relates to the three-person national presidency and fifteen-member House of Peoples (one of two legislative chambers). The system has been found wanting in several European Court of Human Rights judgments, one of which found that all citizens – not just members of the three constituent peoples recognised under the constitution – should be eligible to run for the presidency. For Bosnian Croats, a key demand is that they have a mechanism for electing their own representative to the presidency, perhaps by being allotted their own electoral district in which they are the majority. Such a mechanism would help prevent the Bosniak majority in the Federation from electing the Croat member of the presidency with minimal Croat support, as has happened on three occasions. For Bosniaks, however, drawing a Croat-majority electoral district seems like an unwelcome step toward separatism.

The long-running dispute poisons relations at the national level as well as in the self-governing Federation, but more immediately it undercuts any hope that the Croats and Bosniaks might present a united front against Serb separatism. Indeed, it has had exactly the opposite effect, drawing the Croats’ leaders and Dodik together in mutual opposition to Sarajevo. Croat leaders also take out their frustrations by obstructing government in the Federation when they can.

The country is thus divided into two almost equal halves, with the predominantly Bosniak Sarajevo-based parties that want to strengthen the national government arrayed against the Croat and Serb parties that seek autonomy if not complete independence from it. Serbs and Croats have different grievances and different goals – the Croats do not want to see RS secede – but support each other in most cases. In these conditions, and with an election looming in October, no one is inclined to compromise. Croats are threatening to boycott the polls if their demands are not met, and should they do so Serbs might try to organise their own parallel election. The ensuing dispute about who has been legitimately elected could tear the country apart. 

The one bit of welcome news in this scenario is the absence, at least thus far, of signs that leaders are preparing for armed conflict. Conditions throughout the country make civil war much less likely than in 1991, when strife last erupted. Years of emigration mean there are far fewer young people; those who remain do not want to fight and have no military training. There are almost no heavy weapons. Fighting could still break out unplanned – for example, if RS tries to evict state police from the border posts or if either side tries to take full control of the shared Brčko District. But even in the worst case it would be unlikely to feature the searing atrocities of the last war, in part because of the tragic reality that because of the conflict most territories are now (unlike then) ethnically homogeneous. For the time being, there is no need to reinforce the EU’s small peacekeeping force, but the Union should update its contingency plans in case the crisis deteriorates and fighting breaks out.

The EU's Role

The most urgent task is to prevent RS secession or widespread electoral boycott. No meaningful progress toward a sustainable future for Bosnia can be expected while such dangers loom. The EU and its member states, working with the U.S., should address these two main threats at the same time. Progress toward healing the Bosniak-Croat breach should make responding to the Serb challenge easier.

First, European officials should encourage Bosniak and Croat leaders to compromise on elections if the country is to escape serious harm. This task will not be easy. The problem is complicated and local leaders and international envoys have repeatedly failed to resolve it. But the urgency has never been greater or the costs of failure higher. Ideally, EU and U.S. envoys can persuade enough legislators to amend the constitution and election law in time for the October elections to go forward under the new arrangements. The compromise must allow voters in predominantly Croat regions to elect a representative to the state presidency, as those in predominantly Bosniak and Serb areas already can. If the clock on new legislation runs out, then a gentleman’s agreement to the same effect is the next best course.

For such an agreement to avoid a risky boycott, it will be necessary for Željko Komšić, the current Croat member of the presidency who is popular with Bosniaks but less so with Croat voters, to step aside for the good of the country. If Komšić runs, as he intends to, he will likely again win on the strength of votes from the Bosniak majority despite his lack of support among Croats. In that event, Croat parties will likely see reason to boycott. He can still play an important role in national politics, perhaps as chair of the Council of Ministers. Achieving compromise will also mean pressuring Bosniak and Croat leaders to back down from their maximalist positions. Notably, Croat leaders must stop obstructing Federation governance and agree to cooperate in reining in the RS. 

To deal with the risk of RS succession, the EU should make the costs of breaking away clear to Dodik and the Serbs. Secession would leave RS isolated from the EU diplomatically and otherwise. The EU and member states should shun a breakaway RS, and its leadership, if necessary to the point of closing European borders to it. However uncertain their impact may be, the EU should also threaten to match harsh U.S. sanctions on leaders responsible for moves such as establishment of an RS army or rejection of the Constitutional Court’s jurisdiction. It should expand its sanctions toolbox beyond the asset freeze and travel bans contemplated by the framework it has in place so that the possible penalties also include bans on EU citizens and firms doing business with sanctioned individuals and companies. (The U.S. imposed such measures on Dodik on 5 January 2022.) Brussels should also broaden the basis on which sanctions can be imposed: its current framework enables sanctions for undermining the Dayton Agreement or Bosnia’s sovereignty or territorial integrity. It should also add high-level corruption and organised crime to that list, and not hesitate to use the threat of sanctions as leverage in talks. 

Brussels should offer an off-ramp as well. In exchange for RS suspending moves toward separation and committing to participate in the October elections, the EU should urge the high representative to suspend his predecessor’s genocide denial law. There is precedent for such a compromise: the OHR “reinterpreted” a decision in 2007 in the face of Serb opposition.

These are all short-term moves, however, and by themselves they may not be enough even to see Bosnia past the obstacles that lie ahead in 2022. Without the prospect of resolving their complaints about how Bosnia and Herzegovina is governed, Serb leaders may conclude that the pain of whatever restrictive measures the EU can impose is the lesser of two evils. Brussels should therefore make clear that it will actively support a post-election effort to address those grievances. To this end, the EU should encourage, and offer to provide assistance for, a locally driven process to draft amendments to the constitution and place the country on a sustainable foundation. This process should aim to address accumulated frustrations on all sides, including resentment of international supervision. In this context, the EU should affirm its earlier support for ending both the OHR’s mandate and foreign participation in the Constitutional Court. 

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