Dark sides of Croatia-Israel economic relations

One week ago Croatia and Israel marked 20 years of diplomatic relations. The anniversary went largely unreported in the Croatian media and only a single article on commemorative postage stamp has been published, while in the Israeli news media bilateral ties were celebrated as "genuine friendly". However, the reality of the situation does not even come close to anything that could be categorized as being friendly, since they are characterized by twenty years of diplomatic procrastinations, economic controversies and various unsolved issues.



Croatia declared independence from Yugoslavia in 1991, which eventually resulted in a war, and since its beginning Israel's political establishment has taken a pro-Serbian stand. Israel depicted the new Republic of Croatia as some sort of reincarnation of the Independent State of Croatia (a Nazi-backed puppet state), they claimed Croatia's first president Franjo Tuđman has expressed anti-Semitic views in his books and statements, and Israeli press and Yad Vashem (the official Israeli institution for the commemoration of the Holocaust) even refused to recognize crimes that Serbs committed in Croatia during the Croatian War of Independence.



In 1995, Croatia effectively end the war in its favor, and subsequently Israel's attitude towards Croatia gradually started to change. After several months of official negotiations, during the summer of 1997 Israel and Croatia published a joint statement of their intention to establish diplomatic ties. As a gesture of good will, the Croatian government issued a statement apologizing for the crimes committed by historical Independent State of Croatia, and Tuđman promised to publish a modified version of his book. Full diplomatic relations among two countries were finally established on 4 September 1997, relatively long time after setting up bilateral ties with other regional powers such as Iran (18 April 1992), Turkey (26 August 1992), Egypt (1 October 1992) and Saudi Arabia (8 June 1995).



Despite the established formal ties, opening of Croatian embassy in Tel Aviv and few official visits by ministers, there was actually very little of active bilateral cooperation in next three years. Although president Tuđman sought to see Israel in an official state visit, he has been rejected multiple times. Only after his death in late 1999, the situation has begun to improve. The new Croatian president Stjepan Mesić visited Israel in 2000 and Israeli president Moshe Katsav visited Croatia in 2003, both emphasizing the reconciliation between the two nations and the improvement of economic cooperation, but more importantly, in March 2004 Foreign Minister Miomir Žužul and Minister of Science Dragan Primorac also visited Israel and established connections there. Since then, both have become strong lobbyists for Israeli companies and entrepreneurs, and in following years their investment projects were marked by corruption scandals and increase in foreign assets of persons involved.



In 2006, the US-based firm Barr Pharmaceuticals acquired Croatian pharmaceutical company Pliva, and two years later Pliva/Barr became sub-division of Israeli multinational pharmaceutical company Teva Pharmaceutical. This transaction has been agreed after a secret meeting between lobbyist Miomir Žužul, Prime Minister Ivo Sanader, and president of Pliva's management board Željko Čović who strongly favored Barr. Fixing the sale of Pliva damaged the state budget by 9.2 million euros, while Čović and his family earned 4 million euros from stock manipulation and further 7.2 million euros from managerial rights. Both Sanader and Žužul resigned their political positions due to corruption issues and fled the country. Sanader was later apprehended in Austria, extradited to Croatia and sentenced to a jail term, and Žužul unobstructedly works as an international affairs advisor in Washington, DC.



Even more controversial was the proposed golf mega-resort in Dubrovnik on top of Mount Srđ by the Israeli businessman Aaron Frenkel. The project was planned as a golf course of 100 hectares worth between 70 and 80 million euros, but later in 2006 it has been expanded to a billion-euro project with a sports centre, 245 villas, a hotel, restaurants, bars, galleries, tennis courts, a riding club, parks, cycling and running tracks, covering 310 hectares. Meanwhile, Master Plan and Physical Plan of the City and the County have been changed in favor of the project, Ivo Sanader's Government declared it as a "project of extra-ordinary interest for the Republic of Croatia", the Parliament adopted anti-constitutional Act on Golf Courses, Frenkel was appointed as the Croatian honorary consul in Israel by president Mesić who personally advocated for him. This all raised serious concerns about corruption and private interest, so locals and environmentalists have campaigned against the project.



Activists and independent media have emphasized Frenkel's dark past, that self-proclamed "diamond dealer" and "philanthropist" is actually an arms dealer who works for Israel's government companies, and he has been involved in various corruption scandals in Poland, India and Israel. To counter opposition, Frenkel hired a local law firm which threatened to sue anyone if he or his project are negatively portrayed, and as a result even some blog posts with translations of past have been removed. Furthermore, Frenkel sent few popular Croatian journalists on an all-expenses-paid trip in Portugal and hired PR agency for promoting his project. On the other hand, sustained public pressure on government and local authorities repeatedly postponed it. Investors became nervous and in 2013 engaged Israeli president Shimon Peres to pressure Croatian Prime Minister Zoran Milanović towards starting with the realization. However, it didn't help. The citizen initiative filed disputes and the environmental study of the project was rebutted in September 2016, while the Administrative Court annulled the location permit in February 2017. Finally, in September the same year investors submitted a request to the International Centre for Settlement of Investment Disputes (ICSID) based in Washington to initiate an arbitration procedure against the Republic of Croatia, demanding 500 million euros.