Introductory Remarks by
John Sitilides, Executive Director, The Western Policy Center

Regional Integration in Southeastern Europe

MR. SITILIDES: Seven years ago, Greece slapped an economic embargo on the former Yugoslav republic of Macedonia because of disputes over its name, flag, and minorities policies. Today, Greek businesses have invested more than a quarter billion dollars in the fledgling republic.

Eight years ago, Greece's relations with Albania grew tense over the civil rights of ethnic Greeks living in Europe's most backward country. Today, a half billion dollars in drachmas flow annually into Albania as remittances from hundreds of thousands of ethnic Albanians working in Greece.

And just four years ago, a Turkish flag raised on a Greek rocky islet triggered a series of events that nearly brought the two NATO allies to war. Today, a Greek company is seeking to purchase Turkish textiles to manufacture Greek flags, part of a burgeoning Greek-Turkish business relationship that may mushroom to five billion dollars in trade within five years.

Welcome to the new century in southeastern Europe.

After 45 years of Cold War competition and a decade of ethnic wars and human devastation, southeastern Europe - that is, the Balkans and the eastern Mediterranean - is quietly being transformed by pivotal developments in its two most powerful and influential countries - Greece and Turkey.

Turkey has focused its sights on Russia, Central Asia, and the Caspian Sea basin, with mixed results stemming from continued instability in those areas. Its regional engagement is made difficult by severe income inequity, with a highly prosperous, European-oriented sector in Istanbul, Ankara and along the Aegean coast, and poverty and underdevelopment in most of the rest of the country, and exacerbated by high cost of a military campaign against Kurdish guerillas in the southeastern region.

As the West looks to the Balkans, groping for solutions to war, struggling economies, and stumbling nationhood transitions, it is Greece which may provide the key. Having recalculated its own regional interests, Greece has determined that active economic, political, and military engagement in the unstable countries along its northern border may be just as critical to its national security as meeting the perceived threat from Turkey.

This process is still underway and far from certain. It also dovetails with broader American and Western objectives in southeastern Europe, especially reconstruction and economic recovery, the establishment of free-market systems, integration into European legal and political frameworks, sustained engagement, and the eventual re-integration of Yugoslavia.

Greek strategies in the Balkans and the eastern Mediterranean, driven largely by the private sector but increasingly supported by government policies and public opinion in the past five years, have improved Athens' prospects as the region's leader in growth and economic prosperity.

Having examined the critical need to integrate the region into Europe, and Greece's recalculation of foreign and security policy, the Western Policy Center decided to conduct an exploratory mission to Greece for leading foreign policy analysts, here with us this morning, to examine the prospects for Greek regional leadership consistent with U.S. and allied goals in shaping the future of southeastern Europe.

Specifically, the mission involved a comprehensive review of Greece's defense and security policies, especially its regional role in the Balkans and its upgraded NATO role in southeastern Europe; Greece's foreign policy, especially its Euro-Atlantic identity, including NATO and EU membership, and its revised policies toward its neighbors; and Greece's economic policy, especially its own economic integration into the EU and its leadership role in regional economic initiatives and organizations.

When President Clinton visited Greece in November of last year, he selected an audience of Greek business leaders and entrepreneurs to lay out the administration's vision for the region. He detailed the U.S. interest in stabilizing Kosovo and the Balkans; promoting Serbian integration into Europe; creating a stable, prosperous, and free southeastern Europe; building genuine reconciliation between Greece and Turkey; and renewing the U.S.-Greek partnership. On all these fronts, the revision of Greek policies has been constructive.

Greece has adopted a course of multilateral engagement in the Balkans consistent with the forces which drive the process of globalization elsewhere in the world, including Greece's imminent entry into the euro-zone. Greece is increasing its investments in value-added activities in the Balkans and building the energy, transportation, and telecommunications infrastructure needed to fully integrate the region into the European Union.

Some examples:

  • In November 1999, Greece unveiled a $500 million, five-year, public-private Balkan reconstruction plan, the first substantive plan under the European Union's Stability Pact for Southeastern Europe, agreed to in the wake of the NATO campaign against Yugoslavia.


  • Construction will soon begin on the $1 billion Burgas - Alexandroupolis pipeline, where Caspian Sea oil will bypass the heavily-trafficked Bosporus Straits for an overland route through Bulgaria and northern Greece.


  • Greece seeks to extend the existing trans-Balkan natural gas pipeline from Russia to include Albania and Macedonia;


  • A major motorway being built across northern Greece, from the Turkish border to the Ionian Sea, will be extended to connect major cities in Albania, Macedonia, and Bulgaria.


  • The National Bank of Greece, with a dozen main and subsidiary offices in Albania, Bulgaria, and Romania, is poised to become one of the most influential lending institutions in the Balkans.


  • More than 3,500 Greek firms have invested over $3 billion in Balkan economies.


  • Greece is Albania's second-largest trading partner, with 14% of all exports to, and 32% of all imports from, Greece. Two hundred Greek firms have invested $100 million in Albania's infrastructure, energy, telecommunications, banking, and farming, constituting one-fourth of all foreign capital.


  • Greece is Bulgaria's second-largest foreign investor, with more than 1,000 firms investing $90 million in 1998, and total trade exceeding $700 million annually.


  • Greece is the largest foreign investor in Macedonia, with 70 Greek companies having conducted over a quarter of a billion dollars in trade to date. Greek entities will expand the Macedonian electrical grid, modernize its oil refineries, and construct a $60 million thermoelectric plant and a new oil pipeline connecting Thessaloniki to Skopje. When sanctions against Yugoslavia are eventually lifted, that pipeline will be extended to Belgrade in a separate $700 million project.


  • Greece is Romania's twelfth-largest investor, with 1,700 enterprises and joint ventures and more than $700 million invested in the Romanian economy, including the acquisition of 35% of Romania's telecommunications industry.


  • And in the Federal Republic of Yugoslavia, 230 Greek companies have invested $1 billion and are preparing for the country's eventual re-integration into European structures and organizations.


  • Taken all together, Greece accounts for more than half of total Balkan productivity, and over 70% of foreign businesses active in the Balkans today are based in Greece, particularly in Athens and Thessaloniki.


  • Thessaloniki is rapidly being transformed into the commercial hub of the Balkans, with a $265 million airport modernization and a major port expansion both underway.


  • The U.S. Department of Commerce is opening one of three regional Commercial Service offices in Thessaloniki, the others being in Turkey and Italy, to encourage American investment in Balkan reconstruction projects and promote U.S.-Greek joint business ventures. Thessaloniki will also headquarter the European Union's Balkan Reconstruction Agency.

Greek development of the Balkans through support for free-market democratic systems is also the underlying principle of the Southeast European Cooperative Initiative, known as SECI. Designed as a self-help program, not as an aid package, the U.S.-sponsored initiative will promote regional integration and economic cooperation so that the Balkan region becomes more attractive to the private sector for trade and investment.

But as the headlines make abundantly clear, military and security issues predominate and will not dissipate for some time to come. Greek military cooperation in the Balkans, though hesitant during the NATO campaign against Yugoslavia, is emerging in creative ways.

The NATO sub-regional command in Larissa, where Greek, Turkish, and American officers serve together to secure alliance interests, is also the only NATO headquarters in the Balkan peninsula. Fourteen hundred Greek soldiers serve in peacekeeping operations in Kosovo. Greece, along with Turkey and Italy, established the Southeast European Brigade, or SEEBRIG, a seven-nation regional task force currently commanded by a Turkish brigadier general, with policy directed by a top Greek defense ministry official and rotating headquarters starting in Bulgaria.

Codified Greek-Turkish military cooperation through SEEBRIG helped lay the groundwork for Greece's foreign policy recalculation toward Turkey, which began in the immediate aftermath of the Ocalan affair in February 1999 and accelerated after the outpouring of mutual sympathy in the wake of devastating earthquakes. As a result, public support for the two governments' bilateral policy revisions is strong, if unsteady.

As in the Balkans, the private sector deserves much of the credit for spearheading these new policies. In the past several months, an astounding chain of private sector initiatives includes:

  • The planned construction of a half-billion dollar energy plant in Greece to provide power to Turkey within three years, through a joint venture between Italian, Greek, and Turkish companies, using gas from Russia and fuel management services provided by the Exxon-Mobil Corporation.
  • The Greek acquisition of a Turkish mine enterprise producing raw materials exported to Europe and Africa for use in industry, construction, and agriculture.
  • A Greek-Turkish natural gas network link, positioning Greece to provide surplus energy to meet Turkey's yawning demands.
  • A Greek-Turkish joint venture to construct high-voltage transmission lines, using European Union financing, to deliver electrical power to Balkan countries.
  • A Greek-Turkish joint venture to produce plastic irrigation pipes at a Greek plant, using Turkish technology, for sale to Balkan countries.
  • A Greek-Turkish joint venture to launch environmentally-sensitive wind power production systems in both countries, which are beset by urban pollution problems.
  • A Turkish exhibition in Athens to promote exports to Greece, including textiles, chemical products, automotive spare-parts, foodstuffs, industrial machines, electronic products, medical instruments, and consumer goods.
  • Dozens of Greek companies actively seeking to purchase textiles, ready-to-wear clothes, blue jeans, underwear, t-shirts, sweatshirts, blankets, and quilts from Turkey.
  • The planned establishment of an Athens-based Greek-Turkish Chamber of Commerce.
  • And last weekend, 140 Greek businessmen and women met in Istanbul with their Turkish counterparts to find ways to lift trade obstacles such as tariffs and double taxation, open new opportunities for business cooperation, boost export subsidies, and promote new joint ventures in Black Sea countries.

If progress can be made on the difficult Greek-Turkish issues in the Aegean and Cyprus, then developments around and within Greece will become increasingly affected in a positive way by regional integration and globalization trends. And in just four years, Greece will host that very pinnacle of global events, the Olympic Games. Thanks to the predominance of modern media technologies and global information networks, Greece will literally be at the center of the world.

In the process, Greece is poised to become the geopolitical, economic, and military bridge between the post-Cold War Balkans and the emerging stability of the European Union. None of this obscures the grave problems which beset the area. Ethnic Serbs and Albanians kill each other in a smoldering Kosovo; Montenegro is considering secession from Yugoslavia, which could trigger a violent response from Slobodan Milosevic; 35,000 Turkish troops still divide Cyprus; and Greece and Turkey routinely scramble fighter jets in mock dogfights over the Aegean.

As the diplomatic community knows all too well, there are no pat solutions. But we do know that the process by which these problems are solved will emerge on a track that is parallel to the one now being laid. In the years ahead, the countries of southeastern Europe will become increasingly absorbed into the emerging global framework built upon free-market capital systems, trade and foreign investment, political and military cooperation, democratization, social development, and privatization.

In the new century, private-sector investment, long-term development, and Western-style legal and political systems offer the promise of genuine peace, stability, and economic and commercial opportunity throughout the eastern Mediterranean and the Balkans. It is a future in which Greece intends to be a leader.

  • PANEL A: "Building the Western Bridge"

    MR. RIZOPOULOS: Thank you, John. Before we begin introducing our speakers, I would like to inform you that, unfortunately, one of our guests us on the trip, Dr. Charles Kupchan of the Council on Foreign Relations, regrets that he will not be able to join us this morning. He is in Berlin. In view of his findings, he has agreed to have Dr. Ian Lesser present some of his perspectives, based on an op-ed they co-authored for our latest Strategic Regional Report.

    I would like to introduce our first speaker, Mr. Janusz Bugajski. Janusz is the Director of Eastern European Studies at the Center for Strategic and International Studies in Washington. He was formerly a Senior Research Analyst for Radio Free Europe in Munich and worked as a consultant on Eastern European affairs for a number of agencies and institutions, including the U.S. Agency for International Development and the U.S. Department of Defense. Mr. Bugajski's recent books include Ethnic Politics in Eastern Europe: A Guide to Nationality, Policies, Organizations, and Parties and Nations in Turmoil: Conflict and Cooperation in Eastern Europe. Janusz.

    MR. BUGAJSKI: Good morning, everyone, and thank you very much for being here. I'd like to thank the Western Policy Center and Spiros Rizopoulos in particular for sponsoring what I think was a very serious and impressive fact-finding tour in Greece. I think we all learned a great deal in our numerous meetings with government officials, businessmen, journalists, NGOs, and others -- a cross-section of Greek public opinion.

    In my brief remarks today, I will focus on three issues regarding Greek relations with what I learned in Greece is called the Central Balkans, the countries bordering Greece to the north, with the South Balkans being Turkey and Greece. The Central Balkans is the area in which I'm most involved.

    There are three issues I want to look at. First of all, Greek approaches to this region, which I learned from this trip. Second, the posture of nearby Balkan states toward Greece and toward the Greek role in the region. And, third, the role that the United States can play in facilitating more constructive regional relationships in the Balkans. Let me begin with Greek policy.

    In our meetings with Greek officials dealing with foreign security policy, as well as with Greek NGOs and businessmen, it seemed evident to me that Athens now has a very constructive approach to the Balkans, especially when compared to some unfortunate policy decisions in the early to mid-1990s. However, I do believe the government must also remain vigilant and keenly aware of several limitations and problem areas that remain in the region.

    Greek policy, I think, is constructed in two senses. First, I think that Athens no longer sees any neighbor to the north as a direct threat to its territorial integrity or its national security. And, second, it understands that, to help secure and stabilize the region, economic investment and reconstruction is necessary, and Greece is well positioned to play a leading role in this process. As has already been mentioned this morning, Greek businessmen are large-scale investors in Bulgaria and Macedonia, and are looking for future opportunities, depending on the political situation in regions such as Albania, Serbia, Montenegro, and Romania.

    Realistically, though, Greece also sees several danger areas to its north and is looking for ways to defuse new tensions and new insecurities. Let me mention four. First, recognizing that the integrity of the Republic of Macedonia is a factor of Balkan stability, Athens, in my discussions and perceptions of what was said, now seems to have become one of the strongest supporters of Macedonian statehood and territorial unity, regardless, I believe, of the main dispute.

    Second, Greek officials and advisors agree that Serbia's Milosevic regime remains the biggest, if not the only, threat to security and development in the region, and they would clearly prefer that this regime be replaced by a pro-democratic and pro-European government. The notion of an Orthodox bond between Greece and Serbia, however this has been exaggerated, should not be confused with the bond between Athens and Milosevic. Certain nationalist propaganda has tried to create such an impression, but it does not match reality.

    Third, Athens rightly remains concerned about political and economic conditions in Albania that could precipitate a larger outflow of refugees to Greece, and that could act as a magnet for regional criminal networks. It is, therefore, in Greece's direct interest to reconstruct the Albanian state and the Albanian economy on much more durable foundations.

    Fourth, regarding Kosovo, although officially the Greek authorities repeat the formula that I think all governments do, that the Federal Republic of Yugoslavia must be kept together, they are also realists and they understand, ultimately, that you cannot force the Kosovar Albanians back into Serbia and that, most probably, Kosovo and Montenegro will gradually gain their independence in the coming years. But, as a result, Athens supports a long-term NATO, U.N., and EU presence on the territory of Kosovo and throughout the region to help provide the foundations for stability and reconstruction, as well as absolute guarantees for Macedonian statehood, being keenly aware that the disintegration of Macedonia or conflict in the country is potentially very dangerous for Greece as well.

    Let me now turn to Central Balkan perceptions and policy toward Greece. Although technically this was not part of our fact-finding mission, it is important to place Greek policy in the wider regional perspective. Albania and Macedonia, in particular, have an ambivalent attitude toward Greece. On the one hand, both countries welcome Greek recognition, diplomatic support, and business investment. On the other hand, there are fears of increasing Greek economic control through large buyouts and investments, as well as potential future political domination. Similar fears, however unfounded, can be found in other parts of Eastern Europe, for example, in Poland and the Czech Republic vis-a-vis Germany.

    With regard to Albania, during my frequent trips to the country, many Albanians complain that Athens favors the Socialist Party government and interferes in Albania's domestic politics. There are also criticisms that negative Greek stereotypes of Albanians collectively foster animosity and conflict. Understandably, the Greek authorities do fear a flood of refugees and illegal immigrants from Albania. But the periodic expulsions of Albanian migrants and widespread perceptions of Albanian communities as breeding grounds for organized crime undermine good neighborly relations.

    Second, with regard to Macedonia, there are lingering suspicions in Skopje that Greece primarily stands to benefit from most of the resources to be pledged under the Stability Pact for Southeastern Europe. It is believed that the European Union will favor Athens in any reconstruction plans by giving funds, resources, and contracts to Greek companies, to the neglect of indigenous Albanian, Macedonian, or Bulgarian firms.

    Furthermore, many Balkan leaders believe that the entry of these countries into the European Union will ultimately depend on Greek support, and there are some fears that this may have to be bought at too high a price over the coming years. Such suspicious attitudes, whether they are misplaced or not, must be understood and handled by the Greek government and by Greek businessmen. In a region where misperception, rumor, and sometimes outright paranoia run high, Athens must be careful not to alienate its neighbors and not to push too far, too fast.

    And this is where, potentially I think, the United States can help play a constructive role. This is my third point, or cluster of points. Being perceived as a neutral and very powerful country without a hidden agenda in the Balkans, the United States can act as a facilitator and confidence-builder between Greece and all the Central Balkan states, with the exception of Serbia. It may work the other way around. Indeed, both sides should favor such a role, as it could help dispel any latent misunderstandings and fears.

    Let me provide a few examples of where there could be a constructive role played by Washington. U.S. embassies and consular offices in the Balkans could arrange business meetings and symposia with Greek and Central Balkan participants. We were privileged to attend a meeting with Greek businessmen of Thessaloniki, and there is no reason that similar meetings cannot be arranged in some of the Balkan countries, with Greek participation.

    Second, joint Greek business ventures with American partners could be encouraged and supported. Third, combined Greek-Turkish reconstruction projects could be assisted. I do believe that a more prominent Turkish economic role in the Central Balkan region could also help build confidence among the region's many Muslim populations, with the Slavic Muslims or Albanians, or native Turks.

    Fourth, trilateral U.S.-Greek-Balkan workshops could be organized as a form of confidence-building with individual functions, with Albania, with Macedonia, and with Bulgaria, and they could focus on a range of issues, from crime and security to business and reconstruction. Ultimately, I think all sides stand to gain from such arrangements, with the possible exception of the Milosevic regime. In addition, the Greek-American relationship will be greatly strengthened around some very concrete and pragmatic mutual interests. Thank you.

    MR. RIZOPOULOS: Thank you very much, Janusz. Our second speaker, E. Wayne Merry, is the Director of the Program on European Societies in Transition at the Atlantic Council of the United States in Washington. Until 1998, he was Senior Advisor to the U.S. Commission on Security and Cooperation in Europe. Previously, he served in the U.S. Foreign Service in the Soviet Union and Russia, and in Germany. He served in Greece in the late 1980s. Mr. Merry.

    MR. MERRY: Thank you, Spiros. I want to share Janusz's statement of gratitude to the Western Policy Center. It was a fascinating and enjoyable trip, and I agree with him that it was a very serious trip, despite the fact that we ate an immense amount. We also learned an immense amount. I think sympathy is due to Spiros, who notably aged during the week as he tried to keep the seven of us together, and particularly so when we arrived at JFK, flying right into the middle of the ice storm of the decade. We kept debating among ourselves when Spiros would finally snap. He came close a couple of times but didn't quite make it.

    Ten years ago when the Cold War came to an end, there was obviously an immense amount of fascination in the world about the opening up of what we called the Iron Curtain between East and West. But very few people paid attention to the fact that an important segment of that former Cold War frontier was in the Southern Balkans, where Greece, the only Balkan member of NATO and the European Union, also had its northern frontier, the same kind of division that had divided Central Europe north to south. I think the dynamic of what's taking place between Greece and its northern neighbors should be seen in the context of this overall post-Cold War environment.

    This northern border is special and different from the Cold War borders in Central Europe in several ways. First, unlike any other member of NATO or the European Union, Greece had borders with three very distinctive types of socialist states: Bulgaria, which was often known as the sixteenth republic of the Soviet Union because of its almost slavish adherence to Moscow; Yugoslavia, one of the leaders of the nonaligned movement but in the process of disintegration at the same time; and Albania, the quixotic, isolated, bizarre form of oddball state socialism.

    Another different element is that, while the level of living standards and economic development between East and West and Central Europe differ, they are by no means as striking as they are across Greece's northern border, where Greece now borders two Second World economies in a state of massive depression and one country, Albania, which I think can only be characterized as a Third World economy. So it is the only place where the European Union has a direct physical land border with the Third World, where the First World and the Third World dramatically meet, creating obviously real challenges.

    Finally, the northern border of Greece is a historic border of difficulty in the course of the twentieth century, being the subject of at least five wars: two Balkan wars, the two World Wars, and the Greek civil war. Any turmoil that takes place along that frontier creates great anxieties in Greece in an area in which lines on the map have moved around a great deal within living memory, and in which anything that creates the potential for them moving again must be a cause of concern to Greece.

    Ironically, just as Greece, with the opening of its northern border, was able to resume a very large Balkan identity and Balkan role, it also became fully committed and mature in its commitment to Western Europe and to the European Union. It is no secret that, for some years, Greece was somewhat ambivalent about its role in the European Union. But, by the end of the Cold War, this identity had become very widely shared across the political spectrum and ceased to be a point of major dispute between center-right and center-left in Greek politics.

    Unfortunately, the first thing that the opening of this northern border did was raise a question in the minds of most other Europeans over the seriousness of Greece's commitment to the European Union because of the prolonged and most unfortunate nomenclature issue over the name "Macedonia." Last year, questions were also raised because of the Greek position on Kosovo. My own view is that the ultimate Greek policy decisions on Kosovo demonstrated exactly the opposite. They demonstrated the absolute primacy of the European identity in Greek foreign policy and, except for the radical extremes of Greek politics, a consensus.

    The fact that the Greek government was willing to adhere to a consensus within the European Union and within NATO, which it believed to be wrong and which it believed to be adverse to its own very important regional and national interests, demonstrated the extent to which Greece is now completely committed to this European identity.

    The opening of this border, as was the case with the opening of the Cold War borders in Central Europe, creates both opportunities and challenges. As has already been noted, many of the opportunities are for Greek business. They have been most highly developed in the case of Bulgaria, where Greek business, banking, and trade are very active. Perhaps the single most promising area of economic development lies in the energy field, both in the building of the pipeline, the so-called Bosporus bypass pipeline, which in my view makes a great deal more economic and business sense than the much ballyhooed Baku-Ceyhan route, and in the development of other types of energy generation for regional purposes in the Balkan region.

    The historic city of Thessaloniki is in a position to resume its traditional role as the sea-gate for much of the Southern Balkan region and to restore to itself much of the broader economic role which it lost because of the closing of borders due to the Cold War. And the ability of Greece to develop new economic ties across its northern border holds prospects for improving the state of economic development in Western Thrace and other parts of northern Greece itself.

    The opening of these borders creates obvious challenges. First and foremost, at home, there is the presence in Greece of several hundred thousand migrants, mostly from Albania, but not exclusively so. While this new labor force has proved to have a positive and important role in agriculture, it also has created problems for a country the size of Greece, problem