Published by Financial Times, 12 November 2007
When Croatia won its place last month as a non-permanent member of the United Nations Security Council, Vuk Jeremic, Serbia's foreign minister, was quick to congratulate Zagreb. Mr Jeremic hoped the appointment would "lead to a better understanding of problems related to the Western Balkans" at the UN.
Belgrade's warm reaction to its erstwhile rival's diplomatic achievement would have been hard to imagine not long ago.
But bilateral relations have thawed noticeably since Ivo Sanader, as Croatia's newly elected prime minister in 2003, visited Belgrade on a sensitive mission of reconciliation. Serbia returned the favour five months ago, when Boris Tadic, Serbia's president, visited Zagreb and apologised to Croats for war crimes committed by those "acting on behalf of my people".
In the new atmosphere quarrels are few, and prickly issues relating to the war that ended 12 years ago tend to set leaders of the two countries on diplomatic tiptoes.
Even when Mr Sanader took the unusual step of flying to New York last month to protest vigorously against the lenient verdicts against three Serbs tried at the UN's International Criminal Tribunal for the Former Yugoslavia, he treated Serbia gently. In his plea before the General Assembly, Mr Sanader had harsh words for the former Yugoslav regime of Slobodan Milosevic, the late president, and a critical message for the Tribunal. But he said "Serbia" just once, referring to Belgrade's "democratically oriented political forces".
Mr Sanader openly courts those forces in line with the European Union's hopes for harmony in the region. His repeated insistence that the status of Kosovo, Serbia's breakaway province, cannot be resolved internationally "without Belgrade" echoes standard EU rhetoric but is also a prize for Vojislav Kostunica, Serbia's prime minister, a conservative nationalist who has made retaining Kosovo his chief goal. Zagreb is cautious over recognition of Kosovo's independence over Belgrade's objection but would accept any EU-wide decisions. Mr Sanader also speaks of his desire to see Serbia included in the European Union and NATO.
Yet the official warmth between Zagreb and Belgrade is decidedly cautious. Leaders on both sides know what lurks beneath. For many citizens of Croatia and Serbia - especially those who have minimal contact in business or private life with their former Yugoslav compatriots - bitterness from the war era remains.
Contact is less common than it might be, because transport links remain poor. Regular air flights between the two countries were never reinstated after the war, meaning, for example, that Serbian citizens travel with difficulty to Croatian holiday spots on the Adriatic shore.
On the road network, Croatia seems to pretend that Serbia does not exist. Travellers heading east from Zagreb search in vain for signs pointing toward Belgrade. On the former Yugoslav-built Brotherhood and Unity motorway running between the two cities, signs over the eastbound lanes are marked for Slavonski Brod, a city inside Croatia, not even halfway to Belgrade. By contrast, Zagreb is heavily signposted on westbound routes out of the Serbian capital.
Such attitudes are not conducive to trade, which is minimal and growing only slowly. Croatia trades more than twice as much with Slovenia, its western neighbour of 2m people, as it trades with Serbia, a market of 8m not including Kosovo's 2m. Some 5 per cent of Croatian exports go to Serbia, but just 1 per cent of imports come from there.
Still, if one factor points the way out of this post-war era of cautious diplomacy and limited interaction, it is business. Companies working in both countries usually say national rivalries do not extend into this area.
A small but fast-growing example is New Technology, the Croatian daughter company of ComTrade, a Serbian-owned IT manufacturer and distributor. ComTrade robotically assembles its patented personal computers in Serbia and sends up to six truckloads per week to New Technology, along with machines from Fujitsu-Siemens, Toshiba and Acer.
Petar Pintar, New Technology's general manager, says that in its first year of operations the company has captured 1.5 per cent of Croatia's IT market. He says ComTrade's owner told him at the start to follow local laws zealously and to minimise risks of bureaucratic obstruction, and so far has been pleasantly surprised.
"I really do not have the impression that anything is hard to do. One customer, once, told me that he did not want to do business with a company working from Belgrade. But that is one out of 1,000," says Mr Pintar.
A much bigger boost to Croatian-Serbian trade could be seen if Agrokor and Delta, respectively the two countries' largest private-sector companies, follow through on their year-old agreement to merge their region-wide retail operations.
In addition, last year's updated Central European Free Trade Agreement brought Serbia into the pre-EU trade bloc, which already included Croatia, with a new customs union soon to take effect.
Along with the momentum of private sector investments, regional integration could strengthen the practical economic side of a bilateral relationship that is strategically close yet remains politically awkward.
Potential for rancour remains. Proceedings are to open six months from now in Zagreb's genocide case against Belgrade at the International Court of Justice. Some Croatian diplomats say dropping the lawsuit would help to improve bilateral relations, but any such move would risk a popular backlash.