In the wake of the July 2010 International Court of Justice (ICJ) advisory opinion on the legality of Kosovo’s declaration of independence, Kosovo and Serbia have an opportunity to resolve differences, establish bilateral relations and unblock their paths to greater European Union (EU) integration.

The obstacles are formidable, including mutual suspicion, incompatible agendas and uncertainties about the true goals of each. Failure to negotiate in the next months would probably freeze the conflict for several years, as the parties entered electoral cycles, during which the dispute would likely be used to mobilise nationalist opinion and deflect criticism of domestic corruption and government failures.

Enough has changed recently, especially the development of more realistic if not yet fully public attitudes in Belgrade and Pristina, to suggest a win-win solution is possible. Without preconditions and facilitated in particular by the EU, Kosovo and Serbia should promptly open talks with the aim of reaching as comprehensive a compromise settlement as possible.

The draft resolution calling for new talks on Kosovo that Serbia submitted on 28 July is likely to be discussed by the UN General Assembly in September. Kosovo would accept a dialogue that does not question its status or territorial integrity.

Facilitating a Kosovo-Serbia rapprochement is a challenge for a divided EU, of whose 27 member states 22 have recognised Kosovo and five have not and whose counsels are likewise split between those who advocate a comprehensive solution and those who caution that only a gradual approach beginning with modest, technical issues is feasible.

The issue of diplomatic recognition of Kosovo’s statehood is at the heart of the bilateral impasse. Though 69 states have taken this step, Serbia has vowed to never accept the territory’s “unilateral declaration of independence” (UDI). That stand – and their own fears of secession precedents – provide the political justification for the five EU non-recognisers. On the UN Security Council, Russia and China oppose recognition, as do several non-permanent members.

Pristina hopes the ICJ’s opinion that its 17 February 2008 declaration of independence did not violate international law or Security Council Resolution 1244 (the latter the basis for UN supervision of the territory since the end of the 1999 war) will provide a strong impetus for more recognitions.

But to sway the holdouts in the EU and among the permanent members of the Council, Kosovo still needs Serbia’s consent to its independence, at least implicitly via establishment of some form of diplomatic relations, and eventually full and formal recognition.

On the ground, the real dispute is over Kosovo’s Northern municipalities. The North has not been under effective authority from Pristina for two decades; its sparse and rural Serb population uniformly rejects integration into Kosovo. This includes the plan named for Martti Ahtisaari, the former president of Finland and Nobel Peace laureate, who developed it as UN Special Envoy in 2007 and which regulates Kosovo’s supervised independence, offering substantial self-rule for Serb-majority municipalities and additional competencies for the North in education and healthcare.

Serbia still runs municipalities, courts, police, customs and public services, and the EU Rule of Law Mission (EULEX) has been unable to deploy more than a token presence there. Two incidents in Mitrovica in July showed that violence remains a threat.

Three solutions for the North are conceivable: the Ahtisaari plan, expanded autonomy and a land swap. Crisis Group has consistently supported the carefully-conceived Ahtisaari plan since its inception, though so far it has been insufficient to secure the North’s integration or Kosovo’s international recognition

. Pristina might offer additional rights to the North comparable to those enjoyed by various European regions including a regional legislature and executive and local police and courts, as well as agreeing that most customs fees and tax revenue collected in the region could remain there. But there are no signs that Belgrade or the Northern Serbs would accept even this expanded autonomy. Instead they say partition could pave the way for Serbia to recognise the remainder of Kosovo as independent.

Pristina will not accept partition but gives some hints it might consider trading the heavily Serb North for the largely Albanian-populated parts of the Preševo Valley in southern Serbia. That would involve complex calculations. Some Kosovars worry more about the implications for their state of Northern autonomy, but many internationals fear that border changes could provoke mass migration by Kosovo Serbs now living south of the Ibar, as well as destabilising separatism in neighbouring Macedonia and Bosnia-Herzegovina. Crisis Group has also warned of this in the past, but recent explorations suggest that these concerns are no longer well founded.

Another key issue for Kosovo-Serbia talks – perhaps even more sensitive for Serbian national sentiment than the fate of the North’s 45,000 or so brethren – is the status and security of the Serbian Orthodox Church’s most venerable monasteries and churches.

The Ahtisaari plan provides extensive protection, but the Church, fearful of a repeat of the March 2004 mob violence that left many religious sites in smoking ruins, wants more. No Serbian leader could sustain an overture to Kosovo without the Orthodox Church’s strong support.

Belgrade accordingly desires to enhance the Church’s position by obtaining the substance if not necessarily the form of extra-territoriality, treaty guarantees and protection by an international force after NATO-led peacekeepers (KFOR) leave. There would appear to be scope for the Pristina government, which already made extensive concessions to the Church during the Ahtisaari talks, to consider such measures without prejudice to its sovereignty.

Rather than status, the North and the Church, however, Pristina would like talks to focus on technical issues, such as customs, trade, communications, electricity and transport. The EU and the U.S. also prefer a beginning with these apparently less volatile matters, so as to build mutual confidence. These are also problems which similarly affect the daily lives of Kosovo Albanians and Kosovo Serbs, limiting their access to goods and services. But past EU attempts at shuttle diplomacy on similar issues have largely failed. The status issue would likely block progress also in these areas, unless Belgrade is willing to acknowledge Kosovo’s authority at least implicitly.

To exploit the opportunity for serious, comprehensive talks that could bring a compromise final settlement, bilateral dialogue will need to go beyond technical matters. If Serbia really seeks meaningful progress and wants to convince the EU and U.S. that it is negotiating in good faith rather then merely trying to postpone more recognitions, it will have to treat Kosovo as an equal, even if it does not immediately recognise the new state. Crisis Group’s soundings suggest grounds for moderate optimism.

There is a greater sense of political realism on the Kosovo issue today in the Tadić government than its Kostunica predecessor ever demonstrated, to the point that some officials appear to be looking creatively for ways to free Serbia honourably from the burden Kosovo has become. The government claims to be confident it can deliver its public opinion, but it would need a meaningful face-saving measure to persuade nationalist elements that is has not sold the interests of the nation. Pristina, too, is becoming more realistic about what it and its international supporters can accomplish in the North.

The international community should facilitate as complete a settlement as is possible, leaving it up to the parties themselves to decide how far and in what direction they can go to achieve the goal of recognition. The most controversial outcome that might emerge from negotiations would be a Northern Kosovo-Preševo Valley swap in the context of mutual recognition and settlement of all other major issues.

Neither Pristina nor Belgrade proposes this openly, but officials in both capitals have begun to speak of it quietly in contacts with Crisis Group. Many in the international community would be unhappy with this option. Crisis Group believes that ruling out this or any specific mutually-agreed option from the onset, however, would risk freezing the Kosovo-Serbia conflict, with no guarantee of eventual resolution.

Greater autonomy for the North and self-governing autonomous status for Serbian Orthodox Church sites, as envisaged by the Ahtisaari plan, in exchange for Serb recognition should be acceptable to both sides. But neither Belgrade nor Northern Kosovo Serbs appear ready to sign on, and a divided international community has few levers with which to exert pressure. If a land swap is also unacceptable, and a comprehensive solution proves an illusion, an interim status for the North might be another avenue for the parties to explore.

At a minimum and in order to obtain positive consideration in Brussels for the EU candidacy application it filed in December 2009, Serbia should pledge to work with Pristina to secure the rule of law in the North, establish good neighbourly relations by cooperating on a host of technical issues to improve people’s daily lives and stop blocking Kosovo’s participation in regional institutions.

If the talks fail completely, the EU and the U.S. could try to press greater integration on the North by forcibly extending EULEX and Kosovo law enforcement there, but with decreasing troops, resources and political influence in the area, that prospect seems unlikely.

RECOMMENDATIONS

To the European Union (EU), its Member State Governments, and the U.S. Government:

1. Offer to facilitate Kosovo-Serbia talks on the following basis:

a) they should be held at the level of President Boris Tadić for Serbia and Prime Minister Hashim Thaçi for Kosovo;

b) they should begin promptly and aim to conclude by early summer 2011; and

c) the parties themselves should set the agenda, with no topics ruled out from the beginning.

2. Appoint a high-level diplomat to start preparing the talks, including by shuttling between Belgrade and Pristina.

3. Pledge to support all agreements reached by the parties.

4. Renew efforts to achieve a compromise in the name dispute between Greece and Macedonia, and take other steps to insulate Macedonia, as well as Bosnia-Herzegovina, from possible negative repercussions of a Kosovo-Serbia rapprochement.

5. Work with Kosovo to secure more international recognitions.

To the Governments of Serbia and Kosovo:

6. Accept the facilitation offer and engage in talks as equal parties.

7. Consider a comprehensive settlement, including the following elements:

a) recognition of Kosovo within current borders;

b) broad autonomy for the region north of the Ibar River consistent with Kosovo’s territorial integrity, including a regional legislature and executive, control over most customs duties and local tax revenue and such other matters as may be mutually agreed; and

c) self-governing autonomous status for Serbian Orthodox Church sites, including all the components of the Ahtisaari plan, supplemented by international armed protection after the departure of KFOR and guaranteed by treaty or Security Council resolution.

8. Support each other, if a comprehensive agreement is impossible now, in securing the rule of law in the North and establish good neighbourly relations by concluding customs, trade, communications, electricity and transport agreements that can improve people’s lives and strengthen both the Serbian and Kosovo economies.

9. Open representation offices immediately in Pristina and Belgrade, without ambassadorial accreditation.

10. Cooperate in ensuring the security and effective functioning of Kosovo’s office in North Mitrovica.

To the Government of Serbia:

11. Build mutual confidence by immediately allowing Kosovo – without a UN chaperone – to participate in a manner that does not prejudge status in such international organisations and arrangements as the International Telecommunication Union, the Central European Free Trade Agreement and regional law enforcement bodies.

12. Work with concerned member states to amend the proposed UN General Assembly resolution on Kosovo to ensure that it serves as a framework for dialogue and receives the widest possible backing.