11. Hungary/Slovakia: Failure to resolve Gabcikovo dam dispute. Relations deteriorate and are broken off. Reprisals against minorities in both countries.
12. Bulgaria: Tightening
of sanctions on Serbia exacerbates recession. Reformists discredited. Neo-Communists take over.
CONFIDENTIAL
Indirect. Blow to credibility of EC/CSCE, and European stability more generally.
Further regional instability. Entrenchment of democratic market economies in Central Europe suffers blow.
Supporting trilateral expert commission; efforts to resolve dispute through international arbitration.
Ensure IFIs take account of effect of sanctions in their reviews of Bulgarian economy.
13.
breakdown
South Africa: of the constitutional process, escalation of conflict in Natal, breakdown
of internal order and ethnic conflict.
14. Gibraltar: major financial scandal and/or constitutional crisis.
Major commercial and investment interests; 350,000 South Africans hold British passports; a further 850,000 are eligible.
Large potential costs for the UK: in compensation in the event of a financial scandal, or in ruling Gibraltar directly if its Government refused to cooperate. Gibraltar's inclusion in the Single Market for financial services could lead to the risk of EC-wide financial scandal.
up to
Support for constitutional negotiations; UN/ EC/ Commonwealth observers 100 - are operational, as are experts for the Goldstone Commission.
Agreed with Spanish on 1 March to look at ways of developing Brussels process. Some progress in persuading Bossano to improve standards of government and regulation of financial services in Gibraltar. Contingency plans drawn up for freezing assets, suspending the constitution and direct rule very much last resort).
CONFIDENTIAL
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