The beginning of a new phase of the relationship between Croatia and the Federation of Bosnia and Herzegovina began in November 1998 at the signing of the Agreement on Special Relations endorsed by the U.S.. The Agreement provides a framework for the development of relations between Croatia and the Federation that would enhance transparent cooperation of executive, legislative, and other institutions fully respecting their sovereignty and integrity. The Agreement was envisaged also as a mechanism of creating favorable circumstances for the full implementation of the Dayton Peace Accords.

  The recent visit of President Mesić to Sarajevo emphasised the renewed efforts of the political leaders in Croatia and Bosnia and Herzegovina to seek improvement of bilateral relations, as well as to forge a basis for a strategic partnership in the pursuit of joining Euro-Atlantic institutions. The most important topics discussed were the return of refugees, transparent relations with Croats in Bosnia and Herzegovina and further cooperation through the Interstate Council on Cooperation.
 

Return of Refugees

  On March 10, 2000, following a joint meeting between U.S. Secretary of State Albright,  Croatian Foreign Minister, Tonino Picula and Republika Srpska Prime Minister Milorad Dodik in Banja Luka, the Croatian and Bosnian Serb sides issued a joint declaration on the right of refugees to return to their homes. The declaration also describes numerous joint measures that will be undertaken to facilitate the return of refugees who want to go back home, or assist those who decide to stay in the new environment, primarily through the work of a Joint Working Group which will be comprised of the representatives of the respective governments, and representatives of refugee associations from Croatia, Republika Srpska and UNHCR (United Nation High Commissioner for Refugees).
 

Transparency of Assistance

  Croatian Defense Minister Jozo Rados met U.S. Secretary of State Madeleine Albright in Sarajevo on March 8, 2000 to discuss the new means through which Croatia will allocate funds for assisting the Croat component of the Federation Army.  Following the meeting, Secretary Albright announced that the two sides had agreed on a Defense Assistance Transparency Agreement and stated that "The U.S. and the Republic of Croatia have agreed that, starting today, all requests for and approvals of security assistance to the Federation will be transmitted through the Standing Committee on Military Matters." Minister Radoš commented that through this, Croatia "is thus directly contributing to the stabilisation of the situation in the entire Southeast Europe."

  Following talks between Minister Rados and Federation Defense Minister, Miroslav Prce in Zagreb on April 3, 2000, Minister Radoš told a press conference that "Croatia and the Federation will very soon have completed a draft agreement on financial assistance to the Croat component of the Federation Armed Forces that will transparently regulate Zagreb's financing".