The PM said this in his speech about Croatia's integration with the EU at the Bertelsmann Foundation in the western German city.
"Croatia cannot be anyone's hostage, and this goes for General Gotovina as well. He must solve his case before the Hague tribunal," Sanader said.
The UN war crimes tribunal's chief prosecutor Carla del Ponte said in Luxembourg on Monday she believed the Croatian authorities would locate Gotovina by the end of November and expressed deep dissatisfaction with Croatia's failure to arrest him before the summer.
In his address to business people and politicians of the Westphalia region, Sanader also spoke about Croatia's guidelines and prospects on the road to full membership in the European Union.
Starting from the assumption that entry talks would start in early 2005, Croatia could complete the talks by the spring of 2007, Sanader said. Apart from the Copenhagen criteria, Croatia must meet three other conditions - cooperation with the Hague tribunal, refugee return and reform of the judiciary, he said.
He expressed a wish for Croatia to become a spring board for investors wishing to expand their business onto other south-east European countries.
By joining the EU we do not want to leave the region, but want to be its bridge to Europe, he added.
Commenting on reconciliation in the region, Sanader said that reconciliation between Germany and France could serve as a model for the Croatian-Serb reconciliation.
The PM also introduced the "One Stop Shop" project, an agency which would facilitate foreign investments in Croatia by helping investors obtain the necessary documents quickly. The government is expected to adopt this project at a session later this week, Sanader said.
He also pointed to this year's favourable economic development of Croatia, particularly with regard to tourism, decreased unemployment, and improved trade indicators.
Sanader visited Gueterslohe at the invitation of the Bertlesmann Foundation, which promotes democracy and market economy in transition countries.