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Milosevic's Mounting Money Woes

May 02, 1999|Alex Alexiev | Alex Alexiev, an international business consultant, writes frequently on Russian and Eastern European affairs

HUNTSVILLE, UTAH — As NATO mulls the introduction of ground troops in Kosovo, criticism of such a dramatic escalation is intensifying. Critics believe that the ground-force option would place the North Atlantic Treaty Organization in a no-win situation, with a real possibility of a protracted engagement ending in a Vietnam-like debacle. Could the critics be right? Could a country like Yugoslavia pay for a large-scale war effort? How is Belgrade even able to finance its current campaign in Kosovo?

For the critics to be right, Yugoslavia would have to succeed in three areas. It would have to find the financial and logistic wherewithal to sustain a prolonged war effort. It would have to maintain a high level of civilian and military morale and combat performance in a struggle against technologically superior forces. Last but not least, Yugoslavia would have to secure the political and materiel support of a major international player like Russia.

It is often assumed by skeptics of NATO's ground-war prospects that Yugoslav President Slobodan Milosevic would continue to muddle through financially, just as he did during the Bosnia and Croatia conflicts, and as he is doing in Kosovo today. But several factors cast serious doubt on Yugoslavia's economic and financial ability to wage large-scale war. The country's current financial situation is far worse than it was during the earlier conflicts. Two of Milosevic's major sources of financing--capital transfers by Serbs working in Western Europe and revenues from the numerous Yugoslav companies operating in Russia--are drying up. Revenues from expatriates, estimated at more than $180 million a year, have declined because the government no longer allows the workers' relatives free access to their foreign-exchange accounts. Income from the companies in Russia, which are personally controlled by Milosevic's older brother, Borislav Milosevic, who is also Yugoslavia's ambassador in Moscow, has shriveled along with Russia's economy. Yugoslav exports, another source of hard currency, have fallen precipitously.

What's left is de facto confiscation of the population's diminishing resources. In recent months, salaries and pensions, which were infrequently paid anyway, have been cut, foreign-currency accounts blocked and new tax surcharges imposed. With Yugoslav civilian industry in shambles as a result of the NATO bombing campaign, the once productive agricultural sector operating in a subsistence mode, economic output halved, and poverty and unemployment rates greater than 50%, Milosevic's ability to squeeze additional resources from his impoverished populace is finite.

Moreover, the international environment in which Milosevic operates today has changed dramatically, to his detriment. During the Bosnia war, Yugoslavia was able to circumvent the U.N. embargo through massive smuggling from neighboring Bulgaria, Romania and Macedonia, which were then ruled by neo-socialist regimes sympathizing with Milosevic. Criminal gangs associated with the Bulgarian regime, for instance, smuggled tanker loads of oil, weapons and other embargoed supplies seemingly at will. All three countries are now run by democratically elected governments that aspire to join NATO and the European Union.

Finally, one must be mindful of the nature and cost of current Yugoslav operations in Kosovo. The units used there have, for the most part, consisted of paramilitary cutthroats and local police. They excel in murder, rape and pillage against unarmed civilians. None of this costs much money.

It is often remarked that Serbs are united behind Milosevic as never before and are prepared to follow his leadership in an all-out "defense of the fatherland." Accordingly, the Yugoslav army would put up fierce resistance and, at the least, inflict unacceptable casualties on NATO's forces, regardless of the country's finances. Most Serbs are indeed outraged by NATO's bombing campaign. Unhappiness with the West, though, hardly translates into unqualified endorsement of Milosevic, whom many Serbs consider a brutal dictator and the real cause of much of their misery. This is evident not only in Montenegro, where a majority supports the anti-Milosevic democratic government. It is also detectable in Serbia proper, where Milosevic's government increasingly resorts to ever harsher methods, including murder, to stifle and destroy independent media and organizations critical of his rule. Last week, Vuk Draskovic, Yugoslavia's deputy prime minister, was dismissed after threatening street demonstrations against Milosevic.

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