THE REFLECTIONS OF THE "POSITIVE SHOCK"

FRY after the easing of the sanctions

Summary:

Although the Security Council only conditionally and symbolically eased the international sanctions on FR Yugoslavia, the rejoicing in Belgrade is not without reason. Everyone here believes in the theory of "connecting vessels" according to which the "emptying" of some of the prohibitions from one vessel will automatically lower the level of sanctions in all other ones. Yugoslav officials are already announcing that they will demand that the easing of the sanctions proceed further. Federal Prime Minister Dr. Kontic gave silent instructions to the federal machinery to prepare economic policy for next year as if Yugoslav funds in foreign accounts will be "unfrozen" (they are estimated at about US $ 2 billion in Belgrade).

The Governor of the Central Bank, Dr. AvramoviS, unofficially claims that the IMF and World Bank (in which he worked for over 25 years) are willing urgently to reschedule Yugoslavia's external obligations amounting to US $ 4-6 billion. A banker from Milosevic's circle claims that it is possible to reactivate previously approved foreign credits for the power generating industry, as well as the establishment of shareholding companies with foreign capital for road construction in Serbia. All in all, although the real effects of the easing of the sanctions are yet to be seen, Milosevic got the support of the international community and safeguards against economic collapse. At least that is how official Belgrade sees it.

AIM, BEOGRAD, September 25,1994.

Although the UN Security Council only conditionally and symbolically as it were eased the international sanctions against FR Yugoslavia, the rejoicing in Belgrade, although excessive, is not without grounds. Everyone here believes in the theory of "connecting vessels". According to it, if bans on international sports and cultural events and bans on air and ferryboat traffic are emptied from one "vessel", the level of sanctions in all other "vessels" will automatically go down.

The credibility of this theory is reinforced by the initial reactions from Moscow, Kiev, Athens and Budapest. Yugoslavia's trade and transport partners, who suffered the largest losses on account of the world blockade understand the invitation of the Security Council to its own Sanctions Committee " to adopt an appropriate current procedure to accelerate the consideration of requests concerning legitimate humanitarian aid..." well. Actually, much of the "black trade" between Yugoslavia and neighbouring countries evolved during the past 122 weeks of the international sanctions, through the genuine and false papers (approvals) of that Committee of the Security Council, and the Office of the High Commissioner for Refugees and the Red Cross.

In any case, why now persecute businessmen for doing business with the Serbs and Montenegrins, if they are now allowed to play football with them in front of Eurovision cameras. Yugoslav officials are already announcing their demands for the easing of the sanctions to go further. Federal Prime Minister, Dr. Radoje KontiS, stated publicly that the complete lifting of the sanctions against FRY would constitute the "largest contribution to peace and stabilization in this region", and the federal administration unofficially claims that he gave the federal machinery silent instructions to prepare next year's economic policy on the assumption that Yugoslav financial resources in external accounts (optimistically assessed at about US $ 2 billion) will be unfrozen.

The Governor of the Central Bank, Dr. Dragoslav AvramoviS, also unofficially, claims that the IMF and World Bank (where he has personal connections, as he worked there for over 25 years) would be willing to urgently reschedule Yugoslavia's external obligations (between US $ 4-6 billion, depending on the form of "succession" of the former SFRY and the calculated interest rates during the sanctions).

Yugoslavia's pressure on the UN for financial transanctions with the world to be allowed will certainly be increased soon, because the country with about US $ 500 million in operationally available foreign exchange reserves will not be able to pay for expanded "legal humanitarian imports". Illegal ones, assessed this year at about US $ 1.5 billion can no longer cover illegal exports, which did not in the first eight months of this year exceed a billion dollars (in the last "normal year" - 1989, Serbia and Montenegro exported goods worth US $4.2 billion, and imported goods in the value of US $ 5.2 billion).

Despite the caution with which the victorious statements of Serbian economic officials must be viewed, which are more wishful thinking than realistic expectations, we should note that the new president of the Investbank in Belgrade, Nikola Stanic ( allegedly close to Milosevic's inner circle) is already speaking about the "possibility of activating previoulsy approved foreign credits for the completion of power generating facilities". He adds that it is possible to establish shareholdiing companies which would on the basis of state concessions build highways, the point being that the inflow of foreign capital in that form would not be an investment into state, but rather "private" (shareholding) ventures in the territory of Serbia (specifically referring to the Belgrade - Subotica highway of interest to the entire European Union).

Nikola Stanic (indirectly) in advance develops the idea on the gradual lifting of the financial blockade, and says that in cooperation with foreign creditors his bank will suggest a "model for offsetting our external debt and foreign exchange claims from abroad" ( the problem there being that the main Yugoslav debtors are Iraq and Libya, also under international sanctions, while Russia does not acknowledge "Soviet debts", and cannot pay the indisputable ones in money but only in diplomatic services). The easing of the sanctions took place at the eleventh hour, from the standpoint of Yugoslavia's economic stability, attained through Avramovic's well-known "hard dinar".

In September the stabilization program was seriously eroded and prices rose (official statistics have no estimates yet, but the "black exchange rate" of the dinar and the German mark signals a monthly inflation ranging between 30 and 40 percent). Even if the possible direct positive economic effects of the "easing" are too late, they nevertheless provide manouevering space for the authorities of FR Yugoslavia. Nervousness in the market and the reactions of economic and monetary authorities can be justified before the public by preparations for a new period - "after the sanctions", a period of "growth, justice and efficiency", which are the key worlds of the new economic program recently endorsed by Serbian President Slobodan Milosevic.

Irrespective of the extent to which he, as the strongest political personality in FR Yugoslavia is in the hands of those who will conduct the "process of the easing of the sanctions", by this first step the world community has undertaken to support him in the future, and protect him against economic collapse. At least that is the reasoning of official Belgrade.

DIMITRIJE BOAROV