PRE-ELECTION GIFT TO MILOSEVIC

After Lifting of UN Security Council Sancions

Milosevic marks definitive lifting of the world sanctions as a historical success and beginning of accelerated economic development, but fails to mention the remaining "outside wall" of the sanctions, due to which Dayton suspension of the sanctions last year in November could bring practically no benefit to the economy of FRY

AIM Belgrade, October 2, 1996

Despite the fact that the "outer wall" of the world sanctions continues to paralyze finances of the FRY, significance of lifting of the UN Security Council sanctions which was unanimously adopted on October 1 - should not be underestimated. Although significance of this prize given to Milosevic by the international community for implementation of the Dayton accords in Bosnia, lies more in the sphere of politics than that of the economy, it has an economic dimension to it, too. After all, definitive lifting of the sanctions is the basic precondition for FR Yugoslavia to finally formally demand regulation of its membership in international economic institutions: International Monetary Fund, World Bank, World Trade Organization, etc., which according to the "outside sanctions" still remain closed for Milosevic - until the Americans give a signal to them to finally open their doors for FR Yugoslavia. This is expected to take place when Milosevic normalizes relations with all the newly-founded states on the territory of ex-Yugoslavia, when he accepts economic succession of the SFRY and when he gives Kosovo its autonomy back. Conditions stipulated by the US Congress are usually added to this list - protection of human rights and freedom of the media.

Immediate constructive consequence of definitive lifting of the sanctions, however, will be that the negotiators of the FRY who contact international institutions will finally have to come out with real and specific proposals and concessions - which allegedly they postponed because preconditions for them had not been effectuated. Will the official position of the FRY in this sense "soften" or become even "firmer"? It is not simple to answer this question, because there are few information about the nature of differences in stances on reintegration of FRY into international community between the USA and the European powers. Allegedly, the European stance is more favourable for Milosevic, so the suspicious Slovenes hurried to file an appeal before the exptected lifting of the sanctions after the Bosnian elections, with French courts, in order to continue the blockade of former SFRY foreign currency reserves on accounts in nine big (parastate) banks. Formally (and legally), the National Bank of Yugoslavia could have immediately claimed the right to control that money with a demand bearing "the old stamp" of the SFRY. French courts adopted the demand of Slovenia 24 hours before lifting of the sanctions, which leads to the conclusion that European centres will continue respecting the American "outside wall". But, for how long and in what way - remains to be seen, because complaints can be heard that the IMF is being "politicized" in this way. This, of course, has nothing to do with concern for Serbia, but with fear of Europe from American domination with the "world monetary gendarme".

Regardless of the fact that the world sanctions have practically not been lifted yet, decision of the Security Council No. 1074 which abolishes the sanctions imposed by Resolution no. 1022, is an opportunity to look back on their effects on the economy of Yugoslavia. First of all, real sanctions did not last for "four years, four mopnths and one day" (since May 30, 1992), as stressed now, but much longer. Sanctions were imposed on FRY in the sphere of transportation and foreign trade by the European Union back in November 1991. What has Milosevic accomplished during the "five-year period" of sanctions, apart from reinforcing his power, while allegedly defending independence of the country from external threat? Here are just a few summarized indicators.

Primarily one should be reminded that the average salary amounting to 619 marks in 1991 (the highest was in 1989

• 824 DM), dropped to less than 200 DM this autumn (when paid at all). The number of employees is reduced from 2.7 to 2.1 million people (among whom 900 thousand people are redundant labour according to expert analyses). Social product of the FRY, according to official data, in this five-year period, declined from 29.6 billion dollars to less than 15 billion (which is expected to be reached this year, although doubted by many economists). Industrial production went down by 60 per cent. What is even worse is that during these five years of the sanctions, economy of Serbia has lost its position in the international market, so it is assessed that, even in ideal conditions, it would be impossible to regain even half of the previous export and foreign currency inflow of 13 billion dollars (25 per cent of the gross product accounted for international exchange, and a significant foreign currency profit was made by rendering transportation and other services). It should also be added that before dissolution of the SFRY, the economy of Serbia and Montenegro made about 30 per cent of its gross product in exchange with Slovenia, Croatia, B&H and Macedonia - which will not be restored for many years to come.

During the sanctions, citizens of FRY had to endure hyper-inflation which lasted almnost two years and during its finish reached the rate of 62 per cent per day (2 per cent an hour), plunder of foreign currency savings by state-controlled banks (4 billion dollars) and privately-owned banks (Jugoskandik and Dafiment Bank spent almost 1 billion dollars which belonged to the citizens), general criminalization of foreign trade, ethnic shifting (about 700 thousand persons fled to FRY and almost the same number emigrated from it and went abroad), political repression, socialist conservation of the system, etc. For all that the pretext were the effects of "unjustified and unprovoked" world sanctions, and now they are to be eliminated by "accelerated development" Milosevic is mentioning. It is going to be difficult. Especially because the damage caused by the sanctions will continue to increase even after their lifting.

According to the assessment of the Federal Ministry of Science, Technology and Development presented two years ago, total damage due to dissolution of Yugoslavia and world blockade amounted at that moment to 147.3 billion dollars. This is an assessment of losses which would have appeared in the period between 1991 and 2011, on the assumption that the sanctions were abolished in the end of 1994. Although this calculation is outdated, one should be reminded of it.

The period between 1991 and 2011 was taken into account because the 1990 level of social product could have been reached only in 2012, on the assumption that in the next two decades FRY achieved an average annual increase of social product of 4.1 per cent. Losses in FRY due to sanctions imposed by Serbia on Slovenia are assessed to be 50 billion dollars.

It would be useful to dwell a little longer on this investigation of the Centre for Development and Economic Policy of the Ministry of Science from 1994, because of a series of less notorious data. In the assessment of the unearned social product, investigators have started from the thesis that 1990 social product should be taken as the reference, which amounted to 26,590 million dollars (according to UN methodolgy), since it was "the lowest in the decade which preceded, so it was chosen as the possible feasible social product after 1991", had there been no sanctions. Only according to this, damage due to unmade social product in the period 1991-94 was assessed to amount to 38,136 million dollars. Absence of income from abroad of 1,415 million dollars was added to it, as well as the expenses of 497 million dollars for paid salaries of those who had been temporarily unemployed due to the sanctions, etc.

Thousands of different calculations about damage done to the economy of FRY will be done in the days and years to come, and in majority of them, reasons for their imposing will not be given. Milosevic and his men were the first to "forget" that the sanctions were imposed because of their militant and war policy, and they are already reciting that they have been lifted thanks to their "consistent and wise peace policy". However, poverty cannot be forgotten.

(AIM) Dimitrije Boarov