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Economic War Between Croatia and Serbia Causes Chaos

September 13, 1991

BELGRADE, Yugoslavia (AP) _ Bloody ethnic fighting in Yugoslavia has been accompanied by a growing economic war between Serbia and Croatia, with Croatia cutting oil supplies and its rival threatening to switch off the lights.

The two largest Yugoslav republics have virtually stopped all trade and have impounded each others’ businesses, office buildings and other assets. They also slapped huge taxes on the few goods they still exchange.

As the result, inflation in Yugoslavia is beginning to soar and federal officials warn they may halt foreign debt payments. There has been a 25 percent drop in industrial production since the beginning of the year.

The clash over oil supplies could further deepen tensions between the two republics, already fighting an undeclared war.

At least 400 people have died in the fighting involving Croatian forces, rebel Serbs living in Croatia and the federal army since the republic declared independence June 25.

Haunted by the memories of a Nazi puppet state of Croatia that killed hundreds of thousands of Serbs during World War II, rebel Serbs living in Croatia say they are fighting to keep their territories within Yugoslavia.

Human losses have overshadowed the economic havoc wrought by the clashes and political bickering in what was once Eastern Europe’s most prosperous and reform-minded country.

Serbia’s vice premier, Budimir Kosutic, accused Croatia on Wednesday of cutting off an oil pipeline that runs from the Adriatic sea to Belgrade, the Serb and federal capital. The Croats denied wrongdoing, saying Serb insurgents had damaged the pipeline and adding that Croatia was ready to pump Serbian- bought oil to Belgrade.

″Croatia has impounded 183,000 tons of oil belonging to Serbia, worth $27 million,″ Kosutic told reporters in Belgrade.

Croatia produces enough oil for its own needs, but also controls the pipeline from the Adriatic island of Krk, where tankers are unloaded.

Serbian authorities said that because of ″the Croatian robbery,″ the largest Yugoslav republic faces serious shortages of gasoline.

Although supplies were still normal, lines of cars already were appearing at pumps in Belgrade in anticipation of shortages. Serbia said it had been expecting the move and had a delegation in Moscow seeking alternate supplies.

″This problem is the culmination of irrational moves in the economic war between Serbia and Croatia,″ the federal government said in a statement appealing for resumption of normal economic ties.

Kosutic announced unspecified countermeasures and the Serbian authorities appealed to the European Community to intercede with the Croats.

Sources close to the Serbian government told The Associated Press that the republic is contemplating cutting off electricity to Croatia. Serbia provides half of Croatia’s electricity.

The sources, who spoke on condition of anonymity, said Serbia would have made such a move already if its electricity exports to Italy and Austria did not use Croatia’s grid. Serbia badly needs the hard currency that its electricity earns.

Ivan Djerek, an assistant manager of the INA oil company in Zagreb, said the pipeline had been damaged in central Croatia last Friday by Serbs fighting in Croatia.

Ante Cicin-Sain, chairman of the pipeline company, indicated Serbia was getting no oil because it was not supplying the pipeline with oil it had bought.

He said the pipeline was operating for those with their own oil supplies.

Except for agriculture, where good weather is boosting crops, all other sectors of the Yugoslav economy are in steep decline.

Foreign currency reserves have been more than halved to $4 billion since the beginning of this year, and official statistics predict a $2.2 billion trade deficit this year.

The International Monetary Fund and other Western creditors have frozen negotiations with the federal government on $4 billion in badly needed loans.

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