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Sanctions Begin to Take a Bite on Yugoslavia’s Economy With AM-Yugoslavia, Bjt

August 5, 1992

BELGRADE, Yugoslavia (AP) _ At first glance, life under international sanctions seems pretty much as before. Shops are still well-stocked with imported goods, and farmers’ markets bulge with cheap fruit and vegetables.

Only the long lines outside gas stations hint at the crunch economists say is sure to spread across much of the economy.

Yugoslavia was hit with U.N. sanctions, including bans on trade, financial transactions and oil deliveries, on May 30 to punish Serbia and Montenegro, the only two republics left in the federation, for inciting fighting in neighboring Bosnia-Herzegovina.

So far, sanctions have had no effect on the violence, although they have prompted Yugoslav authorities to publicly renounce their support for Bosnian Serb fighters.

Inflation, which in June hit a record 102 percent, actually dipped to 64 percent in July. That was, in part, due to falling food prices because of abundant summer crops. But it was also because the government did not print enough new bills when it recently devalued the currency.

″Signs of normality are deceptive, because of the time-lag of three to four months necessary for economic measures to take effect,″ said Jurij Bajec, an economics professor at Belgrade University and former adviser to Serbian President Slobodan Milosevic. ″Sanctions may not yet have accomplished much on the political field, but they are affecting the economy in many negative ways.″

In June, about 100,000 employees in Serbia were forced to go on compulsory leave, a euphemism for losing their jobs. About 600,000 others joined them in July, according to Belgrade’s authoritative daily newspaper Borba.

Many will not return to their jobs because of the lack of imported materials and spare parts needed to operate Serbia’s export-oriented factories.

All but 2,000 of the 18,000 employees of the Electronic Industry of Nis, a town 140 miles south of Belgrade, went on leave at the beginning of August. None are expected to return to work next month if sanctions continue, company officials say.

Unemployment is already more than 20 percent.

But Bajec said, ″It is in September, when the traditional vacation season ends and factories are supposed to reopen, that I expect sanctions to assert themselves fully.″

″We are entering a very critical autumn,″ he added.

In an apparent attempt to preempt labor unrest, Serbia’s governing Socialists, the renamed Communists, last week adopted a new public order law giving police unprecedented powers to determine whether, where and how long public protests can be held.

Yugoslavia is particularly vulnerable to the oil embargo because domestic oil production covers only 22 percent of its annual consumption of 6.5 million tons.

Some oil allegedly has been smuggled into the country over the last two months via Romanian ports on the Danube River and through the Montenegrin port of Bar, though not enough to cover the shortfall.

Romania denies being a conduit for oil shipments, and Western ships are keeping an eye on the Adriatic ports.

Borivoje Petrovic, deputy speaker of the Serbian parliament, told a Socialist Party gathering last month the country was getting oil supplies, but did not say how.

Some reports say as much as $750 million was transferred to the accounts of state-run firms in Cyprus before sanctions that could be used to pay for clandestine imports.

The fuel shortage is expected to bring most traffic to a standstill and leave many Serbian cities without heat if the embargo continues through October.

Serbia’s gross national product, which, due to Yugoslavia’s civil war fell from more than $2,000 in 1990 to about $1,300 per capita last year, is expected to drop another 40 percent in 1992, according to official predictions.

Private firms, which employ one-quarter of the work force, cannot count on government financial backing and will be the first to go under, said Zlatko Mandzuka, a director of Belgrade’s private Capital Bank.

Only farmers, who reportedly have been hoarding wheat and corn because of low, government-fixed prices, are expected to do well in late autumn and winter when food prices are expected to increase significantly.

″The economy and the Yugoslav people will pay a high price for the unyielding attitude of the Serbian authorities,″ said a report by the Economic Research Center of Belgrade’s Institute of Social Sciences. ″Without the lifting of the sanctions, all efforts to keep the economy going are doomed to failure.″

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