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Arms Industry Expansion Under Way Despite Sanctions

February 22, 1993

BELGRADE, Yugoslavia (AP) _ An attack jet is being upgraded, plans for a new-generation tank revived and prototypes of a new truck and weapons carrier unveiled. Yugoslavia even is considering a new supersonic jet fighter.

U.N. sanctions have hit Yugoslavia’s economy hard, but that hasn’t stopped the arms industry from attempting a comeback.

A secretive government-military agency, the Federal Directorate of Supply and Procurement, aims to restore weapons manufacturing to its role as the cornerstone and motor of Yugoslav industry.

The arms industry was Yugoslavia’s most lucrative exporter before the old Balkan federation disintegrated in 1991.

Now made up only of Serbia and Montenegro, Yugoslavia is internationally isolated by U.N. sanctions imposed in May for its backing of Serb fighters in the Bosnian and Croatian wars.

Strapped for cash, hopeful of creating jobs and mindful that they might need more weapons should a broader war erupt, Yugoslav generals and politicians are keen to support the arms industry.

In 1990, old Yugoslavia earned almost $2.5 billion selling weapons abroad. Its main customers were Iraq, Libya, Burma - countries Yugoslav generals think will not be put off by Yugoslavia’s status as a pariah in much of the industrialized world.

″The country’s defenses must be based on a strong and dynamic arms industry,″ Gen. Zivota Panic, the armed forces chief-of-staff, said in a recent statement.

Just 40 percent of old Yugoslavia’s weapons-making capacity was left in Serbia and Montenegro after Bosnia, Croatia, Slovenia and Macedonia seceded.

Armored vehicles, military trucks and electronics were manufactured in Slovenia. Croatia made tanks and warships.

Bosnian Serb fighters allied with Yugoslavia have captured two-thirds of Bosnia and most of its arms factories in their 10-month war against Croats and Muslims.

But they failed to take the Soko aircraft plant at Croat-held Mostar and missile and artillery factories at Travnik, under Muslim control.

To make good the loss, Yugoslav paratroopers raided the Soko plant last spring and carted off most of its machinery and tools to the Utva light aircraft factory in Pancevo, 12 miles east of Belgrade.

Utva director Jovo Opsenica claims his factory ″is now capable of producing a completely new series of combat planes.″

First, however, he needs at least $5 million to replace Utva’s old grass airstrip with a proper runway.

″All our plans hinge on how much credit the government can provide,″ he said.

He isn’t alone. The entire defense industry will need heavy state support unless large-volume exports are assured.

But state funds are few, thanks to the sanctions and the costs of the Croatian and Bosnian wars.

Inflation has spiraled to 25,000 percent annually, and industrial production has plummeted by 40 percent since the sanctions were imposed. Unemployment is rising.

Still, Utva is going ahead with a modernized version of the Super-Galeb trainer and light attack jet, a Yugoslav version of the British Aerospace Hawk.

A factory in Krusevac, in central Serbia, that once made construction equipment is now tooling up to build modern M-84 battle tanks, a version of the Soviet-designed T-72.

And another factory, which once built Mercedes-Benz trucks and buses under German license, last week rolled out a new four-ton army truck and an all- terrain weapons transporter.

″This represents a good example of the militarization of civilian production,″ said Milan Mitrovic, the vehicles’ designer.

Perhaps the most ambitious project, and the one closest to the high-tech hearts of many generals, is the Novi Avijon, or New Plane, a fighter jet capable of reaching Mach 2 speeds.

The project was suspended when Yugoslavia’s violent breakup began in 1991.

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