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Subject: Serb Smugglers Turn Sanctions Into a Boon; Few Profit, Many Face Soaring
Date: Thu, 5 Nov 92 05:01:45 EST
Message-ID: <33.1992Nov5.050145@AmeriCast.com>

Serb Smugglers Turn Sanctions Into a Boon; Few Profit, Many Face
Soaring Inflation<By Blaine Harden=Washington Post Foreign Ser-
vice=

BELGRADE, Nov. 4 - An advertisement today in a Belgrade newspaper
concisely explains the effect U.N. economic sanctions are having
on Serbia.

"People of Belgrade, pamper yourselves," the ad says. "A re-
gistered trading company dealing in oil products will bring gaso-
line to your door. Wherever you want it, as much as you want."

For those who prefer the more traditional method of driving a car
to a service station, more than 190 private stations have opened
across the republic in the past month. The Serbian government is
leasing the state-owned stations to private operators, and it
asks no questions about the price or source of the gasoline.

Gas lines are far shorter than they were before May 30, when the
United Nations decided to impose sanctions to punish the Serb-
dominated Yugoslav federation for armed aggression in neighboring
Bosnia-Hercegovina.

Prices are high - about $7 a gallon - but supply is abundant.
Indeed, so much gasoline is available that market forces have
pushed prices down during the past two weeks.

More than five months after the imposition of what was supposed
to have been a tough and comprehensive package of sanctions it is
becoming embarrassingly clear to Western governments that they
are not working.

The sanctions, which include a ban on most trade, have contribut-
ed to a growing economic crisis in Serbia, including soaring inf-
lation and a 60-percent drop in production and have caused severe
shortages of some products, such as heating oil. But Western di-
plomats here acknowledge that the sanctions are having the per-
verse effect of punishing working Serbs with soaring prices while
lining the pockets of smugglers who operate with the approval of
the Serbian regime led by Slobodan Milosevic.

"These sanctions are enriching those who are responsible for the
policies that caused the sanctions in the first place," said one
Western diplomat in Belgrade. "This communist government has
turned loose the free market, and it is blowing sanctions out of
the water."

A single tanker truck of smuggled gasoline can net a profit of
between $40,000 and $60,000, according to estimates of Western
governments.

Hundreds of such trucks are regularly lined up at the Bulgarian
border with Serbia, and Western diplomats here say that permis-
sion to cross the border is often obtained with gifts of top-
brand Scotch whiskey to Bulgarian customs officials.

Besides bribes, there are huge legal loopholes in the sanctions.
One allows trucks marked "transit" to enter Yugoslavia, unload
and exit the country without systematic checks to verify the
whereabouts of the cargo.

Another loophole allows into Yugoslavia trucks carrying goods
bound for Bosnia. Since most of that former Yugoslav republic is
now controlled by Serb gunmen, the sanctions do not hinder the
Serbs, widely regarded as the aggressors in the war, from getting
supplies of fuel or food.

"We are doing much better than the West had expected," Serbian
leader Milosevic told a congress of his governing Socialist Party
- the renamed communists - last month.

Widespread smuggling is allowing Belgrade to weather sanctions
with shops full of everything from Belgian cookies to the latest
in Italian designer shoes. But soaring prices have meant a col-
lapse in living standards for all but a favored elite.

Average real income in Serbia has fallen nearly tenfold in the
past two years, from roughly $700 to about $78 a month. In the
meantime, food prices have soared to levels higher than those in
much of Western Europe. After a government-ordered price increase
today, bread costs slightly more than $1 a loaf.

Acute heating oil shortages have left many apartment buildings
cold. Belgrade's only crematorium had to close last month for
lack of butane gas. State hospitals lack basic medicines and X-
ray film, and patients are told by doctors to buy anesthetics
from private pharmacies before coming to the hospital for sur-
gery.

The economic underpinnings of Serbia's economy are in ruins, with
industrial productions down about 60 percent from last year, mass
layoffs in the dominant state-owned sector and hyperinflation at
such a frenzied pace that bank deposits are now earning an annual
return of 31,500 percent.

"If these guys in the government were rational, they would see
the long-term damage to their country," said a Western economist
here.

But U.N. sanctions appear to be doing nothing to change the na-
tionalist policies of the Milosevic regime toward Bosnia or
Croatia, where Serb fighters have seized large chunks of territo-
ry.

What the sanctions have done is trigger explosive growth in the
black-market economy, growth that has been accompanied by a dou-
bling in the city's crime rate.

The capital has been flooded with weapons brought in by Serb
fighters returning from Bosnia and Croatia. Street shootouts,
carjackings, burglaries and muggings are now common in a city
that five years ago described itself as the safest in Europe.

Last week, there was a gangland-style murder in the city's best
hotel. "People are killed as easily as in the movies. Criminal
mafias are rampant in Belgrade, other cities and even some vil-
lages," Yugoslav President Dobrica Cosic said last month, in a
speech that condemned Milosevic's policies and called for the im-
mediate arrest of paramilitary gangs across Bosnia and inside
Serbia.

Cosic was later denounced by Milosevic's loyalists in the Yugos-
lav parliament. They said the president's comments were inap-
propriate and insulting to Serbia because Cosic, a well-known no-
velist, is not an expert on military matters.<02:25 11-05C9999--
---

Copyright 1992, The Washington Post.  This story is from the
Washington Post's Capitol Edition On-Line and is not to be ar-
chived or redistributed.

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