The State's Cache

The very fact that the USA Ministry of Finance's usual May list of Serb accounts in world banks has grown since last year from 170 to 850 firms and individuals, shows that the matter is more than the usual pressure. This is why the storm kicked up after Beta news agency and the Belgrade daily "Nasa Borba" carried the new list published by the US Congress official organ is quite logical. The list names all those firms and persons whose accounts have been blocked since April 13 this year. That the situation is not naive is proved by the sad and comic silence of all Federal Republic of Yugoslavia official organs on this political (not economic) event of the week. If the matter is considered from the legal and economic point of view, the US List is contrary to the very foundations of a liberal economy and civil society, it is contrary to an economic civilization which has been built on the principle of free world trade. But such is the essence and nature of world economic sanctions against any state, including Yugoslavia. And that such sanctions have never yielded expected political results, but on the contrary, encourage totalitarianism and the criminalization of "frozen regimes", is a well known fact, and VREME wrote of this when sanctions against Yugoslavia were introduced in spring 1992.

From the legal point of view, the "black list" has a weak point inasmuch as it lists a number of firms which are not Yugoslav just because their owners are Yugoslav citizens or because the firms which own these foreign firms have their headquarters in Yugoslavia. Thanks to this type of improvisation, it can be said that the legal aspect of the action by the Office for controlling foreign property with the USA Ministry of Finance, is aimed at publishing the names of persons and firms with whom Americans are banned from doing business. And as far as including Bosnian Serb leader Radovan Karadzic's complete government (85 names), it all smells of "The Hague". In other words, it is not said if these persons have accounts and property abroad, but it has been made clear with whom the Americans have no intention of doing business any longer. At the same time, the failure to include Serbian President Slobodan Milosevic's nomenclature on the list, indicates that US contact group head Richard Frasure's offer to Yugoslavia on the lifting of the economic embargo and the embargo on international financial transactions for 200 days, are not empty stories. They can't ask Milosevic to make strategic political concessions if he and those around him are not allowed to manipulate the money they have cached away in world banks.

With regard to the US Government's "executive order 12934", no one has come up with a serious assessment on how much of the cached Yugoslav working capital got blocked in the latest American raid. According to unofficial Yugoslav sources which cite unofficial assurances given by the US Embassy in Belgrade, the US Financial Police have not undertaken anything in the operative sense this time either, so that it turns out that no money has been blocked since mid-April this year. This is partly contradicted by Serbian vice-PM and Simpo furniture factory general manager Dragan Tomic, who said that only subsidiary accounts held by his firm had been frozen. The threat from Washington is interesting to the Yugoslav public less because of eventual direct consequences, but more as the instigator of some really serious questions: how much Yugoslav capital has really left the country, how much is blocked on various accounts, how much has escaped the freeze and who is in charge of this capital now. If we take the official state foreign currency reserves, which are kept on the accounts of solid world banks, it should be said that the Yugoslav public was not informed of how much was on the accounts when sanctions were introduced (late May, 1992) nor what amount of these reserves has been blocked. When Yugoslav National Bank Governor at the time Dusan Vlatkovic demanded that the Socialist Federal Republic of Yugoslavia Assembly declare a moratorium on the country's foreign obligations on 10 March 1992, the SFRY foreign currency reserves were estimated at 2.5 billion dollars. In a speech before the remaining deputies (the Slovenians and Croats had already departed), Vlatkovic said that the foreign currency reserves in January and February, while Yugoslav PM Ante Markovic was "on vacation", had decreased by 800 million dollars, and that the state was no longer capable of paying foreign creditors.

If to this statement we add last year's by NBJ vice-governor Zarko Trbojevic that about 1.5 billion dollars of the NBJ's foreign currency reserves had been frozen, it turns out that in March, April and May, Milosevic had cached or spent around one billion dollars. But a precise figure cannot be reached by following this line, because according to the data on foreign trade published in July 1992, goods totalling 1,909 million dollars were exported over a seven month period and goods worth 3,012 million were imported - so that a layman might reach the conclusion that Yugoslavia had been left penniless. In reality, all the imports and exports weren't paid for, and it is a mystery how much was "cached away" and where. Just before the introduction of sanctions, the USA announced that they were freezing around 850 million dollars of Yugoslav capital. A more precise calculation of our foreign currency reserves at the time of the blockade was published recently by Aleksandar Kovacevic of the First Yugoslav-Swiss Bank in Belgrade, in the Novi Sad-based magazine "Financing" (editor-in-chief Stanko Radmilovic). Kovacevic takes as the starting point of his calculations the fact that SFRY foreign currency reserves stood at 3,801 million US dollars in July 1991. Since these reserves melted very quickly during the disintegration of the former Yugoslavia, and a part of them were at the disposal of Slovenia, Croatia, Bosnia-Herzegovina and Macedonia, it turns out that at the moment when the financial blockade was introduced, there were only 1,118 million dollars of foreign currency reserves. Yugoslavia was desperately trying to retain its membership in the International Monetary Fund (IMF) and agreed on 14 December 1992 for its assets and liabilities to be divided in such a way that Serbia and Montenegro retained 36.5% of the rights and obligations, thus legalizing a formula which would be applicable to all financial transactions of the former SFRY. If this formula is applied to the foreign currency reserves, it turns out that the Federal Republic of Yugoslavia can claim that 408 million dollars of its own from these reserves have been frozen. If, after the lifting of the blockade, the IMF and the World Bank are the first in line to have their debts settled (80 and 650 million dollars, respectively), it can be concluded that Yugoslavia doesn't have any frozen foreign currency reserves.

It remains to be seen how much foreign currency capital Yugoslav firms have cached abroad - both by foreign inspectors and NBJ inspectors. If we judge by the federal law on Yugoslavia's (obligatory) foreign currency borrowings from domestic commercial banks, it could be said that the state has around one billion dollars foreign currency reserves stashed away. The law was pushed through by Nikola Stanic last year when he was posted to assist NBJ Governor Dragoslav Avramovic. The law demanded approval for the Central Bank's borrowings from Yugoslav commercial banks of up to 300 million dollars, and there were unofficial stories that the state was demanding "foreign currency racket" up to 30%. This estimate is probably not based on reliable indicators. Minister of the Interior Zoran Sokolovic's department discovered that wheeler dealer and private banker Dafina Milanovic had entered 100 million DEM as travelling expenses for herself, her brother and an "unnamed employee", but they did not reveal this fact, nor were any steps taken to get the money back into the country. It remains a moot question how much others took out of the country - those whose affairs have not been looked into by the Yugoslav Assembly. If we start with the rough estimate that social firms in the world have "five times 850 accounts" which are out of reach of the Yugoslav organs, it is possible to make a rough estimate and say that around two billion dollars have escaped from the country and sanctions. Many businessmen claim that the sum is much higher -but if you offer them a deal worth more than 500,000 dollars, without various benefits, then they are less broad-minded. At last week's meeting "Banks - The Situation and Further Prospects" in Nis, Zivorad Zlatkovic said that in Federal Republic of Yugoslavia territory, there were 2-3 billion dollars in circulation which were "outside banking channels"; and that this money was probably in circulation both in Yugoslavia and Europe. If Zlatkovic is not exaggerating, his estimates are based on the assumption that the non-commodity foreign currency inflow into the country brings about one billion dollars into the country. There is no point in guessing how much liquid foreign currency capital Yugoslavia can count on in the event of an intelligent policy and the lifting of the embargo on the international payment operations, even though it would be a good thing if this dimension were familiar to those conducting economic policy. Because, there are serious foreign obligations with regard to these independent 4-5 billion dollars.

No one knows exactly how much we owe foreign creditors, and this is logical, since in high finance, the debtor always "coordinates" matters with the creditor. The Federal Republic of Yugoslavia must also coordinate these questions with the former Yugoslav republics. Domestic experts have very different views on the current amount of Yugoslavia's foreign debt. Dragana Djuric believes that it stands between 7.5-8 billion dollars. Radovan Kovacevic thinks that Yugoslavia's overall foreign owings (the principal capital and accumulated interest) "surpass 8 billion dollars". According to Dejan Jovovic, of the SFRY's debt in late 1991 totalling 14.5 billion dollars, 5.5 billion belong to the Federal Republic of Yugoslavia, which with the interest rates which have accumulated in the meantime adds up to around 9 billion dollars. According to calculations made by Srdjan Petrovic by the end of 1995, the Federal Republic of Yugoslavia will have foreign owings totalling 11.42 billion dollars.

To get back to Aleksandar Kovacevic - we can give a short run through of his calculations of the Federal Republic of Yugoslavia's total foreign owings which he puts at 16.262 million dollars. Kovacevic takes as his point of departure that Serbia's and Montenegro's direct debts (medium and long term deadlines) stand at around 5.3 billion dollars. This includes their individual debts of around 3.6 billion dollars and the part of the unallotted debts of the former federation (a total of 4.7 billion dollars). If we take further that these 5.3 billion dollars have definitely been burdened with interest on arrears of 26%, it turns out that the Federal Republic of Yugoslavia owes 6.68 billion dollars. Since Yugoslav firms imported large quantities of strategic goods at a very fast rate in spring 1992, a good deal of these imports were bought on a short-term credit, until the introduction of sanctions on 31 May, so that another billion dollars of guaranteed but unpaid foreign obligations have accumulated in this way. If we take into consideration that these debts were burdened with a 26% interest rate, it turns out that another 1.38 billion dollars of short-term owings should be added to the sum of 6.68 billion dollars, and we end up with the total of 8.06 billion dollars.

Unlike many official figures, Kovacevic underscores that the citizens' foreign currency savings will not be treated differently from foreign debts, so that the overall total of foreign currency owings must be increased by a further 4 billion dollars. Kovacevic believes that the unsettled owings of Dafiment bank, wheeler dealer Jezdimir Vasiljevic's bank and others must be added to the state's debt thus increasing the total by another 200 million dollars (according to his estimates). Kovacevic considers the claims of the former Yugoslav republics with regard to the Federal Republic of Yugoslavia's 710 million dollar reserves as part of its overall debt. Therefore, according to these estimates Yugoslavia's frozen foreign currency reserves of less than 1.2 billion dollars and other means are faced with overall owings of close to 13 billion dollars. When this final sum is increased by the costs that the Yugoslav state and banks will incur as re-programming costs, insolvency costs, costs of being under-equipped and incompetency, etc. - we reach the grand total of 16.2 billion dollars of foreign currency owings. Yugoslavia's entire GNP in 1994 is estimated at 14 billion dollars.

The "Financing" editorialist from whose article we took these data, has calculated that Yugoslavia's foreign debt increases daily by 2.7 million dollars' interest, while the whole nation creates only 33 million dollars of the GNP daily. In this context Kovacevic cautions that this fact must not be relativized and that the question of reintegration into international economic relations is very important and complex, because the burden of the foreign owings has yet to be experienced.

If we continue with calculations - theoretical ones, since interest grows on interest, in 3-4 years all that we earn during the day will only cover the interest, so that Yugoslavia will become economically totally dependent, and its citizens slaves of the world's creditors. But, this will become topical when sanctions are lifted, and until that day, the illusion of state independence and an economic revival will continue to live on.