No Strangling, No Mercy

A lot of noise about nothing—for now!  A true oxymoron:  sanctions are imposed but they aren’t.  It’s all confusing.

One can say nothing more than this concerning the resolutions adopted by the Contact Group last week in Rome regarding the situation in Kosovo.   In an economic sense, three things are important:  only talk about sanctions, the freezing of companies and assets under federal and state control abroad, and the prohibition of all investment.
The constant threat about the imposition of an economic blockade upon SRJ, as noticed by Dr. Dragan Djuricin of the Economic Faculty in Belgrade, is that investors are already discouraged from making long-term plans.  The possibility of sanctions increases the risk of their investment in Yugoslavia. On the other hand, in one strategic study, David MacWilliams from the National Bank of Paris noted that it (sanctions) will bring down the price of everything in this country that can be purchased.  However, considering that the Yugoslavian government completely counts on the influx of capital from abroad, above all through the sale of parts of state/collective assets, one can only guess as to the short term plans of SRJ and citizens for survival should a prohibition of all investment in SRJ be imposed.  In the long-term, that isn’t so significant when the biggest obstacles to the development of the economy remain the system itself. The absence of foreign capital, as Dr. Stojan Stamenkovic from the Institute of Economic Studies told VREME, will reach a point at which, “all this will be destroyed in a few years.”  Mr. Stamenkovic then poses the question of insufficient clarity regarding the conclusions from Rome---will these restrictions concern all countries in the world or only those members of the Contact Group?  What will Russia do, will countries in the Contact Group and all countries in the European Union or those negotiating entrance to it join the blockade..?

Confusion: This question brought us to confusion when the resolutions from Rome were disclosed.  That is to say, in the first moment, it wasn’t completely clear just what was to be frozen.

Firstly, what was meant by the words concerning “assets” or “ funds”.  The difference is very important because assets can mean all moveable and immovable items and money abroad (buildings, planes, buses, boats, and money on all accounts) while the word funds touches upon financial resources.  Additionally, statements from member countries of the Contact Group are adding to the confusion, because while they only speak of “assets” others are using the phrase “funds” (James Foley, April 30).  Finally, it turns out that only the word “funds” is used in official announcements from Rome (point nine).

And then, new confusion begins.  Which funds?  Does the blockade also concern wages of those working in SRJ embassies and money that diplomatic representations spend on their expenses?  What about money in private accounts or the accounts of private companies?  What about Montenegrin money?  As Vreme learned from diplomatic sources in Belgrade, the freezing concern money in the accounts under the control of the federal and Serbian state governments and companies under their control.  It wouldn’t have to concern the diplomatic representational resources.  Furthermore, they say that wage turnover from abroad is not suspended—for now.  Pointing out the uncertainty of the adopted sanctions, Dr. Milena Jovicic, professor at the Economic Faculty and expert at the Institute of Economic Studies, asks what will happen with profits from exports? Will such earned money be immediately confiscated?  All in all, there are more questions than answers.  It looks as if Goran Svilanovic, vice-president of the Citizens Council of Serbia, is correct when he says that that which is adopted demonstrates that the so called international community won’t choke or touch Slobodan Milosevic.

Then, what is frozen?  It seems that Zarko Trbojevic, vice-governor of the People’s Bank of Yugoslavia, is correct when he says, “They are freezing what is already frozen.”

Skill:  That is to say, Yugoslavian businessmen have already withdrawn all the money from accounts that might come under target after the Rome meeting of the Contact Group.  After all, the People’s Bank warned them in time to undertake such steps.  Mostly in Russia, as was done under those earlier sanctions.  Now, everything will be easier, because Russia decided it won’t participate in the newest blockade of “funds”.  High ranking Yugoslav officials have already been seen in Cyprus and Beirut with bags of money.
Functional models under such conditions are already diluted, according to Borka Vucic, director of Belgrade’s Bank Group.  And as for Vreme, says one financial expert, “funds” are difficult to trace in regard to the fact that in the course of one day, money is deposited from one account to another several times through firms whose ownership is difficult to prove. In Belgrade’s diplomatic circles, it is claimed that in that type of operation, it is possible to trace only if it is discovered at the beginning.  Therefore, to uncover and block already hidden money those who implement the sanctions must “catch” them the moment when they first place the cash in some account.  Afterwards, they simply follow those accounts until they arrive in a country or bank cooperating with the international police.

Mouse and Cheese: Of course, the problem of today’s regime, of this economy, and of the population is that currency was stocked and supplied earlier, that exports won’t go and that, apparently, they won’t be able to sell anything.  If Bosko Mijatovic, expert at the Economic Institute, is to be believed, perhaps that isn’t so bad.  At a meeting of the Institute for European Studies, Mijatovic, in regard to the initiation of sanctions, said that this would save us.  “I believe that it isn’t really in the interests of SRJ that the world pump dollars in the millions and billions into our economy.  That money would not be spent productively, whether it be spent on wages or to grease this mistaken economy and political system.  In other words, new credit would continue the agony of one unsuccessful system with no perspectives and with the enlargement of financial obligations in the future,” said Mijatovic.

After all, the majority of economists consider that sanctions aren’t the only pressing problem in the Yugoslav economy.  They are, as his colleague Bozo Stojanovic said at the same meeting of the Institute of European Studies, a  rather sobering work because, “it’s the only way of breaking the drunken ecstasy of wealthy society.”  Avramovic’s program demonstrated that sanctions don’t have to result in chaos or hyperinflation.  Stojanovic considers that their effect wouldn’t be, in the short run, dangerous, if only the government would deal with it correctly.   He compares that with a quiz on German television in which the question was, “what is the best thing a mouse can do when he falls into a trap?”  The winning answer, “To eat the cheese.”  To Stojanovic, that means that sanctions must be responded to with standard mechanisms of free exchanges.  That would be, at least by his opinion, the reaction of “mentally normal people.”  Are there any here?