wealth - both pecuniary and natural. Yet, the media tends to confuse
three modes of action with two diametrically opposed goals. There
was state sanctioned capital flight. Gold and foreign exchange were
smuggled out of Yugoslavia and deposited in other countries. This
was meant to provide a cushion against embargo and sanctions imposed
on Yugoslavia by the West.
The scale of these operations has been wildly over-estimated at 4
billion US dollars. A figure half as big is more reasonable. Most of
the money was used legitimately, to finance the purchase of food,
medicines, and energy products. Yugoslavia would have frozen to
death had its leaders not have the foresight to act as they did.
This had nothing to do with party officials, cronies, and their
family members enriching themselves by "diverting" export proceeds
and commodities into private accounts in foreign lands. The culprits
often disguised these acts of plunder as sanctions-busting
operations. Hence the confusion.
Thirdly, members of the establishment and their relatives were
allowed to run lucrative smuggling and black market operations
fuelled by cheap credits coerced out of the dilapidated and
politicised "banking" system.
As early as 1987, a network of off-shore bank accounts and holding
companies was established by Serbia's Communist party and, later, by
Yugoslavia. This frantic groping for alternatives reached a peak
during 1989 and 1991 and after 1992 when accounts were opened in
Cyprus, Israel, Greece, and Switzerland and virtually all major
Yugoslav firms opened Cypriot subsidiaries or holding structures.
Starting in 1991, the Central Bank's gold (and a small part of the
foreign exchange reserves) were deposited in Switzerland (mainly in
Zurich). A company by the name of "Metalurski Kombinat Smederevo -
MKS" (renamed "Sartid" after its bogus privatisation) was
instrumental in this through its MKS Zurich subsidiary. MKS was a
giant complex of metal processing factories, headed by a former
Minister of Industry and a Milosevic loyalist, Dusko Matkovic. The
latter also served as deputy chairman of Milosevic's party. The
lines between party, state and personal fortunes blurred fast. Small
banking institutions were established everywhere, even in London
(the AY Bank) and conducted operations throughout the world. They
were owned by bogus shareholders, out of the reach of the
international sanctions regime.
When UN sanctions were imposed in stages (1992-5), the state made
sure its export proceeds were out of harm's way and never in
sanctions-bound UK and USA banks. The main financial agent
was "Beogradska Banka" and its branch in Novi Sad. In a series of
complex transactions involving foreign exchange trades, smuggled
privatisation proceeds, and inflated import invoices, it was able to
stash away hundreds of millions of dollars. This money was used to
finance imports and defray the exorbitant commissions, fees, and
costs charged by numerous intermediaries. Yugoslavia (and the
regime) had no choice - it was either that or starvation, freezing
and explosive social discontent.
Concurrently, a massive and deeply criminalized web of smuggling,
illegal (customs-exempt) imports, bribe and corruption has stifled
all legal manufacturing and commerce activities. Cigarettes through
Montenegro, alcohol and oil through Romania, petrol, other goods
(finished and semi-finished) and raw materials from Greece through
the Vardar river (Macedonia), absolutely everything through Croatia,
drugs from Turkey (and Afghanistan). UN personnel happily colluded
and collaborated - for a fee, of course. The export of commodities -
such as grain or precious metals (gold, even Uranium) - was granted
in monopoly to Milosevic stalwarts. These were vast fiefdoms
controlled by a few prominent "families" and Milosevic favourites.
It was also immensely lucrative. Even minor figures were able to
deposit millions of US dollars in their Russian, Cypriot, Lebanese,
Greek, Austrian, Swiss, and South African accounts. The regime
leaned heavily on Yugoslav banks to finance these new rich with
cheap, soft, and often non-returnable, credits. These were often
used to speculate in the frenetic informal foreign exchange markets
for immediate windfalls.
The new Yugoslav authorities are likely to be deeply frustrated and
disappointed. Most of the money was expended on essentials for the
population. The personal fortunes made are tiny by comparison and
well-shielded in off-shore banking havens. Milosevic himself has
almost nothing to his name. His son and daughter may constitute
richer pickings but not by much. The hunt for the Milosevic treasure
is bound to be an expensive, futile undertaking.