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    Copyright: The following text is for personal information only. Any professional use or publication in written or electronic form is subject to an agreement with AIM, 17 rue Rebeval, F-75019 Paris, France

    SUN, 30 JUN 1996 18:45:33 GMT

    Inheritance of Former Republics

    FRY BURDENED BY DEBTS

    Yugoslav leadership rejected Avramovic's attempt to divide inheritance of the SFRY in a quick arrangement, for the sake of applying for new foreign credits, so now a long process is in prospect in which Federal Republic of Yugoslavia (FRY) will suffer great damage while waiting for uncertain gains

    AIM Belgrade, June 23, 1996

    The moment Milosevic's advisors headed by member of the Serbian Academy of Sciences and Arts Kosta Mihailovic, prevented ex-governor of the National Bank of Yugoslavia to meet his colleagues from former republics of the Socialist Federal Republic of Yugoslavia (SFRY) - governors of Slovenia, Croatia, B&H and Macedonia (in the beginning of April), it was clear that Belgrade had decided to have the property and debts of former Yugoslavia divided through an international court proceedings. Of course, despite opposition of its governor, the National Bank of Yugoslavia immediately filed a complaint against Slovenia in order to prevent its arrangement with the London Club on its exclusion from joint financial obligations resulting from commericial credits of the SFRY, and in return the new states from the territory of former Yugoslavia prevented unblocking of gold and foreign currency reserves of the National Bank of Yugoslavia in Switzerland and London.

    It seemed that everything was well mutually tied and that all potential inheritors of the SFRY could do nothing but keep on dreaming about their return to the free world financial markets for a long time to come. However, on June 11, at the stock market in Luxemburg, the Slovenian package of debts appeared amounting to 812 million dollars excluded from the Yugoslav inheritance of debts - and when it was immediately exchanged for Euro-bonds made out to dollars and marks, due in 2006, it became quite clear that the entire official concept of the FR of Yugoslavia - tumbled down to pieces.

    Simply, the international financial circles signalled by this move that the blockade of Yugoslav reserves and resources of the FRY would continue, but that the FRY would not be able to block Slovenia, Croatia, B&H and Macedonia. Indeed, it is generally assessed that it is just a matter of days when Croatia will also exclude the part of debts which belongs to it from the Yugoslav package pursuant the formula of the International Monetary Fund (IMF). Back in 1995, Economic Bank Zagreb Securities - a branch of the greatest Croatian state bank, issued Euro-bons made out to dollars, based on its part of Yugoslav debts, which was interpreted as the first sign that it is also "excluding" its destiny from the apparently well-sealed package of the SFRY. It should be noted though that this was just a short-term, six-month loan.

    However, a precedent was made and news are arriving that the entire Croatian participation in debts of Former Yugoslavia will soon be resolved according to the Slovenian model. According to the IMF method, it amounts to the total of 2,121 million dollars, and the undue part has already been rescheduled for 14 years but with three and a half period of grace, after Croatia had reached an agreement with the Paris Club in March 1995. It seems that financial obligations of 643 million dollars to the London Club will be rescheduled for ten years, but without a period of grace, which caused great concern in Zagreb, so that it was even demanded that the state proclaim these obligations to be a public debt, because the economy would not be capable of starting to service them. But, after a possible agreement on exclusion from the Yugoslav package, Croatia will be free to take loans in the world financial stock markets.

    Useless Quarrel

    It should be added at this point that Macedonia is also on its way to regulate its part of the debts in the joint package, as well as that it has already reached an agreement with the Paris Club. Bosnia & Herzegovina is still in a specific postwar temporary status, but the unregulated status of this state concerning the old SFRY financial obligations was no obstacle for the international factors to provide abundant sources of foreign funds for its reconstruction.

    All things considered, the complaint of FRY submitted in London against Slovenia and a consortium of foreign banks of creditors, which Milosevic's advisor Kosta Mihailovic had insisted on, served no purpose. Its purpose, to block gradual economic denouement concerning debts and property of the SFRY, to exert pressure on the international community to approach the problem from the standpoint of a "single package", was not achieved. Unfortunately, however, the price which was calculated as part of such an arrangement, will have to be paid - the bill for the quarrel with those whose will we shall depend on in the future.

    Removing Avramovic from office, refusing the possibility of direct agreement, insisting on continuity with the SFRY accompanied by the stand that the former state dissolved due to secession of the new states - all these stances suffered defeat and this is clear to anyone who is even slightly informed, but does not seem to be clear to the creators of such policy.

    This became obvious during a television program on the official first channel of Radio-Television Serbia on June 16. Guests of the program, Kosta Mihailovic, Vladan Kutlesic and Dragan Gnjatovic, members of the Group for Succession of the Federal Government, continued to insist on their old stances and ignored new circumstances and new signals from the world financial centres. A parallel with dissolution of the USSR was mentioned again, they insisted on continuity again, and redefining of social ownership (which would increase the inheritance, as believed to the detriment of western ex-Yugoslav republics), and the criterion of territory was rejected on account of the criterion of the population - in case of "en masse" agreement on division of the inheritance.

    Secret of Borka Vucic

    It is interesting that member of the Academy Mihailovic tried to give a rational explanation for quite different criteria for division, if a smaller sum of the inheritance is defined (e.g. 20 billion dollars), or if a larger inheritance sum is defined (e.g. 200 billion dollars). He even "divided" the issue of continuity of the FRY with the SFRY, and said that for a part of the property, continuity with the Kingdom of Serbia is applied and for the second part, continuity with the Kingdom of the Serbs, the Croats and the Slovenians, and for the third part - continuity with the socialist SFRY (i.e. Democratic Federal Yugoslavia and Federal People's Republic of Yugoslavia).

    This complex approach, despite the fact that in treatment of social ownership it implies certain form of "justice", stands little chance to be adopted in a situation in which all actors of the Yugoslav crisis are in a hurry. Kosta Mihailovic does not seem to realize that FR of Yugioslavia should also be in a hurry to get the inheritance process over with in order to take new loans in the world for the already exhausted and largely technologically anachronistic economy.

    The greatest blow to the attempt of the FRY to prevent the financial denouement and in this way force out a possibly more favourable solution was striken by the Serbian bankers themselves. A secret about intense speculation with cheap puchase of obligations of the SFRY in a secondary market is concealed in the so-called "Cyprian dossier" of Borka Vucic, director of the branch office of Belgrade Bank in Larnax. This lady banker who is close to the Milosevic family, according to rumours, acquired or bought at a good price about 350 million dollars from reserves of the NBY on the eve of dissolution of the SFRY, and then allegedly bought about 530 million dollars of old Yugoslav obligations which are nowadays worth more than 850 million dollars (with interest and at a higher price).

    In fact, it is not yet known at what price and when this operation took place. If that was before introduction of the world sanctions, a dollar of debt could be purchased at the time at the price of 63 cents; if, for instance, the purchase took place after the introduction of the UN Security Council sanctions (i.e. after May 31, 1992), the debts were bought at 20 cents per dollar. In the latter case, Borka Vucic could have been able to buy these obligations only through secret mediators. The problem seems to be that the National Bank of Yugoslavia, on the occasion of rescheduling its old debts in 1988 (about 10 billion dollars) waived the right to purchase its own debts on secondary markets when their price dropped, and in return it was offered the "joint and several clause".

    If the central bank of former Yugoslavia really waived this right, possible revealing of the operations of Borka Vucic could be treated as violation of the agreement which the complaint of the FRY filed to a London court is founded on. If it can be qualified in this way, there will be no gains in this trade, and quite a realistic danger exists that Slovenia and the others may demand that the package of Borka Vucic be included in the inheritance sum. Most probably the situation will follow in which after Slovenia, Croatia, B&H and Macedonia will also "draw out" their part of the debt from the package of the SFRY, so that FRY will be faced with the most inconvenient solution: all that remains on the undistributed heap will be left for it to service, and all that in a highly unfavourable negotiating position with the IMF, the Paris and London Club.

    (AIM) Dimitrije Boarov