Documents Reveal Milosevic Support for Croatian and Bosnian Serb Armies

In cross examining expert witness Morten Torkildsen, Milosevic admitted that Serbia supported the armies of the Republika Srpska (RS) and the Republic of Serbia Krajina (RSK). 'It is no secret we extended assistance to the RS and RSK and would have been the worst scoundrels if we hadn't,' Milosevic vehemently declared.

At the same time, the accused spent considerable effort trying to limit a contradictory statement he made to Yugoslav authorities after his arrest for misappropriation of public funds in 2001. To counter the accusation that he appropriated FRY customs receipts for personal or political use, he declared in his written statement that the money was used to fund the RS and RSK armies. It didn't show up on the FRY ledger, he said in the statement, because it was a state secret.

The statement designed to get him off the hook on one charge is incriminating him on another, much more serious one. In the ICTY indictment, Milosevic is charged with participating in a joint criminal enterprise to ethnically cleanse large areas of Bosnia and Croatia of their non-Serb populations. One way he is alleged to have done that is by providing financial, logistical and material support to the military forces used to accomplish it.

Mr. Torkildsen, a financial expert, pointed to Milosevic's inculpatory statement in support of his conclusion that the JNA 'left the Serbs in BiH [Bosnia-Herzegovina] with a nearly complete army supplied with the remains of the JNA's second military district.' He also cited a December 1992 report by the new army's commander, Ratko Mladic, where he bragged, 'Our Army is one of the rare ones in history to have started a liberation war with a very solid material base especially as concerns combat hardware, ammunition, and food reserves.'

It was unclear why Milosevic expended so much energy and time trying to show that his 2001 statement did not refer to disposition of Serbian funds to the VRS (Army of the Republika Srpska) in the earlier period, but was limited to funneling money to the RS from 1994 on. As noted above, Milosevic admitted in open court that not only the FRY, but Serbia supported the RS and RSK armies in the earlier period.

In his report, introduced into evidence, Mr. Torkildsen cited numerous documents to support his conclusions that Serbia and/or the (S)FRY provided financial and material support for the armies of the RS and RSK, from 1992 to 1995 and 1991 to 1995, respectively, and that 'decisions regarding this support . . . were made by the highest ranking military and political leaders of the (S)FRY and the Republic of Serbia. . . .' A sampling follows.

*November 1, 1991 letter from Serbia's MOD to the Government of Serbia, stating that material and financial assistance in the amount of 1.2 billion dinars (about 97.7 million DEM) is needed for the Croatian Serbs through the end of 1991. 'Assistance has already been provided to the Serbs in Croatia but there is still an urgent need,' the communication reads. It further states, 'We believe that very good results would be achieved towards joint aims if the Republic of Serbia ensured the assistance to meet the said needs. . . .'

*October 14, 1992 letter from the RSK Minister of Defence to the Serbian MOD, seeking funds according to an established plan: 'Therefore, we ask you to transfer to us the planned funds of approximately 200 million per month [1.4 million DEM], otherwise it will be impossible to maintain the whole system for paying the army we have created.'

*Official minutes of a meeting on November 12, 1992, involving Milosevic, RSK officials and the Governor of the National Bank of Yugoslavia: 'The president Milosevic stated his attitude that the means for the maintenance of the technical devices should be planned via the Yugoslav Army and he said that he will help in realizing it and that he will initiate the Yugoslav Army to finance the active officers and the civil personnel that stayed in Krajina.'

Milosevic tried to characterize the support, the vast majority of which went to the military, as social assistance intended to prevent families of soldiers from going hungry. Mr. Torkildsen testified that 90% of the support went to the military. While paying soldiers' and officers' salaries provides a source of income for their families, it is not generally considered a social benefit. FRY payment of officers' salaries continued until 2002, when it ended under pressure from the international community.

Rather than tackling the central issue raised by the Expert Report, Milosevic spent another substantial portion of his cross examination trying to get Mr. Torkildsen to change his conclusion that Milosevic had supported the practice of printing money (called 'primary issue') as a solution to budget deficits. In the end, the witness modified his conclusion about Milosevic's position on this side issue, but held firm that the end result was the same: money was printed to cover budget deficits.

Financial problems in Yugoslavia (SFRY) became acute as its republics began withholding their contributions to the federal budget in 1991. The federal budget was primarily used to fund the Yugoslav People's Army (JNA). A meeting of the Federal Presidency was held on August 21, 1991, to discuss the problem. In reviewing the minutes of that meeting, Mr. Torkildsen concluded, 'The Presidency soon recognized that the only realistic method of obtaining financing for the JNA was through primary issues [printing more money].' As Mr. Torkildsen testified in court, printing money 'is the equivalent of an extra tax on the people. It is a transfer of wealth from the citizens to the state.' Milosevic did not want to be seen as having supported this solution.

Whether he supported it or not, the SFRY used primary issues to finance the JNA and, later, the FRY (Serbia and Montenegro) used them to support the Yugoslav Army (VJ), as well as the RS and RSK. Not surprisingly, the result was hyperinflation, a situation which, at its zenith, required almost 89 million dinars to buy one deutsche mark.

While Milosevic blamed sanctions for the hyperinflation, the crisis ended at the beginning of 1994 when Dragoslav Avramovic stepped in to head the National Bank of Yugoslavia, stopped the practice of printing money to cover budget deficits and pegged the dinar to the deutsche mark. As Mr. Torkildsen pointed out, sanctions continued.

Curiously, Milosevic did little to attack the substance of the expert report. For example, Mr. Torkildsen summarized and quoted from the minutes of a November 12, 1992 meeting of Goran Hadzic and Milan Martic (RSK officials) with the accused and the Governor of the Yugoslav National Bank in Milosevic's office(cited above). At the meeting, 'the parties agreed on the outline of a defense system for the RSK,' that Serbia would ensure its funding and that Milosevic 'would direct the VJ [Yugoslav Army] to finance the military officers and civilian personnel that remained in the RSK.' Milosevic only addressed this evidence when Mr. Torkildsen pointed it out in response to one of Milosevic's irrelevancies (whether the RSK was a peacetime army). When he asserted that he had no authority over the VJ and tried to argue that he could only urge them to assist, Judge May interrupted to point out that the English translation of the minutes said he would 'initiate the Yugoslav Army to finance the active officers and the civil personnel that stayed in Krajina.'

More than usual, Milosevic made long assertions without asking the witness a question. He seemed more concerned to demonstrate his knowledge of banking and finance, than to challenge the witness's quite significant evidence. At the end of the day, Milosevic may have preserved his professional pride but the substance of Mr. Torkildsen's evidence stands, most significantly that Milosevic exercised his power and influence to secure financial support for the Bosnian and Croatian Serb armies over an extended period.