Institute for War and Peace Reporting | Giving Voice, Driving Change

Milosevic's 'Hidden Billions'

While the Yugoslav President has undoubtedly stashed away a tidy sum for a rainy day, it's probably not as much money as the speculators believe.
By Dimitrije Boarov

The personal wealth of Yugoslav President Slobodan Milosevic has been the subject of much speculation both in Yugoslavia and abroad for many years. Now he is reported to be planning to invest a part of his private fortune - estimated to amount to some $4 billion - in the reconstruction of his country.


According to the Russian weekly Komersant Vlast, which has called Milosevic's personal reconstruction plan 'Marshall 2', the Yugoslav President intends to invest via Russian businessmen, specifying that the businessman-politician Vladimir Potanjin will manage the operation.


That said, the newspaper failed to cite any sources or provide any other evidence. The story, which probably originated among Moscow-based Serbs doing business in Russia and the Asian republics of the former Soviet Union, may therefore simply be an attempt to entertain readers during the media's summer 'silly season'.


Most Serbian analysts believe that Milosevic could not possibly have as much money as the newspaper article reported, even if the assets of all Serbian companies and also his inner circle which is held abroad is considered to be the Yugoslav President's personal property.


This does not mean, however, that money has not been taken out of Serbia.


Rumours that Milosevic looted the former Yugoslavia's hard currency reserves date back to the beginning of the wars of Yugoslav dissolution. But even if the Yugoslav President did help himself, the sums involved fall short of the billions of dollars he is reported to possess.


In March 1992, the hard currency reserves of the then Yugoslavia were estimated to be $2.5 billion. By May of that year, when the foreign currency reserves of the Yugoslav Central Bank were frozen, only $1.5 billion was left. Between March and May 1992, therefore, Milosevic either spent or stole about $1 billion.


The base of Milosevic's fortune is therefore considerably less than $4 billion. Moreover, it is hard to believe that this money has grown by successful investment during the past eight years, especially since some $850 million of Yugoslav capital was frozen on 31 May 1992 when sanctions were imposed against Yugoslavia.


Various systems have been deployed to siphon off money and export it from Serbia, some simple, others more sophisticated. During the years of hyper- inflation, the authorities injected freshly printed dinars into circulation via street dealers who bought hard currency from ordinary people. Hard currency was then taken out of the country in suit cases.


Other ways that money left Serbia was via artificially unfavourable terms of trade, excessively dear foreign loans, commission payments and the writing-off of foreign debts, which apparently could not be collected.


For example, in 1997 Yugoslavia paid $186 per tonne for Chinese crude oil, at a time when the better-quality North Sea brent crude was trading at about $150 per tonne. Meanwhile, the country paid $95 per thousand cubic metres, even though the price paid by neighbouring states at the same time was about $80. In total, some $100 million a year probably flowed out of the country via the "expensive imports" of these two sources of energy.


It is not precisely clear which individuals benefited from these transactions, but the businessmen-politicians behind them almost certainly took a cut. It may also have been a way in which Milosevic channeled money to his own secret accounts abroad.


It seems that money exported in this fashion has also been repatriated on occasions when needed. After all, the Milosevic regime has managed to remain afloat financially despite running a permanent trade deficit, estimated by professor Ljubomir Madjar of the University of Belgrade's faculty of economics at $15 billion between 1991 and 1998.


It is almost impossible to distinguish between Milosevic's private money, capital transported abroad by his associates or funds held in secret foreign currency accounts abroad. Everybody who has managed to take money out of Serbia, has done so with Milosevic's blessing and remains indebted to the Yugoslav President.


The manner in which Milosevic dealt with Bogoljub Karic, allegedly one of the main conduits for the Yugoslav President's money out of Serbia, is indicative of the way in which he retains control over "his businessmen".


At the time of the street protests in Serbia at the end of 1996 and the beginning of 1997, Karic calculated that Milosevic's days were numbered and, much like now, decided to distance himself from the regime.


In response, Milosevic turned the state-controlled media against Karic directing the Belgrade daily Politika to an investigate into the source of his wealth and the abuse of state funds and loans. And he had a court case disputing ownership of Karic's company Bel Pagette reopened so that Karic risked losing control over assets which made him about $10 million in profits per year.


One of the reasons that Karic has again fallen out with Milosevic is believed to be that his company was to be cut out of lucrative reconstruction contracts. It seems that Karic had wished to be the conduit by which capital from Russia could be repatriated to Yugoslavia.


Most of Karic's financial and construction interests are in Russia, assets which Komersant probably considers as part of Milosevic's private fortune..


Dimitrije Boarov is an economic writer for the Belgrade weekly Vreme.