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Milosvevic Breaks Financial Blockade

Western counties are undermining their own efforts to starve Yugoslav President Slobodan Milosevic of cash.

Western countries seeking to deprive Slobodan Milosevic of hard currency are sanctioning multi-million dollar trade deals between Yugoslavia and Iraq.

The United States, Britain and France, which are supposed to be trying to limit Milosevic's access to foreign capital, are represented on a UN committee which has allowed him to earn millions of US dollars in trade with Baghdad.

The revelation comes as the European Union is considering ways of tightening so-called "smart-sanctions" aimed at hurting leading members of the Belgrade regime.

Milosevic is profiting from the UN's Oil-for-Food programme, which enables Iraq to sell oil on the open market and use the proceeds to buy UN-approved supplies in order to alleviate the humanitarian problems caused by years of economic sanctions.

The UN's 661 committee, which overseas the Oil-for-Food programme, has over the past few years approved several lucrative deals between the Yugoslav government-owned company the Federal Directorate of Supply and Procurement (FDSP), known in Serbia as Yugoimport, and the Iraqi authorities. Any member of the UN committee can veto these contracts.

The UN approved two FDSP deals with Baghdad in 1998 worth $3.8 million and $18.3 million, respectively, the latter given the go-ahead just as NATO threatened to intervene to thwart a Yugoslav military onslaught in Kosovo. Last month Yugoimport announced it had received permission for a $20 million contract - and boasted its value would increase to $100 million by year's end.

The UN said no FDSP contracts had been approved this year. "It could well be that Yugoimport has signed a contract for further sale of wheat, but we cannot confirm that they have submitted a contract to the UN for approval," a UN spokesman said. "The other two contracts were approved quickly."

The 661 committee has put on hold three other contract applications filed by Yugoslav companies in 1999, to sell pitch, hydrocortisone, tyres tubes and flaps under Oil-for-Food. The US has faced criticism from Baghdad officials in the past month for blocking several other Iraqi contracts The apparent clampdown on Yugoslav-Iraq business may well have been prompted by concerns over the UN loophole in the financial sanctions regime against Belgrade.

There are some suggestions that it may also have come about as a result of fears that Milosevic is using the Oil-for Food programme as a front to provide military support for Iraq. The 661 committee is obliged to block any deal that it suspects involves the sale to Baghdad of dual-use technology which might be used to enable Saddam Hussein to build weapons of mass destruction. Although there is no direct evidence, there's mounting suspicion that Yugoimport may be involved in such trade.

FDSP's own literature suggests that it might be in a position to help Baghdad with its military goals. The company's website says that it alone accounts for just over 10 per cent of Yugoslav's exports and that its activities include trade in defence equipment, technology transfer, and the construction of fortifications for military bases and airports. Yugoimport's military and economic role was underlined when it was targeted during the NATO bombardment of Belgrade last year.

In the past, Yugoslav companies have been instrumental in building much of Iraq's military infrastructure, according to William Arkin, a consultant to the arms division of campaign group Human Rights Watch. And recent high-level discussions between Belgrade and Baghdad officials have stressed the importance of Iraqi security.

Following a meeting between Serbian interior ministry officials and the Iraqi ambassador to Yugoslavia, Sami Sadun, the Yugoslav news agency, Tanjug, reported that Sadun had said the preservation of economic stability and security in the country were priorities.

Laura Rozen, a regular contributor to IWPR, is a journalist specialising in the Balkans.