Serbia Rocked by Seychelles Affair

A political storm over money laundering allegations by Serbia's former central bank governor, Mladjan Dinkic, is threatening to destabilise the government.

Serbian prime minister Zoran Zivkovic, vice president of the Democratic Party, DS, the largest party in the ruling DOS coalition, is facing a tough dilemma over the alleged laundering of funds by government officials close to his party.

Either he begins investigating them, creating yet more political enemies, or stalls proceedings, risking the loss of support from reformist parties such as Dinkic's influential G17 Plus party.

Dinkic, vice president of the party, was dismissed as bank governor on July 23 due to a combination of disagreements with the Serbian government over monetary policy and concerns that he was becoming too powerful.

Following his departure, Dinkic stepped up his claims of financial irregularities, which now threaten to undermine the government.

A Hungarian police document - copies of which Dinkic released to journalists, including this IWPR reporter, at a July 25 press conference - names two government officials as being involved in an alleged fraud.

The document - which Dinkic said was received by the Serbian interior ministry on June 25 - accuses Zoran Janjusevic, security adviser to the former and current Serbian prime minister, and Nemanja Kolesar, executive director of the government's Bank Reconstruction Agency, of money laundering.

The Serbian ministry of interior has confirmed the authenticity of the document and that it is in their possession.

Speaking at his press conference, Dinkic, quoting the Hungarian police report, said that funds were "illegally appropriated" through Myron Sails, a company registered in the Seychelles whose account Janjusevic is said to have been authorised to use.

According to the Hungarian police document, a total of 1.02 million euro had been transferred to Myron Sail's account and then transferred to several other accounts including those of Kolesar and Janjusevic.

Janjusevic and Kolesar have strenuously denied any wrongdoing and fired counter accusations aimed at the former governor and G17 Plus.

Janjusevic said that money transfers from his offshore account to his private bank account represented legal transactions. "Under the law, I have the right to distribute the money from my companies according to my personal wish and transfer it to my personal or any other accounts," he told journalists.

Kolesar, who has threatened Dinkic with legal action, told the media that the money he received was from his parents, who work abroad, and was to be used to buy a flat.

In a written statement, Kolesar slammed the former bank governor, saying he would be made to back up his accusations, "For me, any kind of polemic from a person like Mr Mladjan Dinkic represents the crossing of the boundaries of good taste. Mladjan Dinkic will have to repeat claims from today's press conference before the authorised bodies."

Both Janjusevic and Kolesar muddied the waters yet further by accusing Dinkic and Miroljub Labus, leader of the G17 Plus, of illegally financing their party through money transfers from offshore accounts. They distributed documents which, they claimed, were from the Hungarian HVB bank, purporting to show transfers of huge sums of cash to G17 Plus accounts.

Labus has denied the accusations and insisted the aforementioned documents were fabricated.

Dinkic has also claimed that the authorities failed to respond to the Hungarian police report quickly enough, accusing the interior minister, Dusan Mihajlovic, of concealing the material - claims the minister's Liberal party have dismissed.

Speaking to B92, Mihajlovic said investigators will respond "professionally" to a request from the Serbian public prosecutor for the Dinkic, Kolesar and Janjusevic accusations to be looked into as a matter of urgency.

The political fall out from the affair has already claimed its first casualty, with the resignation last week of the Serbian health minister Tomica Milosavljevic in protest over what he sees as a with-hunt against his G17 Plus party following Dinkic's revelations.

Former interior ministry adviser Boza Prelevic told IWPR last week that the government is facing two simple choices, "To start criminal proceedings and save itself or prove that [Dinkic's] accusations are groundless."

According to a B92 source, the money-laundering affair has caused such concern among some DS members that they demanded that Zivkovic punishes Janjusevic and Kolesar, during a meeting of party members in parliament on July 21.

Although DS spokesperson, Aleksandar Radosavljevic, reportedly denied on July 24 that the matter had been mentioned during the meeting, one of the DS deputies who attended confirmed the B92 source's claim.

Analysts believe that this affair may expose a conflict prone, anti-reform group that includes both DS members and their associates.

Many members of this group maintained strong links with both Milosevic-era oligarchs and the government of the slain prime minister Zoran Djindjic.

In the immediate aftermath of Djindjic's assassination, this group was accused by many Belgrade analysts of wanting to take control of the DS and the ruling coalition.

According to the DS source, the meteoric rise of this group - which some observers believe include Janjusevic and Kolesar - has raised suspicions not only amongst DOS parties but also some DS rank and file.

Before becoming executive director of the government's Bank Reconstruction Agency, 32-year-old Kolesar worked in the Delta Bank belonging to Miroslav Miskovic, a top Milosevic era financier.

After DOS ousted Milosevic, he joined Djindjic's team, working from 2001 until June this year as spokesperson for the prime minister's office and chief of cabinet.

Due to his banking background and knowledge of monetary matters, he held a key position within Djindjic's circle of financial advisers.

Janjusevic was a member of Republika Srpska's secret police from 1992 to 1993. An expert in telecommunications and phone tapping techniques, he became Djindjic's economic adviser in 2001 and later his security adviser.

According to the DS source, the current financial scandal could provide the prime minister with an excuse to try and oust members of the anti-reformist group.

"Although Zivkovic has felt for some time that this group has become a burden, he could not enter into open conflict with it because it was too powerful," he said, adding that the premier may be encouraged by the US to act during his current trip to Washington.

Obrad Kesic, a specialist in Serbian-American relations, told IWPR last week that Washington supports the reformists within Serbia and DS, such as Zivkovic and current defence minister Boris Tadic.

How Zivkovic's responds to this challenge on his return from America this week could set the tone for the rest of his government.

The DS source said that the prime minister's attitude towards the money-laundering affair could determine who is going to rule Serbia in the next five years, "If the prime minister decides to punish Janjusevic and Kolesar, he would open the way for cooperation with other reform forces."

If he fails to act, the government and DS could lose support amongst reformists, which may lead G17 Plus to seek some sort of political accommodation with the conservative politician Vojislav Kostunica and his Democratic Party of Serbia.