Economic Sanctions as a Foreign Policy Tool: The Case of ...

ECONOMIC SANCTIONS AS A FOREIGN POLICY TOOL:
THE CASE OF YUGOSLAVIA
Milica Delevic
The practice of economic sanctions is hardly new in international relations,
but the twentieth century is especially rich in sanction episodes. The use of
sanctions increased from two cases in the 1920s to more than 20 in the 1980s.
Despite their widespread use, traditional scholarly perception is that sanctions
are remarkably unsuccessful in achieving their stated policy objectives.
Nevertheless, the number of disputes in which they were employed during the
first half of the 1990-s contributes to the conclusion about the ever-growing
popularity of sanctions. It also demonstrates clear differences from previous
decades. While the majority of the sanctions employed previously were unilateral
and originated by the United States, today they are predominantly multilateral
and imposed by the United Nations. This reflects a belief that a new, inexpensive
and potentially potent weapon against small and medium size troublemakers has
been found (Mueller 1994, p. 363). This study will argue against this view.
To this end, basic concepts of sanctions will be defined, the post-Cold War
environment will be discussed in view of changes that led to the recent proliferation
of multilateral economic sanctions, and finally, the case of Yugoslavia will
be analyzed. It will be argued that the sanctions, helped to a great extent
by pre-existing economic difficulties and macroeconomic mismanagement, had a
devastating effect on the Yugoslav economy, thus helping make Serbian President
Milosevic more cooperative, but were of no decisive importance for stopping
the war in Bosnia. Moreover, poverty, which increased as a result of the sanctions,
made people more receptive to authoritarian and totalitarian regimes, making
democratization ever more difficult to achieve.
A Study of Economics as an Instrument of Politics
Basic concepts
In defining relevant terms, this study will mostly rely on Baldwin’s
(1985) definitions. Baldwin’s takes a more general and theoretical approach,
as opposed to focusing on particular cases, that is more conducive to this study.
Offering economic rewards or withholding economic advantages in order to make
other international actor(s) do what they would not otherwise do means using
economics as an instrument of politics and is, according to Baldwin, best labeled
as -economic statecraft. The economic techniques of statecraft are defined as
governmental influence attempts that have three basic components. Economic policy
instrument, as opposed to other means of statecraft relying primarily on negotiation
(diplomacy) or force (military statecraft), economic statecraft relies on instruments
primarily aimed at affecting other actor’s- production and consumption
of wealth, for example, denying or promising aid or trade boycott. A case can
be made that, insofar as the -going market price- for such transactions exists,
they should be labeled as an economic statecraft. There are, however, borderline
cases, such as the sale or gift of military hardware, that can be classified
either as economic or as military statecraft, depending on the particular case
in question.
Secondly, there is the domain of the influence attempt where other international
actors upon which influence attempt is targeted and is often referred to as
the -target. Finally, the scope of the influence attempt applies to some dimension
of target’s behavior that the sender(s) country(ies) perceives as objectionable
and wants to change. It can be named also as -goal.- It is worth noting that
any dimension of the target’s behavior can be selected. Since the political
quality of the act is a function of the total influence relation, it is not
a function of scope. This implies that attempts at influencing another state’s
attitude towards foreign direct investments or tariff levels are no less -political-
than attempts at influencing its respect for human rights.
Economic statecraft is usually deployed to exercise economic power. It is
used to threaten or damage the wealth of the target, leading to compliance by
making the objectionable policy more expensive and/or provoking political disintegration.
However, the sanctions need not bite in order to work (Baldwin, 1985: 372),
implying that they might work through noneconomic power bases. Trade restrictions
can successfully convey a threat of invasion even if their economic impact is
negligible, while human rights offenders might care more about their moral standing
in the international community than the effects of sanctions on their economic
welfare.
Economic techniques of statecraft are often accused of not working, which raises
the question of how their usefulness is measured. This can be done by employing
one of two alternative criteria--effectiveness and efficiency. The first step
in assessing effectiveness is establishing the intended goals and targets (scope
and domain). However, as Baldwin correctly notes, the evaluation of effectiveness
can be diluted with the importance of secondary, implicit or unstated goals,
as well as third parties. Therefore, instead of considering economic statecraft
strictly in terms of securing compliance with explicit and publicly stated demands,
the approach which recognizes that there are usually a multitude of targets
and goals is likely to bear more fruit. Another problem, as identified by Baldwin,
is that some of the best known applications of economic statecraft involve extraordinary
levels of difficulty. One example of this is promoting economic development
and democracy in countries that have never known either (Baldwin, 1985: 133).
Moreover, not all effects of statecraft are easy to observe. Less glamorous
than diplomacy and less decisive than war, the effects of economic statecraft
tend to be underestimated since they are seldom sudden or dramatic. All this
implies the need to be careful when judging influence attempts into simple dichotomies,
such as -success- or -failure- because the outcome is much more likely to be
mixed or ambiguous.
Given that the concept of effectiveness involves only the achieved benefits
while ignoring the cost sustained by the sender, a more appropriate criterion
would be efficiency, in Baldwin’s view. Efficiency implies that economic
statecraft is always chosen among alternative courses of action, such as negotiations
or military action, depending on the basis of their cost and benefits. However,
this concept is not without its problems, for Baldwin warns that analytical
pitfalls frequently occur, such as completely ignoring cost or misleading cost
comparisons.
Economic statecraft, as defined here, is intentionally broad, since it has
to include all economic forms of influence. However, the distinction can be
made between negative sanctions (withholding economic advantages) and positive
sanctions (offering economic benefits), as well as trade and financial sanctions.
For the purposes of this study, using the case of Yugoslavia, economic sanctions
will be used to describe the technique of economic statecraft that withholds
economic advantages through either trade or financial restrictions.
Sanctions After the Cold War
This section will analyze different patterns in the use of sanctions during
the 1990s, focusing on factors that gave rise to the recent proliferation of
multilateral economic sanctions.
Since the first documented sanctions episode, Pericle’s Megarian decree
enacted in 432 BC Sanctions have remained an important foreign policy tool,
especially for great powers. However, only after World War I was extensive attention
given to the opinion that economic sanctions might substitute for armed hostilities
as a stand-alone policy (Hufbauer, Schott and Elliott, 1990:5). President Wilson
viewed economic means as suitable for pursuing foreign policy goals, as he was
the leading advocate for building a capacity to use the “economic weapon”
in the League of Nation’s. Out of the eight cases Hufbauer, Schott and
Elliott identified between 1918 and 1940, four involved League of Nations attempts
to apply economic sanctions to settle disputes. Sanctions were usually imposed
to disrupt military adventures or to complement a broader war effort (League
of Nations vs. Yugoslavia, League of Nations vs. Greece). In the period after
World War II, the imposition of sanctions occurred against the background of
the rivalry between the superpower, thus making other policy motives increasingly
prevalent. The sanctions were used for strategic reasons –to deny strategic
materials and/or impair military potential (COCOM), destabilize foreign governments
in the context of containment (Cuba, Chile), or overthrow a rebellious government
inside the block (Yugoslavia, Albania). Apart from the episodes with the dominant
Cold War flavor, sanctions were still occasionally used to force a target country
to withdraw its troops from border conflicts, to abandon plans of territorial
acquisition, or to cease other military adventures (as was the case of Egypt
that was forced to withdraw from Yemen and the Congo as a result of withholding
development and food aid) (Hufbauer, Schott and Elliott, 1990:5). Finally, sanctions
were also used on behalf of efforts to protect human rights (as was the case
of Chile, where the United States imposed sanctions after General Pinochet was
charged with widespread violations of human rights), to halt nuclear proliferation
(evidenced by sanctions imposed on Pakistan in 1979 by the United States), to
settle expropriation claims (as demonstrated by sanctions imposed on Ceylon
1961-65 by the United States after expropriating assets of US and UK oil companies),
and to combat international terrorism (as in the case of Syria, where sanctions
were imposed in 1976 after Syria, among others, was listed by the Carter administration
as a country supporting international terrorism).
Of the 116 cases documented by Hufbauer, Schott and Elliott, the United States,
either alone or in cooperation with its allies, have deployed sanctions 77 times
(1990:7). This reflected the US role as an economic hegemon and a political
and military superpower. However, both the economic and political situation
have changed. Beginning with the 1970, trade and financial patterns have become
far more diversified, new technology has spread faster, and new competitive
economic superpowers have emerged. These trends resulted in the declining average
trade linkage between the United States and its targets -- from 24% of GNP prior
to 1973 to 17% since, as well as lower costs imposed on targets – 1.7%
of GNP vs. 0.9% of GNP (1990:107). The overall outcome was a diminishing effectiveness
of US sanctions due to the reduced vulnerability of the potential targets to
unilateral economic coercion.
As the Cold War came to an end, the strategic reasons for imposing sanctions,
which existed due to superpower rivalry, disappeared. Coupled with severe economic
problems at home, Russia became far less likely to assist the countries hit
by the US sanctions as it used to do with Cuba. Not less important, the termination
of the Cold War seemed to have opened the door for an unprecedented degree of
international cooperation. As far as the United Nations was concerned, this
cooperation raised the expectations that it would finally be able to act in
the true spirit of the UN Charter and that the broad use of veto, that had made
the Security Council impotent to act during the Cold War, would be abandoned
(Higgins, 1994:174). This was apparent in the use of multilateral economic sanctions
that were, in fact, collective enforcement measures (Article 41, Chapter VII
of the UN Charter). Article 41 was applied for the first time in the UN history
in December 1966, when comprehensive economic, financial, and diplomatic measures
were adopted against the racist regime of Southern Rhodesia. In the absence
of a similar consensus in the Council, only a mandatory arms embargo could be
decreed against South Africa in 1977. Since the invasion of Kuwait on August
2, 1990, however, sanctions have been instituted against Iraq (1990), the Federal
Republic of Yugoslavia (1992, lifted in 1960), and Libya (1992). They were also
imposed on Somalia in 1992 and Haitian 1993, but were abolished after unsuccessful
military intervention (Somalia) and when the democratically elected president
came back to power (Haiti).
Nonetheless, as expectations rose to new heights, disappointments lurked just
around the corner, for the improved East-West climate was only one of the preconditions
for the improved prospects of the United Nations. Additional concerns included
the need for reform that would address shortcomings in forms of inefficiency
and too much bureaucracy, as well as the financial problems due to failure of
the member states to pay budgetary dues (Higgins, 1994:180)
However, the euphoria that followed the enforcement measures authorized by the
United Nations against Iraq in 1990-1991 gave way to a new and disturbing reality
(Ibid, 180). After the relatively straightforward two-alliance confrontation
of the cold war, the world has turned back to the riskier maneuverings of a
multi-power system (The International Order, 1994: 17). The world’s chief
powers remembered how different they were from each other and started acting
accordingly (Ibid, 20). This came to a head in the case of Yugoslavia.
The Case of Yugoslavia
The sanctions on the Federal Republic of Yugoslavia were imposed in May 1992.
One year later, the Serbian President Slobodan Milosevic, in the wake of a deteriorating
economic situation in Yugoslavia and threats of a tighter regiment of sanctions,
urged acceptance of the Vance-Owen peace plan as opposed to the Bosnian Serbs,
who rejected it. In August 1994 he responded with an imposition of sanctions
on the Bosnian Serbs when they refused to accept the Contact Group peace plan,
thus illustrating a clear U-turn from his previous support for the Bosnian Serbs-
war effort. In November 1995, a peace agreement, negotiated by the US, was reached
in Dayton, Ohio. All this suggests the conclusion that the sanctions were successful.
However, the essence of the peace plan that envisioned two separate entities
within the Republics of Bosnia and Herzegovina (the Muslim-Croat Federation
and the Republics of Srpska) as well as the decisive use of NATO’s air-power
in August 1995 cast doubt on the importance of sanctions for stopping the war
in Bosnia.
The following section will address the question of usefulness of sanctions
with reference to the framework discussed previously. To make the domain and
scope (target and goals) of UN action more comprehensible, a historical overview
of the crisis in the former Yugoslavia will be discussed, while the relevant
economic data will describe the impact of the instrument used. Finally, the
sanctions will be assessed with respect to their contribution in achieving the
stated goals (effectiveness) as well as in comparison with other policy alternatives
(efficiency).
Situation
Since defining the intended scope and domain of sanctions is, according to
Baldwin, the basic step in assessing their effectiveness, this section hopes
to contribute to this end through presenting a chronology of the main events
in the crisis in former Yugoslavia, as well as a brief historical overview of
the involvement of the international community.
The Socialist Federal Republic of Yugoslavia (SFRY) was a second attempt of
the Yugoslav peoples to live together in one state. The first Yugoslavia, set
up in 1918, brought together peoples of different historical backgrounds: Serbia
and Montenegro were sovereign states that had gained independence at the 1878
Berlin Congress after centuries of Ottoman dominance; Slovenia and Croatia were
parts of the Austro-Hungarian Monarchy; Bosnia and Herzegovina were under Ottoman
rule until 1908, when they were annexed by the Austria-Hungary; and Macedonia,
as a component part of Serbia, had been under Ottoman rule. This resulted in
a plural society, divided by several lines of cleavages -- nationality, religion,
language -- and further aggravated by an uneven level of economic and cultural
development. The SFRY tried to address those cleavages in a number of ways.
One way was the 1974 constitution, the adoption of which many take as the point
of departure in the disintegration of Yugoslavia. The 1974 constitution established
a loose form of federation and a rather impotent federal government, with the
constituent parts of the federation (six republics and two autonomous provinces,
Kosovo and Vojvodina, that were parts of Serbia) autonomous to a great extent.
Moreover, the communism that existed in Yugoslavia differed from the Communism
in other Central and Eastern European countries due to the Tito-Stalin rift
of the late 1940s. Being independent of Moscow brought Yugoslavia a special
relationship with the US, which included the implicit guarantee of special access
to Western credits in exchange for Yugoslav neutrality and its military capacity
to deter Warsaw Pact forces from invading Western Europe (Woodward, 1995: 104).
In 1980, Marshall Tito died. His death left a void of charismatic leadership
in Yugoslavia -- he was a symbol of the independent policy Yugoslavia had been
pursuing. The outbreak of the debt crisis, triggered by the defaulting of Mexico
and Poland, made it more difficult to get new credits, while increasing in interest
rates aggravated by repaying the old. After a relatively dynamic growth rate,
Yugoslavia entered a decade of economic stagnation (Stamenkovic, Posarac, 1994:
33). Handling the situation required a federal government more in charge of
things, yet constitutional reform could deliver a more powerful central government
could not be agreed on among the republics. As a result, the 1980s passed against
the background of steadily deteriorating economic conditions and numerous attempts
to create economic policy able to serve the foreign debt while reviving economic
growth at home (Woodward, 1995: 114).
In 1987, the leadership of the League of Communists of Serbia, a branch of
the so-called leading political force of Yugoslav society, the League of Communists
of Yugoslavia, changed and Slobodan Milosevic came to the forefront. Soon he
became very popular, capitalizing on the ,people’s will to see Serbia
united, since autonomous provinces were perceived to be -states within a state-
that paralyzed the decision making process. On the other hand, the situation
in Kosovo, Serbia’s southern province with an Albanian majority, was becoming
more complicated and tense. Milosevic’s visit to Kosovo and his famous
statement that he would make sure that no one harmed the Serbs in Kosovo any
more, made him almost a national hero.
As the federal state increasingly malfunctioned, the governments of the republics
became ever more powerful. The poor economic performance in the 1980s caused
republics to begin blaming all the problems on the others, contributing to an
awakening of ethnic tensions. Slovenia and Croatia, as the wealthier parts of
Yugoslavia, complained that helping the poorer members of the Federation slowed
their progress, while Serbia protested against being treated as the chief supplier
of raw materials and the market where the final expensive products could be
sold.
The last attempt to save and reform the SFRY was Ante Markovic’s government
that took office in January 1989. As soon as he took office, Ante Markovic announced
he was going to launch comprehensive economic reforms as well as reforms designed
to transform Yugoslavia into a multiparty parliamentary democracy which would
integrate the country into European institutions. However, apart from having
to compete for power with regional authorities, a problem that his predecessors
also had to face, Markovic also had to deal with the dramatically changed international
environment. By 1989 the Cold War was over, so Yugoslavia no longer had the
geopolitical importance the United States had previously given it (Zimmerman,
1995: 2). With the disintegration of the country well under way, and international
financial institutions unwilling to back up the reform with new financial arrangements,
the collapse of Markovic’s government came as no surprise.
The degeneration of the political system, as well as growing nationalism,
affected the League of Communists of Yugoslavia, and it fell apart at the 14th
Congress in 1990, marking the end of party monolithism. Like Serbia, nationalism
proved to be the winning card in other republics, but the communists understood
this only too late, losing power everywhere but in Serbia and Montenegro. The
fact that ethnic parties won power in all of the republics apart from Macedonia
(Zimmerman, 1995: 6) represented a serious setback for those who had hoped that
Yugoslavia could stay together in a democratic framework. The only all-Yugoslav
party was the Alliance of Reformist Forces of Yugoslavia (SRSJ) led by Ante
Markovic. Only created in July 1990 after the parliamentary elections were held
in Slovenia and Croatia, SRSJ took part in the elections in the remaining four
republics. Hopes were high for successful performances in ethnically mixed settings
of Bosnia and Macedonia. In Bosnia, however, the three national parties gained
votes and seats almost directly proportional to individuals- choices of national
identity in the 1981 census , while in Macedonia SRSJ was one of the three best
placed parties. In Serbia and Montenegro, the last republics to hold multiparty
elections, poor electoral results came as no surprise, given the support that
Milosevic’s Socialist Party enjoyed.
Almost all of 1991 passed against the background of increasingly aggravated
inter-republic and inter-national relations. The turn for the worse occurred
at the end of June 1991, when both the Slovenian and the Croatian Parliaments
declared independence and sovereignty. The Yugoslav government responded by
manning all frontier crossings along Slovenia’s borders with Italy, Austria
and Hungary, as well as all airports on that republic’s territory. This
resulted in a short war that included the involvement of the European Community
(EC), who decided to send a peace mission (so-called Troika) to Yugoslavia.
The crisis was temporarily solved with the so-called Brioni Declaration on Yugoslavia,
under the auspices of the European Community, by which the decisions of Slovenia
and Croatia to declare sovereignty and independence were suspended for a duration
of three months. Within the context of its ever broader involvement in resolving
the Yugoslav crisis, the European Community decided, in agreement with all interested
parties in Yugoslavia, to convene a Peace Conference on Yugoslavia at The Hague
(later to be continued in Brussels) that was aimed at brokering a cessation
of the conflict in the former Yugoslavia and at reaching a comprehensive solution
of the Yugoslav crisis. Lord Carrington was appointed its chairman. It was also
decided to set up an Arbitration Commission, consisting of five Presidents of
Constitutional Courts of five EC member-states. The Commission was often referred
to as the Badinter Commission after its chairman Robert Badinter, President
of the Constitutional Court of France.
The crisis occurred after the Badinter Commission Report of November 29, 1991.
in which it was stated that Yugoslavia was being dissolved into six republics
as its successors (as opposed to the Serbian view that Slovenia and Croatia
seceded from Yugoslavia, so they could not be its successors). The second report
of the Commission of January 15, 1992 contained the opinion on whether the Serbian
population in Croatia and Bosnia-Herzegovina, as a constituent people of Yugoslavia,
enjoyed the right to self-determination and whether the internal borders could
be considered as borders in the sense of international law. This report also
contained the opinion of the Arbitration Commission on the recognition of Bosnia
and Herzegovina, Croatia, Macedonia and Slovenia.
With respect to the first question, the Arbitration Commission replied that
the Serbian population in Bosnia-Herzegovina and Croatia was entitled to enjoy
all rights recognized to minorities and ethnic groups -- that those republics
had an obligation to ensure the members of these minorities and these ethnic
groups were given all human rights and fundamental freedoms recognized by international
law, including, in case of need, the right to national determination. As for
the second question, the Arbitration Commission replied that, first, external
borders would have to be recognized in all cases in accordance with the international
law; second, demarcation lines between Croatia and Serbia or Serbia and Bosnia-Herzegovina
or possibly between other neighboring States would be possible to change only
by free and mutual agreement and third, if nothing happened to the contrary,
the former borders would assume the character of borders protected by international
law. Regarding the recognition of Bosnia-Herzegovina, Croatia, Macedonia and
Slovenia, the Arbitration Commission replied that Slovenia and Macedonia had
fulfilled the necessary conditions for recognition of new states, while Croatia
had not met, at the time, the European standards on individual and minority
rights or free speech. As far as Bosnia-Herzegovina was concerned, the answer
was that the expression of the desire for sovereignty by the population of Bosnia-Herzegovina
could not be considered fully justified until an internationally controlled
referendum was held in which all of the citizens of Bosnia-Herzegovina would
be invited to participate.
Faced with the escalating violence in Croatia that had began at the end of
spring 1991, and the increasingly tense situation in Bosnia-Herzegovina, the
European Community decided to apply economic pressure. Slovenia, as a nationally
homogenous state, remained intact and began to return to normality. The next
instrument available to the Community included diplomatic recognition or nonrecognition
of the warring parties. Paradoxically, though the Badinter Commission had suggested
Slovenia and Macedonia for recognition, the first to be recognized were Slovenia
and Croatia in January 1992, with Bosnia and Herzegovina to follow in April
1992. The unilateral recognition of Slovenia and Croatia and the subsequent
recognition of Bosnia-Herzegovina, coupled with the Serbian’s persistent
rejection of the Carrington proposals, finally brought about the failure of
the EC mediation centered on its peace conference.
Posing a -direct threat to international peace and security- the Yugoslav crisis
was put on the Security Council agenda on September 25, 1991. In October 1991,
Secretary General Perez de Cuellar named former US Secretary of State Cyrus
Vance as his special envoy for Yugoslavia. Vance continued his duties after
the arrival of Boutros Boutros Ghali. The Vance plan, which formed an annex
to the report of the Secretary General to the Security Council on December 11,
1991, represented the plan of the United Nations for a peacekeeping operation
in Yugoslavia (UNPROFOR). This temporarily ended hostilities in Croatia and
caused the first rift between Slobodan Milosevic and the Serbian leaders in
Croatia and/or Bosnia, since he was ready to accept the Vance plan, unlike the
Serbian leader in Croatia.
On the other hand, the situation in Bosnia-Herzegovina was deteriorating steadily.
The conflicts, that first occurred in the beginning of March, escalated after
the recognition of Bosnia-Herzegovina on April 6 , 1992, leading to the adoption
of the Security Council Resolution 752 on May 15, 1992. The Resolution demanded
adherence to the cease-fire agreement signed on May 12, that all forms of interference
by military forces outside Bosnia-Herzegovina, including the Yugoslav People’s
Army units and elements of the Croatian army cease immediately, and that all
irregular military forces in Bosnia-Herzegovina be disbanded and disarmed. After
Resolution 752 had not been complied with, Resolution 757, imposing sanctions
on FR Yugoslavia, was adopted on May 30, 1992. Noting that in the complex context
of events in the former Socialist Federal Republic of Yugoslavia all parties
bore some responsibility for the situation, the Security Council condemned the
failure of official bodies in the Federal Republic of Yugoslavia to take effective
measures to fulfill the requirements of Resolution 752. The Security Council
also stressed the unacceptability of territorial gains or changes brought about
by violence, condemned violations of human rights and fundamental freedoms,
including the practice of -ethnic cleansing- and the deliberate impeding of
delivery of food and medical supplies to the civilian population. The Security
Council decided all states should adopt the following measures: prohibition
of imports originating in FRY, and prohibition of the sale and supply of commodities
and products to FRY, excluding supplies intended strictly for medical purposes
and foodstuffs. It also decided that all states should not make available to
the authorities in FRY, or to any commercial, industrial or publicly utility
undertaking in FRY, any funds or any other financial or economic resources.
Air-traffic was also prohibited, as well as participation of persons and groups
representing FRY in sporting events. Finally, scientific and technical cooperation
and cultural exchanges and visits were suspended and the level of the staff
at diplomatic missions and consular posts of FRY reduced.
To sum up, the Yugoslav loose federation, built with the predominate concern
to promote -brotherhood and unity- of the post-war Yugoslavia (Cviic, 1995:
823) failed to resolve economic problems and political antagonisms polarized
around national issues. The crisis came to a head after the Cold War when Yugoslavia
lost much of its geopolitical importance to the United States. In a process
of dissolution, the independent states of Slovenia, Croatia, Bosnia and Herzegovina
and Macedonia were created. Given the significant percentage of the Serbian
population in Croatia and Bosnia (12% and 33%, respectively) as well as Milosevic’s
rise to power based on Serbian nationalism, the outbreak of the war was unavoidable.
Nationalism proved to be winning card in the newly independent states as well.
In such a setting, sanctions were viewed as a tool for stopping the war by containing
Milosevic’s pan-Serbian policy. To put it in Baldwin’s terminology,
putting an end to fighting, violations of humanitarian law and to all forms
of interference in the territorial integrity of the state was the primary goal
of the sanctions. However, the fact that the measures were applied only against
FRY, although the Council had noted that -in the very complex context of events
in the former SFRY all parties bear some responsibility for the situation- could
be explained with the importance of implicit or unstated goals -- a pan-Serbian
policy, pursued by the Serbian president Milosevic, was perceived as a major
threat to peace, so the sanctions were aimed at either changing his policy or
at removing him from power. The domain could be broadly defined as the Federal
Republic of Yugoslavia (Serbia and Montenegro) although the sanctions were meant
to convey different signals to different groups in the Yugoslav society. As
for the ruling elite, the sanctions were intended to communicate strong moral
disapproval and to put economic constraints on further assistance to the Bosnian
Serbs war effort. With respect to the ordinary people, whose lives were to be
the most affected by sanctions, it was expected that both isolation and worsening
living conditions would lead to dissatisfaction, which in turn would, through
electoral behavior, result in compliance with the international community’s
demands.
Economic impact of sanctions
While establishing the intended scope and the domain merely explains who is
being influenced with respect to what, the most important element of economic
statecraft is the economic policy instrument that is relied on to accomplish
this. To be labeled as economic, the instrument has to have its price and that
is, in case of Yugoslavia, the damage caused to the Yugoslav economy. However,
the sanctions were only one of the acute factors that aggravated the chronic
state of crisis in the Yugoslav economy and hence cannot be analyzed separately.
Therefore, this section will present the economic data relevant for assessing
the impact of sanctions with regard to pre-existing economic difficulties and
macroeconomic mismanagement.
The crisis in the Yugoslav economy is a cumulative result of both chronic
and acute factors (Stamenkovic, Posarac, et al., 1994: 17). The chronic factors
were the result of system endemic characteristics that resulted in the lack
of proper economic environment and, hence, inadequate economic policy. As opposed
to the other socialist states characterized by state ownership, the Yugoslav
economy was based on--social ownership and a-self-management, a complicated
system where factories were owned and managed by workers and their councils.
This resulted in a situation where it was very difficult to determine who owns
what and who is responsible for taking decisions.
The 1974 Constitution has to be mentioned here again, since it not only reversed
the existing trends towards a market economy (established by 1965 reform), but
also, through promoting greater autonomy for the constituent parts of the Federation,
contributed to disintegration of the Yugoslav economy. The flow of goods and
services between the republics thereafter declined, and a common fiscal policy
was abandoned resulting in a public spending of-explosion between 1974 and 1978
(Stamenkovic, Posarac, et al., 1994: 18). The resulting deficit was closed with
heavy borrowing. Loans, received from the international financial institutions
as well as commercial banks, were also used for investments that were meant
to promote economic development, but resulted in a number of so-called -socialist
giants, that were too big to be flexible to adjust to market conditions.
The impossibility to get new loans due to the outbreak of the debt crisis in
Eastern Europe and Mexico, coupled with the necessity to repay the old ones,
made the problems visible. The partial reforms, that tried to keep system going
rather than to change it fundamentally, failed. Reforming the economic system
was impossible without a fundamental reform of the political system, since the
two were intertwined (Posarac, forthcoming). The old communist elite was reluctant
to undertake such reforms, being aware that they might end party monolithism
and, hence, their absolute power. Postponing the reforms in order to save the
power fueled the process in which the Yugoslav communists lost not only their
power, but also the state they ruled (Posarac, forthcoming). The last and the
most comprehensive attempt to reform the system was undertaken in 1990, by the
Markovic government. However, with the process of disintegration of the country
well under way and the unwillingness of the international financial institutions
to back up the reform with new financial arrangements, the failure of Markovic’s
government came as no surprise.
As a result of the long-term structural factors, the relatively dynamic rates
of growth in the sixties and seventies were replaced with the decade of stagnation
and, in the first half of 1989, with negative rates of growth. This was further
aggravated by the acute factors, including the disintegration and war in Yugoslavia
as well as UN sanctions (Stamenkovic, Posarac et al., 1994: 21). Throughout
1989 the flow of goods between the Yugoslav republics were disturbed, to mention
only the Serbian boycott of the Slovenian goods and the retaliation from Slovenia.
In 1990 the republics adopted the practice of unauthorized printing of money
(the so-called intrusions in the monetary system), thus trying to make their
own position more favorable in view of the possible dissolution of the country.
The closing of the markets of the republics intensified throughout the first
half of 1991, while the outbreak of war and the independence of Slovenia and
Croatia contributed to a complete severance of economic ties.
The Federal Republic of Yugoslavia was established on April 27, 1992, as a federation
of the former federal units, Serbia and Montenegro. The fact that the internal
market was reduced by 60% (FRY accounts for roughly 40% of SFRY’s and
that the number of consumers fell from 24 million (SFRY) to 10.5 million (FRY),
had an enormous effect on the economy. In 1989, Serbia imported from other republics
47% of GDP (compared to imports from the other countries, that accounted for
27%) and exported 49% (compared to 20.4% export to other countries). Conversely,
the share of Serbia's ?exports to other republics accounted for 44.7% of their
GDP, while exports to Serbia accounted for 49.9% of GDP (Stamenkovic, Posarac
et al., 1994: 118). The structure of the consumers changed, not only because
Slovenia and Croatia were the wealthier parts of Yugoslavia, but also because
the inhabitants of Serbia and Montenegro became poorer (GDP per capita fell
from $2083 in 1989 to $1302 in 1992 - Stamenkovic, Posarac et al., 1994: 106).
On the other hand, the Yugoslav producers were deprived of suppliers that were
left outside the new Yugoslavia, while the substitution of missing materials
and energy was expensive and, hence, inefficient. This resulted in a sharp decline
in the standard of living, aggravated by the costs of fighting a war in other
parts of former Yugoslavia.
Shattered with the economic consequences of disintegration of the country,
FR Yugoslavia was badly poised to take severance of economic ties with the outer
world. At the end of 1991, the European Community suspended the Trade and Cooperation
Agreement with Yugoslavia, restored the quantitative limits for textiles, removed
Yugoslavia from the list of beneficiaries of the GSP and suspended the PHARE
program. Finally, on 30 May 1992, the UN sanctions were imposed. Both the general
public and the Yugoslav politicians were very optimistic about the duration
of the sanctions and their effectiveness. However, three months after their
imposition the industrial production fell by 40% (Stamenkovic, Posarac et al.,
1994: 21).
Surprisingly, no serious adjustments to constraints resulting from acute factors
were made. Even when those facts were finally taken into consideration, the
political will to take appropriate measures was still lacking. This primarily
means unwillingness to reduce the budget deficit to the level sustainable by
the economy. According to Stamenkovic, Posarac et al (1994, p. 28), public spending
as a percentage of GDP in FRY in 1990 was 49, while the revenues accounted for
46% of GDP (calculated out of SFRY budget). In 1991, revenues remained the same,
while the spending increased to 63% of GDP, producing a deficit of 17% of GDP.
The estimates for 1992 and 1993 were even higher - total public spending (with
transfers to the Serbs in Bosnia and Croatia) amounted to 65-70% of GDP, while
the revenues fell to 24% in 1992 and not more than 10-11% in 1993, thus making
the enormous deficit of more than 50% of GDP (Stamenkovic, Posarac et al., 1994:
28).
Those gaps were closed by printing money, that was in effect indirect taxation
through inflation tax. The inflation tax refers to a revenue a government raises
when it decides to finance its deficit through printing money. The money is
absorbed by the public that tries to maintain the real value of its money balances
constant in view of the decreasing purchasing power due to an increase in prices.
By making people spend less than their income and pay the difference to the
government in exchange for extra money (Dornbusch and Fisher, 1990: 657), inflation
acts just like a tax. In developed economies, the amount of money that can be
raised through inflation tax is constrained by the fact that the public increases
its holdings of both bank deposits and currency, and thus a part of the increase
in the public’s holdings of money does not go to the government to finance
the deficit . However, in countries in which the banking system is less developed
and in which people therefore hold large amounts of currency, the government
obtains more revenue from inflation and is more likely to give high weight to
the revenue aspects of inflation in setting policy. However, whenever the inflation
tax is used on a large scale, inflation invariably becomes extreme. As the inflation
rate rises, the expectation of the public changes -- people reduce their real
holdings of the money base, because the base is becoming increasingly costly
to hold. Eventually the real monetary base drops so much that the total amount
of inflation tax revenue received by the government falls. This point was reached
by the Yugoslav government by the middle of 1993 with the monthly rate of inflation
was 4667% (Stamenkovic, Posarac et al., 1994: 28), thereafter becoming the loser
in the hyperinflation game.
However, it is well worth noting that the Yugoslav government did not rely
only on the inflation tax for raising the capital to close the budget deficit.
The foreign currency savings, deposited with the state banks, and impossible
to get since late 1990, amounts to $4 billion. Since the public did not trust
state banks any more, the savings were deposited with the so-called -private-
banks, whose owners maintained close relationships with the ruling party. Those
banks offered a monthly interest rate for foreign currency savings of 15%, so
an enormous number of people were attracted to invest their money. The gamble
lasted until the elections in December 1993. After the elections were over,
the owner of the -Jugoskandik left the country, causing the run on the other
big bank, Dafiment. Soon thereafter, they declared insolvency. The amount of
money owed to the public by these -phantom- banks is unknown, since the data
were denied even to the experts that were supposed to -rehabilitate- them. This
suggests the conclusion that those funds had served as a -buffer- in view of
the slowing down of economic activity due to sanctions and other problems --
they postponed the necessary macroeconomic adjustments and reduced the mounting
social tensions, since a number of people were living on the interest their
foreign currency deposits yielded. As a result of both chronic and acute factors,
GDP in 1993 fell by 30%--from $13.60 to $9.52 billion (Stamenkovic, Posarac
et al., 1994: 29). It was produced with only 35% of the existing capacities.
Industrial plants were either closed or worked with minimum capacities. By the
end of 1993, 1.3 million workers were on -paid leave of absence- -- not working,
but receiving salaries, while 750,000 were unemployed (Stamenkovic, Posarac
et al., 1994: 29). Together with sending the money to the Serbs in Bosnia and
Croatia and additional payments for import-export transactions because of the
UN sanctions (the estimates are that the licenses were paid additional 15-100%
of the transaction - Stamenkovic, Posarac et al., 1994: 29), those 2 million
people that were dependent on public spending contributed to an increasing budget
deficit. On the other hand, the government revenues were diminishing. Sharp
declines in inflation tax revenues occurred in the middle of 1993, while the
other revenues rapidly decreased due to the Tanzi-Oliviera effect (in the first
half of 1993 fiscal income accounted for 16% of GDP, in November only 3%, while
in December they were negligible - Stamenkovic, Posarac et al, 1994: 30). This
resulted in extremely low salaries and pensions -- the average monthly salary
at the end of 1993 amounted to $15 (Stamenkovic, Posarac et al., 1994: 29).
By the end of 1993, with the highest monthly inflation rate in the world (313
million percent), the whole system was at a breaking point. To avoid the collapse
that would have had inevitably occurred had the money continued to be printed
with no limits, the Program for Reconstruction of Monetary System and Strategy
for Economic Recovery of Yugoslavia was launched.
The Program for Reconstruction of Monetary System and Strategy for Economic
Recovery of Yugoslavia (hereafter the Program) relied upon three basic pillars:
cutting the hyperinflation by discontinuing the practice of uncontrolled money
printing, significant reduction of the budget deficit accompanied by the reconstruction
of tax collection system and, making enterprises free to set the prices according
to the costs of production by making the state responsible for the social policy.
The new dinar (often referred to as a-super dinar) was introduced and was linked
to the German mark with the parity 1:1. The internal convertibility was declared--the
new dinar was supposed to be printed to the level of foreign currency reserves
and gold. This reintroduced the national currency, brought about the stability
of prices and established a shaky balance. The fact that money was functioning
again and that the stability of prices had been achieved, were the most important
results. Production increased by 41% in the first three months after the Program
had been introduced (19% if the season is taken out, MAP 1, 1994, p. 4 ). The
most significant growth occurred in the parts of industry that experienced the
worst decline. The average salary was approximately 50 dinars (50 DEM). The
psychological effects were great -- people were enjoying normal life, reflected
by the fact that the price of food was not changing by the day.
However, the limits for recovery were soon reached. The average monthly rate
of industrial production growth in 1994 was 2.6% (Opste tendencije, 1995: 11).
This figure hides differences between the first and the second half of 1994
-- while the industrial production in the first half of the year increased by
an average monthly rate of 4.1%, in the second half of the year the average
rate of growth was only 0.7%. On the other hand, wages grew faster than the
growth of production, resulting in 326.1% increase in nominal, and 255.7% in
real wages between February 1994 and February 1995. Prices -exploded- by the
end of 1994. Their monthly growth in November was 7.3% and in December 2.5%.
The internal convertibility functioned till the middle of 1994, while later
on it was administratively restricted and, in fact, informally suspended. The
price of the German mark started increasing in the second half of the year,
resulting in the exchange rate 2:1 in the beginning of 1995. This trend continued
in 1995 as well, resulting in increase of retail prices by 26.5% in the first
four months of 1995, which corresponds to the average rate of growth of 102%
at an annual level (Opste tendencije, 1995: 8 ). The estimated share of public
spending in GDP in 1994 was 60%, implying that no serious fiscal adjustments
were made. Moreover, the projections for 1995 show that they were not planned
for this year either-the share of public spending in GDP in 1995 was projected
at 68.4%. The situation is further aggravated by the fact that the institutional
framework has never been thoroughly reformed, resulting in additional constraints
on the economic policy. The attitude towards privatization and changing ownership
structure is ambiguous. The uncertainty is great, due to frequent changes in
laws as well as possibilities to pass the laws with retroactive force. Finally,
the system, as envisioned in the Program, is frequently suspended by the regulations
and directives brought by the government (Suspenzija privrednog sistema, 1994:
36).
All this invites the conclusion that the economic recovery of the Yugoslav
economy depends on a number of factors, the majority of which come from politics,
not economics (Posarac, forthcoming). Such factors include the decision to open
the process of restructuring the economy, that will address the chronic component
in the Yugoslav economic crisis, while stopping the war, reestablishing cooperation
with the former Yugoslav republics and lifting of the sanctions will eliminate
acute factors. The Dayton agreement changed the situation inasmuch as it ended
the war, established the very basic preconditions for cooperation with the former
Yugoslav republics and suspended the UN sanctions. Even though the trade embargo
was fully lifted after the September 14th elections in Bosnia, an -outer wall-
of sanctions (membership in international financial institutions) remained and
is linked with cooperation with the Tribunal for War Crimes and problem of human
rights in Kosovo. As far as privatization is concerned, plans are on the way
to sell 30% of Serbia’s telecoms system, while the state oil and electricity
companies are likely to be next. However, no overall strategy towards privatization
is adopted yet.
They bite, but do they work?
This section will examine both effectiveness and efficiency of the UN sanctions
in view of theoretical framework discussed in the previous chapter, with effectiveness
defined as a degree of success in achieving stated policy objectives and efficiency
assessed in comparison with costs and benefits of other policy alternatives
that might have been pursued instead of sanctions.
As previously discussed, the sanctions aimed at changing a pan-Serbian policy
pursued by Yugoslavia, both by putting economic constraints to further assistance
to the Bosnian Serbs and by electoral behavior of dissatisfied citizens. However,
the war in Bosnia fully exploded only after Security Council Resolution 757
was passed. For a long time thereafter coercion seemed to have little effect
on Yugoslav/Serbian government efforts to aid the Bosnian Serbs (Pejic 1994,
p. 21). May 1993 can be taken as a turning point. The Geneva negotiations, set
by the London conference on Yugoslavia and co-chaired by Cyrus Vance, on behalf
of UN and Lord David Owen, on behalf of the European Community, resulted in
the Vance-Owen plan for cease-fire agreement, military disengagement and the
demilitarization of Bosnia-Herzegovina. It also created a plan for a constitutional
system of Bosnia-Herzegovina as a decentralized State consisting of ten provinces
based on ethnic, geographic, economic, traffic, cultural and other relevant
criteria. The Plan was accepted and signed in Athens, under the mediation of
Greece, by representatives of Bosnian Muslims, Croats and Serbs, while Karadzic’s
ayes had to be confirmed by the Assembly of the Republics of Srpska. Despite
Milosevic`s persuasion, the Assembly voted no.
This resulted in tightening the sanctions against FR Yugoslavia (the Security
Council Resolution 820 entered into force automatically after the Bosnian Serbs
rejected the Peace plan and prohibited transport and transshipment of goods
through FRY) and prolonging the war in Bosnia-Herzegovina. Although Yugoslavia
continued to support the Bosnian Serbs for one more year, this was the first
serious attempt by the Yugoslav officials to end the war in Bosnia by trying
to make the Bosnian Serbs comply with the international community’s demands.
The reason behind this was an increasing inability to provide the Bosnian Serbs
with the means necessary for fighting the war in view of the near collapsed
state of the Yugoslav economy, where exploding hyperinflation eliminated inflation
tax revenue and dwarfed other government revenues used previously for this purpose.
Throughout the second half of 1993, the economic situation continued to deteriorate,
while the limits of recovery, brought about by the 1994 Program, were soon reached.
In the long run, stabilization seemed possible only with the lifting of sanctions
and this action was conditioned with the achievement of the peace in Bosnia-Herzegovina.
This is why the Yugoslav officials started applying pressure on the Bosnian
Serbs to accept the peace plan, this time proposed by the Contact Group . After
the Bosnian Serbs had rejected the plan, Milosevic imposed sanctions on them
(August 1994), confirming that he was a man driven by power rather than nationalism
(Zimmerman 1995, p. 5). Welcoming the evolvement of FR Yugoslavia towards a
more cooperative position, the Security Council (Resolution 943) suspended the
restrictions for air traffic from the Belgrade airport, restrictions regarding
the ferry service between Bar (FRY) and Bari (Italy) and the measures concerning
participation in sporting events and cultural exchanges.
With the escalation of violence in spring of 1995, that certainly accounts
for the most tragic parts of the war, the situation in Bosnia seemed to be in
a deadlock. The situation in Croatia, however, started changing. Adoption of
the Vance plan of 1991 froze the then existing situation, with almost one third
of Croatia’s territory controlled by the Serbs. In the beginning of May
1995 in an operation -Lightning- the Croatian forces regained Western Slavonia
-- Serb held territory in former UN sector West. Operation Storm followed in
the beginning of August, when the Croatian forces reintegrated a big part of
the self-proclaimed Serb state with its capital Knin. The majority of the Serbs
fled the region, resulting in a solution, albeit in a nasty way, of the Serbian
question in Croatia (Puhovski, 1995: 2) -- before the war there were 600,000
Serbs in Croatia, while now there would be 100,000 -150,000. The speed of the
Croatian victory as well as lack of intervention from Belgrade came as a surprise
to many, inviting the conclusion that Krajina has just opened the way for the
partition of Bosnia between Milosevic and Tudjman (Puhovski, 1995: 2). Not even
the intervention of Croatian government troops on behalf of Bosnian government
after the Serb assaults against the UN safe areas of Srebrenica and Zepa in
July could reverse this opinion because the areas captured by the Croatian forces
ended up under their control.
Meanwhile, NATO was preparing its own response to the assaults on the safe
areas. In September, after the Serb shelling of Sarajevo, NATO bombers deprived
the Bosnian Serb Army of its command and control links and forced it to withdraw
heavy weapons from around Sarajevo. The moment was seized by the Army of Bosnia
and Herzegovina. Aided by the Bosnian Croats and the Croatian government troops
they captured an enormous swathe of territory in western Bosnia ending up with
at least 52% of the territory. Then the US administration demanded they halt.
The time had come for Pax Americana (Lagumdzija, 1995: 3).
After intensive mediatory effects of the US envoy by Richard Holbrooke, Assistant
Secretary of State, Milosevic announced that he was taking charge of the Bosnian
Serb delegation. Peace talks in Dayton, Ohio were soon to follow. It was agreed
that B-H would continue to exist within internationally recognized borders.
It would consist of two entities, the Federation of B-H and the Republics of
Srpska on a 51% - 49% basis. Elections would be held under international control
and they would have to adopt and observe common -international standard of human
rights.- Sarajevo was to be reunified within the Muslim-Croat federation, Gorazde
(the eastern Muslim enclave) was to be linked with the federation by a secure
land corridor, and Mrkonjic Grad was to be relinquished to the Serb entity.
The final status of Brcko, a Serb held town on a narrow stretch of land connecting
Serb territories in west and east Bosnia would be determined by arbitration
within one year. There would be a NATO implementation force, to be called IFOR,
authorized to use military force to prevent interference with free movement
of and violence against civilians and refugees, with freedom of movement throughout
Bosnia and Herzegovina. The parties were obliged to cooperate fully with an
international investigation and prosecution of war crimes. The UN Security Council
would lift the arms embargo against Bosnia (Resolution 1021) and sanctions against
FRY (Resolution 1022), though the latter would be re-imposed if any Serb authorities
failed to meet their obligations under the peace agreement. Agreed to on November
21 in Dayton, the peace was signed in Paris in December.
A parallel between the economic deterioration in Yugoslavia and Milosevic’s
evolvement towards a more cooperative position suggests that the sanctions,
though helped to a great extent with the pre-existing economic difficulties
and other acute factors, succeeded in making the Serbian president Milosevic
abandon the pan-Serbian policy he had been pursuing. As far as their contribution
to ending the war in Bosnia is concerned, they seem to have been less convincing.
Between August 1994, when Milosevic imposed sanctions on Bosnian Serbs, and
August 1995, the peace process was in a deadlock. This changed after the use
of NATO air force and, more importantly, the US determination not to have the
war in Bosnia on the agenda any more. This was illustrated with diplomatic initiative,
persistent negotiation efforts and, finally, a plan for -united- Bosnia with
two separate political entities formed on ethnical basis. All of this could
have been employed even without the sanctions. True, as Baldwin notes, it is
easier to prevent the war than to stop it, so the task attached to sanctions
involved a high level of difficulty. Still, after four years of war, with 2,702,000
of 3,689,000 people in Bosnia either displaced or affected by war in some other
way (War Report, 1995: 51), the contribution of sanctions can hardly be considered
successful.
With respect to the expectations that the sanctions would create an electorate
more critical about the government, the international community made two mistakes.
The first refers to the lack of democratic tradition after 50 years of party
monolithism. Firmly in control of the media, the Yugoslav officials have managed
to blame the sanctions on the world’s hatred for the Serbs. Having helped
divert dissatisfaction to growing xenophobia, the sanctions provided a convenient
excuse for whatever was wrong in the country. The second mistake was that the
sanctions, rather than creating a more critical electorate, made people more
receptive to authoritarian and totalitarian regimes by increasing poverty .
More than one third of the population cannot satisfy their basic needs, while
another third is very close to the poverty line (Posarac, forthcoming). In view
of the unwillingness to open the process of privatization as well as the small
percentage of employees in existing privately owned firms, those people are
highly dependent on the state for jobs and salaries. Given the fact that the
necessary preconditions for the establishment and development of civil society
and democracy should be citizens economically independent from the state, these
trends will result in postponing the emergence of the civil society in Yugoslavia
(Posarac, forthcoming). The people are likely to support the status quo, since
changes will be too costly. With these facts in mind, the change of policy pursued
towards the Bosnian Serbs does not seem like a remarkable achievement at all,
since everything seems to be predicated on the belief that Milosevic will remain
cooperative. However, if he is replaced by somebody more nationally oriented
or if he decides to adopt any kind of an objectionable policy, the citizens
of Yugoslavia will have no choice but to follow, since the extent to which they
are dependent on the state leaves them little choice.
This brings us to the problem of efficiency or what policy alternative would
have fared better. To answer this question, the crisis has to be examined from
the very beginning because numerous possibilities for alternative action appeared
along the way.
The first possibility for alternative policy course came in sight as early
as 1990, when the federal government of Prime Minister Ante Markovic was trying
to transform the country to a liberal market democracy on the basis of the program
compliant with IMF’s demands. As the reform was taking place against the
background of political disintegration, the federal government increasingly
relied on external factors to legitimize its efforts. Evidence for political
support was abundant -- Bush, Baker, Delors and other leading Western politicians
strongly backed up the economic reform as a means of maintaining the unity and
the territorial integrity of the country, but no new financial agreements were
forthcoming. This seems even more puzzling given the increased assistance provided
by international financial institutions for the process of transition in Central
and Eastern European countries. Whether the reason for this was the loss of
geopolitical importance (Zimmerman 1995, p. 2), or distrust regarding the unity
of the country, still remains to be investigated, but some conflicts would have
certainly been attenuated this way. Instead, Ante Markovic resigned in December
1991, with hardly anybody noticing his resignation, so powerless had Yugoslavia’s
last prime minister become (Zimmerman, 1995: 17).
In June 1991, a couple of days before the crisis came to a head, the American
Secretary of State James Baker visited Belgrade where he expressed the American
hope that Yugoslavia would remain together behind the reformist Markovic. He
also stressed that the United States would not encourage or support unilateral
secession and would strongly oppose any use of force. Opinions about his message
range from the belief that this was an extremely skillful and reasonable presentation
(Zimmerman 1995, p. 11) to the approach that this was a very ambiguous statement
that allowed for different interpretations -- Slovenia and Croatia emphasized
the part about not using force, while the Army attached the greatest importance
on support to unity and discouragement of secession (Klarin, 1996: 3). In any
case, just a few days after Baker’s departure from Belgrade, the Yugoslav
crisis erupted and Slovenia and the Federal Army were at war, thus illustrating
that the moment that the international community could have used to demonstrate
commitment to a negotiated agreement on whatever governing structure to be found,
was not seized. The decisiveness shown in the Dayton peace talks, with the Americans
firmly committed to having Milosevic, Tudjman and Izetbegovic agree on the peace
plan before they left Dayton, is an exemplification of what was lacking, by
way of international commitment to a negotiated agreement, in 1991.
As the crisis continued to deepen, the European Community was given a chance
to deal with what it called a -European problem. This reflected the belief that
-the hour of Europe- (Jacques Poos, 1991, quoted in Dinan 1994: 490) has come
and suited in the context of emerging common foreign and security policy (intergovernmental
conference on common foreign and security policy was in progress when the crisis
broke out in Yugoslavia). The highest point of the involvement of the European
Community in solving the Yugoslav crisis was the establishment of the Conference
on Yugoslavia at The Hague and in Brussels, with the so-called Badinter Arbitration
commission. The most glaring Community weakness, that affected the application
and effectiveness of other policy instruments, involved diplomatic recognition
of secessionist republics (Dinan, 1994: 486). Of the three Yugoslav republics
the European Community had recognized, the Badinter Commission Report supported
only the claim of Slovenia. The claim of Macedonia also supported by the Badinter
Commission, but was blocked by Greece. The determination to achieve closer cooperation
on foreign and security policy accounted for the Community’s inconsistency.
Due to an increasing domestic pressure, Germany began to press for the Community’
recognition of Croatia and Slovenia. Fearing a damaging split immediately after
the Maastricht summit (Dinan, 1994: 486), the other member states agreed and
the Slovenia and Croatia were recognized on January 15, 1992.
In between the recognition of Slovenia and Croatia and the recognition of Bosnia
and Herzegovina that was soon to follow, there was a brief moment when all three
sides agreed on the future of Bosnia. On March 18 a document was signed in Lisbon,
outlining the political principles of a republic composed of three constituent
nations, each with the right to self-determination and of the regional cantonization
along ethnonational lines (laid out on a compromise map proposed by the EC).
In view of Baker’s intensive efforts for the recognition of Bosnia (Woodward,
1995: 196), Izetbegovic reversed his position a week after signing the Lisbon
document. On April 6, Bosnia was recognized, triggering the bloodiest part of
the Yugoslav wars. The Lisbon plan is referred to by many (Pajic, 1995: 18,
Woodward, 1995: 304) as an encouragement for the ethnic partition of Bosnia.
However, in an explosive situation, with the population of Bosnia already nationally
split about political issues, with neighboring Serbia and Croatia eagerly waiting
to step in and each take a slice of Bosnia, the plan addressed the most immediate
concern -- to prevent the war that would further alienate national communities
in Bosnia and possibly endanger the whole region.
As the war grew more violent, the number of the dead, raped and displaced
rapidly increased. Shelling of civilians, ethnic cleansing and concentration
camps became the reality of Bosnia. However, there was no Western military resolve.
Countries contributing troops to UN peacekeeping operation--especially France
and Britain, that had initiated UN involvement and lobbied for more humanitarian
action--objected to greater use of military power fearing that their soldiers
on the ground might be at risk as opposed to the United States, whose fundamental
policy was against sending soldiers. The hostage crisis of June 1995, when the
UN peacekeepers were taken hostage as a response to shelling Serb military positions,
seemed to prove this point. However, the use of NATO air power in August 1995
confirmed that this was not so and that a similar action if used before would
have yielded similarly successful results.
Even this short consideration of alternative policies that could have been
applied in the former Yugoslavia results in four solutions, three of which might
have, arguably, prevented the war. Given the small share of Yugoslavia in the
world economy (less than 1% of world’s exports and imports), costs of
sanctions sustained by the international community seem negligible, inviting
the conclusion that all of the mentioned alternatives fare worse when compared
to sanctions on the basis of costs. Nevertheless, this appears to be so only
at first sight, for enforcing the sanctions was not inexpensive at all, thus
making other alternatives increasingly competitive. When benefits are compared,
however, the fact that tough negotiations and military action had to be applied
anyway to reach peace speaks about the benefits of sanctions loudly enough.
So why have not any of the alternatives been tried earlier- Part of the answer
stems from the fragmented and often contradictory approach to the Yugoslav crisis,
best illustrated by the UN-s Secretary General Boutros Boutros Ghali comment
that UN peacekeepers were sent in the during the war, while NATO soldiers are
expected to guard peace. This came as no surprise, as institutions and organizations
involved in solving the crisis were themselves undergoing a process of transition
to the post-Cold War era, with the UN constrained with various configurations
of power and State interests, EC shaping it’s political identity and NATO
transforming from an anti Russian alliance to the central security pillar of
the new security architecture. The war in Bosnia not only revealed, but also
underscored the urgency to build a new comprehensive structure of relationships
to form a new security architecture (Holbrooke 1995, p. 38). However, the fact
that the peace was initiated, negotiated and delivered by the Americans, demonstrates
that this is still far from assured.
Now it remains to be seen to what extent will the efforts to stabilize Bosnia
succeed, for the tensions between the Croats and the Muslims in Mostar as well
as majority of the Serbs fleeing Sarajevo after its incorporation into B-H Federation
demonstrate how little of the multiethnic fabric of Bosnia, the existence of
which is essential to differentiate peace from merely a cease-fire, is left
behind. The elections of September 1996, aimed at creating common institutions
that will integrate distinct ethnic enclaves, further demonstrated how alienated
three national communities feel. With politicians who have made careers out
of hating each other (Not all bad, 1996: 32) now in charge of establishing confidence
and trust between people, an option of Bosnia being partitioned by nationalist
forces will remain open for quite some time, thus inviting the conclusion that
efforts to keep the country united might increasingly look as squaring circles.
The creation of a new way of thinking and a more tolerant society is going to
be a long process that might turn out to be even more difficult for the international
community then stopping the war that was going on two years ago.
Conclusion
The belief that the new, credible, inexpensive and potentially potent weapon
against small and medium size troublemakers has been discovered (Mueller, 1994:
363), reflected by the recent proliferation of the multilateral economic sanctions,
certainly calls for critical review. Sanctions are mostly imposed on the countries
with little or no democratic tradition (Yugoslavia, Iraq, Libya, Somalia), and
that strengthens rather than weakens the existing authoritarian regimes. As
a State is less democratic, the punishment is more unfair, since there is no
possibility for the majority to influence the acts of government (Dimitrijevic,
1993: 12). Moreover, even if this possibility existed, it is unlikely that the
citizens of those states would translate the economic signals in their electoral
behavior. Misperceptions of this kind can be compared only with the US action
in Somalia, when an extremely powerful TV signal transmitter was installed to
inform the people what was really going on. Only afterwards was it realized
that a number of privately owned TV sets was very small, thus necessitating
the installment of a radio-signal transmitter. The same can be said about the
economic sanctions applied against undemocratic countries - their population
is not used to judge and change governments according to their economic performance.
Finally, the poverty that inevitably increases due to sanctions, makes the citizens
of the state in question ever more dependent on the state and hence receptive
to totalitarian regimes. This invites the conclusion that, even if the stated
policy objectives are achieved, the solution of the problem is temporary at
best. Therefore, the international community should address the cause rather
than cure the consequences - helping democratization in those countries can
be of greater use to foreign policy goals than the imposition of economic sanctions.
Endnotes
1. In response to the kidnapping of three Aspasian women,Athens imposed a
trade boycott on Megara, a Spartan ally, excluding her from access to ports
in the Athenian empire and the market of Athens.
2. In August 1985 the US Congress approved an amendment to the Foreign Relations
Act - the Kassebaum amendment - which provided that the United States should
pay no more than 20 per cent of the assessed contributions to the budgets of
the United Nations and its specialized agencies until those organizations adopted
weighted voting based on the amount of a member’s contribution on budgetary
questions. The violation by the United States of its legal obligation under
article 17 of the Charter to pay its assessed contributions has encouraged other
states to follow this lead.
3. Both the Vance-Owen and the Contact Group plan will be referred to in the
following chapter.
4. For the detailed chronology of events in the former Yugoslavia, see Facts
on Crisis in the Former Yugoslavia, special issue of Review of International
Affairs, March 1st 1993.
5. SDA, the Muslim party, won 33,8% votes, SDS, the Serbian party 29,6% and
Croatian HDZ 18,3%. Remaining 17% were distributed among two parties formed
out of the republic’s communist party and SRSJ (Woodward 1995, p. 122).
6. The mission included Jacques Pos, Gianni de Michelis and Hans van den Broek
(as the -troika- included foreign ministers from the current, immediately preceding
and immediately succeeding presidencies, its composition was changing relatively
fast, so later on -troika- was joined by Pinheiro, Hurd and Jensen).
7. The Badinter Commission found a precedent in international law relating
to border conflict between Burkina Faso and Mali, resulting from the colonial
rule, which declared the colonial border to be inviolable on a principle of
uti possidetis or -keep what you have.
8. At an extraordinary Ministerial meeting in Rome, the member States of the
European Community agreed on the following measures: immediate suspension of
the application of the Trade and Cooperation Agreement with Yugoslavia, with
a decision to terminate the same Agreement; restoration of the quantitative
limits for textiles; removal of Yugoslavia from the list of beneficiaries of
the General System of Preferences; formal suspension of benefits under the PHARE
program. On 2 December 1991, the European Community adopted a decision on the
so-called positive measures in favor of some Yugoslav republics after the termination
of the Trade and Cooperation Agreement with Yugoslavia. Bosnia-Herzegovina,
Macedonia, Slovenia and Croatia were to have the preferential trade provisions
contained in the previous Agreement restored, as well as other benefits and
credits it envisaged.
9. As for Croatia, the Serbs made up 12% of the population, while Bosnia had
a strong multiethnic character and the highest percentage of ethnically mixed
marriages of any republic (Zimmerman, 1995: 10).
10. The amount that is received by the government is the increase in the stock
of high-powered money, that consists of the currency and banks? deposits and
the Central bank.
11. Dafiment, Jugoskandik and many other smaller banks.
12. This effect was named after two economists who independently documented
it - Vito Tanzi and Julio Oliviera - and refers to the phenomenon of the declining
real revenue raised from taxation in the hyperinflatory economies, due to lags
in both the calculation and payment of taxes.
13. The Contact Group, that consisted of the representatives of the United
States, Russia, Germany, Great Britain and France, offered the plan that divided
Bosnia and Herzegovina in two parts - the federation of Moslems and Croats that
should account for 51% of the territory, while the remaining 49% should be controlled
by the Bosnian Serbs.
14. For more data, see the Dayton Agreement or Summary of the Dayton Agreement
as in War Report. Bulletin of the Institute for War & Peace Reporting, Number
38, November/December 1995.
15. Poverty especially increased among the urban population - while the number
of the people under the poverty line in 1990 was 360,000, 205,000 of which in
rural and 155,000 in urban areas, in the first half of 1994 it increased to
2.1 million, 1.6 million of which from the urban areas (Posarac, forthcoming).