CEOL
Europe's 'smart' sanction not so smart

BELGRADE, Jun 19, 2000 -- (Reuters) The European Union's latest attempt to target its sanctions against Serbia more effectively is in danger of backfiring, diplomats here say.

The EU's proposed "white list" will come up for discussion at a two-day summit in Portugal that starts on Monday. Its publication has already been delayed for more than a month and the debate is expected to be heated.

Earlier this year, EU member states agreed to lift a flight ban imposed during the Kosovo conflict and simultaneously decided to tighten financial sanctions to try to put pressure on the elite surrounding Yugoslav President Slobodan Milosevic.

The EU's executive body, the European Commission, drew up new rules stating that Serbian firms wanting to do business with the EU must prove their "ability to withhold revenues from the targeted governments" - those of Yugoslavia and Serbia.

Those that can will be put on the "white list". Critics argue that instead of luring companies away from Milosevic, it simply exposes firms which may be trying to distance themselves or help the opposition to the danger of being closed down.

"It was presented to us as a wonderful tool we could use to oust Milosevic. In fact, Milosevic can sit back and drink another cup of coffee while we do his work for him," said one of many EU diplomats in Belgrade angered by the plan.

They say that furthermore there is evidence that, as with previous sanctions against Yugoslavia, firms close to the government are the ones that are finding ways around.

"Some applications for the white list are a bit too perfect, which, if you know the way things work here, is suspicious," another EU envoy said.

Belgrade has instructed its companies how to undermine the list in a series of instructions to the Yugoslav and Serbian Chambers of commerce carried in Serbian independent weekly NIN.

The complexity of the EU regulations means that small entrepreneurs, who are likely to be furthest from Milosevic, simply do not have the expertise or time to apply.

The G-17 Plus group of dissident economists and other professionals said in a statement that the plan amounted to a trade embargo that would only strengthen Milosevic.

"Ordinary citizens will pay the price in the end," it said.

VARYING APPROACHES TO SANCTIONS

Various Western countries have different approaches to the list, diplomats say.

While Britain and the Netherlands - which normally share the U.S. view that sanctions should be kept tight - want it to be as long as possible, on the principle of safety in numbers, the United States is urging the EU to make it short.

The number of companies could be kept down anyway by the fact that applications take so long to process - a factor that has raised concerns over how follow up checks will be made.

"The feeling here is that for us to use our diplomatic immunity to follow up on companies is not a good idea," said one of a wide cross-section of EU diplomats criticizing the plan.

He also noted that the EU had also proposed black lists for firms deemed to be supporting Milosevic in Yugoslavia's smaller republic Montenegro and in Kosovo, which has been under international control since last year's NATO air campaign.

"The whole thing has to be in one context. If we start with the white list here we have to be very swift with the black lists for Montenegro and Kosovo," he said.

Western analysts working in Montenegro, whose pro-Western government has edged away from Serbia, had heard of no plans to introduce a black list there and said it would be tough because business links were close despite a trade blockade by Serbia.

Given the difficulties of processing applications, the first white list may end up consisting only of EU-owned or part-owned firms working in Serbia and even there the scheme has problems as some firms supply key services in cooperation with the elite.

"Exceptions are being made for (EU-owned) companies involved in infrastructure," the first diplomat said.

The Danube clearance project that has just been approved by the EU, and for which Yugoslav companies will be allowed to tender, is another example where an exemption may be made.

The EU's new deadline for establishing the list is June 30.

"I wouldn't be surprised if it is delayed again," said another envoy. "That would amount to an admission of failure."



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