Divvying Up Yugoslav Assets, Debts Not Easy For Successor States

The guns have fallen silent in the former Yugoslavia. The election in Bosnia is over. But a long, tedious tug of war over the allocation of former Yugoslavia's debts and assets continues among the successor states.

Yugoslavia is now divided into five countries (and two Bosnian "entities"). The former country's gold reserves and foreign currency assets remain frozen in banks around the world. At issue are an estimated $4 billion to $6 billion in foreign exchange deposits held by the central bank in Belgrade when Yugoslavia collapsed in 1991.

Macedonia and, most of all, Bosnia-Herzegovina desperately need their shares of the Yugoslav pie to rebuild and stabilize their economies. But Serbia (which includes Montenegro) continues to torpedo negotiations, while more prosperous Slovenia and Croatia are content to wait for Belgrade's eventual capitulation.

"It's not such a crucial issue for Slovenia, because we actually have a surplus of foreign exchange reserves," says economist Joze Mencinger, who was Slovenia's finance minister in 1991. "But for Bosnia and Macedonia, it's a different story. They desperately need their assets to be released."

Bosnia most needy

Bosnia is in particular need of foreign exchange reserves, as it has none of its own. Dependent on international aid to feed and shelter a large portion of its population, the Sarajevo-based government has taken to printing tens of millions of dollars' worth of unbacked Bosnian dinars to meet vital reconstruction needs. Acquiring a share of the blocked federal assets would reduce the need to continue such inflationary practices.

Negotiations over federal debts and assets - while clearly related - have been conducted separately at the insistence of the International Monetary Fund and commercial lenders.

With the exception of Serbia, all the successor states have agreed to the IMF's quotas for allocation of Yugoslavia's $5.7 billion in foreign debt. Slovenia and Croatia have gone further, negotiating individual debt settlement deals with both the London and Paris Clubs - bodies that deal with debts to foreign governments and to private banks. In all these cases, Slovenia has accepted approximately 16 percent of the debt, Croatia 29 percent, based on IMF calculations of relative gross domestic product and other factors.

With the debt issue settled, Slovenia and Croatia now conduct business normally with the world banking community. Both countries have regular foreign-exchange surpluses, so they've been willing to sit back and wait for Belgrade to come to its senses on the question of assets. "When Serbia really decides to normalize relations with the world and abandon any expansionist or belligerent ideas, they will quickly agree to divide the assets," says Zdravko Rogic, deputy governor of the National Bank of Croatia. "They need a settlement more than we do."

Regular meetings have continued quietly behind the scenes - the most recent in Brussels on Sept. 8. Progress has been blocked by Serbia's claim that it is the sole legal successor to the Yugoslav Federation. It says the other republics are rebellious regions with no claim on formerly shared assets.

Opinion against Serbia

World opinion has sided with the other republics, which argue that Serbian President Slobodan Milosevic's brutish centralization drive forced the collapse of the federation.

Belgrade has even insisted that if assets are divided, they must include reparations to its coffers for federally financed infrastructure in the new states before they declared independence.

"There are more than 9,000 facilities in question, and we know exactly where they are," Yugoslav negotiator Oskar Kovac told a television audience. "Those who hold these facilities owe the state since they were jointly financed."

The new states - with their gaping differences in income and economic stability - have had difficulty presenting a united front. After their most recent coordinating meeting in Ljubljana, Slovene representative Miran Majak said there were differences of opinion on the allocation of Yugoslavia's assets abroad: "For example, we cannot agree that the new Yugoslavia simply retains embassies that used to belong to the former Yugoslavia," he said.

The northern republics are keeping an eye on Serbia's financial dealings. Slovenia recently asked Cypriot authorities to block a $140 million Yugoslav account believed to have been created to hide contested federal assets.

International bankers may be tiring of the negotiations. Last month Macedonian National Bank Governor Borko Stanoevski announced that the Swiss-based Bank of International Settlements intends to divide the about $600 million in former-Yugoslav reserves it holds "regardless of the fact that [Belgrade] does not agree to the division." Mr. Stanoevski said the move was "imminent," but to date no action has been taken.