Serbia thumbs nose at US with company takeover

As the world focuses on Kosovo peace talks in France, the Serbian government has made at least one move to consolidate power back home.

Over the weekend the Serbian government seized a lucrative pharmaceutical factory here that is majority-owned by a US company. The takeover, which analysts say could not have happened without approval from Yugoslav President Slobodan Milosevic, underscores Serbian defiance of the United States - even as the threat of NATO airstrikes hangs over Mr. Milosevic.

Heavily armed Serbian police entered ICN Yugoslavia, a unit of the California-based ICN Pharmaceuticals Inc., and helped replace the plant's private management with state-sponsored officials. The Serbian government owes ICN some $176 million, but now the Serbian Health Fund says it's the majority holder, despite documents showing that it owns 25 percent.

"These kinds of things happen [in Serbia]," says Greg Burton, a political officer at the US embassy in Belgrade. "But this is the first time it's happened to a US firm."

The attack may also be aimed at Milan Panic, the chairman of ICN. A dual citizen of Yugoslavia and the US, he is a leading political opponent of Milosevic.

"This serves three purposes," says Miroslav Hristodulo, a leader from the Social Democratic Union in Belgrade. "It's a crackdown on opposition politicians, it's a way for the regime to get cash, and it sends a message that Serbia will not back down to America."

The takeover also bodes poorly for the peace talks in France, which are aimed at stopping the violent conflict in Kosovo between the Serbian police and the ethnic Albanian Kosovo Liberation Army (KLA). News of the ICN takeover was sent to the White House and Christopher Hill, the chief negotiator in Rambouillet. A response from Washington is expected soon.

It is speculated that Milosevic may grant the ethnic Albanians autonomy if the international community lifts economic sanctions against Yugoslavia. But, says a Western diplomat here, hostile moves like this will make it more difficult for the US and Yugoslavia to find common ground.

"I don't think [Milosevic] has a ghost of a chance of having [all] the sanctions lifted," says the diplomat.

The Serbs have stood by the seizure, which they say is based on disputed figures of how much money ICN invested in the joint-owned public and private plant, which has about 3,000 workers. ICN controls about 60 percent of the pharmaceutical industry in Serbia and has great exporting potential. It's one of the few companies with a regular cash flow and is of paramount importance to Serbia's flagging economy and health-care system.

In addition to moving on ICN, Milosevic recently pushed legislation that will make it harder for private companies to import to Yugoslavia. By controlling imports, Milosevic firms up his economic grip on the country - the key to maintaining power here.

"The most successful part of the Yugoslav economy before 1991 was international trade," says a Belgrade economist who has worked as a contractor for ICN. "Closing the economy is terrible for Serbia. Everything is being destroyed by the acts of this government."

Diplomats say Milosevic may have used distractions from the Kosovo peace talks to facilitate the ICN takeover - much as he did during an October agreement with US diplomat Richard Holbrooke. At the time, the government shut down several independent media outlets and attacked opposition politicians.

Recently, the Serbian regime has cracked down on reform-minded students at the University of Belgrade and independent writers, including one who was prosecuted for writing a satire about the Serbian government.

But it may be Mr. Panic, the flashy owner of ICN and a former Yugoslav prime minister, who causes the most concern for Milosevic.

Panic is trying to form a political base to challenge the ruling coalition of Milosevic and his wife, Mirjana Markovic, who heads a small but influential group of "neo-communist" political parties.

Panic's "Alliance for Change" already has solid footing in Belgrade and is seeking the support of Montenegrin President Milo Djukanovic, also a political foe of Milosevic. And unlike other opposition leaders, Panic has money.

"This is not a coincidence," Panic said this weekend. "It is very typical of the negotiating technique of the Serbian government ... to show they are capable of standing up to the international community."