- Terrorists Help Terrorists -

ICG Balkans Program Director Nicholas Whyte said: "The disclosures open a window on the real power structures inside Yugoslav politics. They show that civilian control over the military is still absent, that connections between criminal, military and political elements are extensive and that senior political figures including Federal President Kostunica and Serbian Premier Zoran Djindjic either knew about the sales and did nothing to halt them - or should have known and acted".

The discovery of a letter by NATO (SFOR) troops following a raid in Bosnia's Republika Srpska in October provides recent evidence that a government-controlled firm, Jugoimport-SDPR, offered to help Iraq hide equipment from UN weapons inspectors. The letter, dated 25 September 2002, indicated that Iraq's weapons purchases from the FRY were being routed through Syria. ICG has also received U.S. State Department information that cruise missile-related technology has been sold directly to Iraq and that Yugoslavia has sold 200 tons of weapons stocks to Liberia, another country subject to a UN arms embargo.

ICG's research found no indication that weapons grade nuclear material has been involved in the Yugoslav-Iraq arms trade although the possibility of nuclear technology transfer to third countries requires further exploration. The FRY's stockpile of nuclear fuel rods was moved to a Russian storage site in July 2002 in an operation funded by the U.S. government.

ICG's Serbia Project Director James Lyon said: "The weapons trade with Iraq seems to have followed patterns of cooperation that were well-established prior to the break-up of the former Yugoslavia. The government of the Federal Republic of Yugoslavia only ordered the closure of Jugoimport-SDPR office in Baghdad on 23 October 2002 - largely in response to demands from the U.S. and EU. Strong outside pressure will be needed to ensure Belgrade gets to the bottom of this scandal, implements reforms and complies with its international obligations".

OFFICIAL REPORT

The democratic government elected in Belgrade in 2000 did not end the extensive busting of arms sanctions engaged in for many years by its predecessor, the Milosevic dictatorship. The NATO (SFOR) troops who raided an aircraft factory in Bosnia�s Republika Srpska on 12 October 2002 found documents that have begun to strip the veils of secrecy from this significant scandal. From ICG�s own investigations, as well as from those initial revelations and stories that have appeared subsequently in the Serbian press, it appears that arms deals of considerable monetary value continued with Iraq and Liberia despite the change of administrations.

In the case of Iraq, the international community still needs to ascertain or clarify many important details, but it is already apparent that the Federal Republic of Yugoslavia (FRY) has engaged in transactions respecting missile, aviation and chemical technology and equipment that contravene United Nations sanctions. These transactions may have assisted Saddam Hussein�s efforts to develop a primitive cruise missile and to maintain or develop chemical weapons capabilities, as well as to repair or preserve his conventional military capabilities with respect to air defence, artillery, and security of bunkers. Weapons grade nuclear material does not appear to have been involved though the possibility of nuclear technology transfer to third countries requires further exploration. Extensive, though less technically sophisticated, Yugoslav arms have also been sold to Liberia which is likewise under a UN arms embargo.

This activity raises serious questions about how much has changed in Belgrade since Milosevic�s day, or even since there was a single, unified Yugoslavia � specifically with regard to respect for international obligations (commitments under arms control conventions as well as UN sanctions), the power of Communist-era networks linking military, industrial and criminal elites, and the willingness or ability of civilian political leaders to control the security sector.

Significant elements of the arms activity, as the NATO raid indicates, were spread across borders to include not only the Serb entity in Bosnia but also the Federation. Likewise, there was Montenegrin involvement. Top authorities, including President Kostunica, Federal Premier Pesic, Serbian Premier Djindjic, Defence Minister Radojevic, the Chief of the General Staff, and the Federal and Serbian Interior Ministers either knew about the sales and did nothing to halt them � or should have known and acted.

The disclosures open a window on the real power structures inside Yugoslav politics. That the special relationship with Iraq (and with Liberia) continued indicates that civilian control over the military is still absent, that connections between criminal, military and political elements are extensive, and that the two strongmen of the post-Milosevic era, Kostunica and Djindjic, have thus far been impotent or unprepared to assert civilian control over the military or remove Milosevic cronies from top positions.

Belgrade�s political leadership and the international community must get to the bottom of the arms scandal itself and attack the fundamental problems it illustrates. The ultimate responsibility for these twin tasks falls on the FRY authorities. The political paralysis produced by the long-running Kostunica-Djindjic power struggle as well as the apparent convergence of interests between many politicians and arms merchants, however, make it likely that serious remedial measures will only be taken if the international community insists � firmly and consistently.

The stakes are high. Failure to achieve reform would leave the FRY still a potential threat to regional stability. Moving this important Balkan country toward Euro-Atlantic integration will require the international community to use all the diplomatic and economic tools at its disposal to weaken the extensive remnants of the old guard and strengthen reformers in Belgrade. The time for special treatment for Yugoslavia because it has rid itself of Milosevic has passed.

RECOMMENDATIONS

To the governments of Yugoslavia and Serbia:

1. Make full disclosure of all weapons sales and technology transfers to countries under UN arms embargos, especially Iraq, and assist the international community to get to the bottom of the arms transaction scandal by answering such specific questions as:

(a) whether chemical munitions were sold to Iraq;

(b) what happened to the stocks of chemical munitions removed from Hadzici (Bosnia) in 1992;

(c) whether precursors or manufacturing equipment or technology for chemical weapons were sold to Iraq; and

(d) whether any nuclear materials or technology were sold to third countries prior to the U.S. removal of remaining nuclear materials in July 2002.

2. Reform the security sector completely and rapidly by:

(a) placing the military under control of the Ministry of Defence;

(b) making the Ministry of Defence, the military and military industrial relations fully accountable to parliament and under its transparent control;

(c) requiring transparent parliamentary approval for all foreign weapons sales; and

(d) placing the state-owned arms firm Jugoimport-SDPR under transparent parliamentary control and replacing its entire board of directors.

To the international community:

3. Apply consistent and continuing pressure on Serbian, Montenegrin, and Yugoslav authorities to undertake the requisite reforms, using conditionality in the following areas as a positive tool to help willing politicians:

(a) membership of the Council of Europe;

(b) membership of NATO�s Partnership for Peace;

(c) negotiations on a Stability and Association Agreement with the EU;

(d) Permanent Normal Trade Relations (PNTR) with the United States; and

(e) other financial and economic assistance.

4. Consider, if Belgrade shuns reforms and does not comply with its international obligations, suspending bilateral and multilateral aid, including through the international financial institutions (World Bank, IMF, EBRD).