Serbs in Conquered Zones of Croatia Live Among the Ruins : Yugoslavia: The war has halted factories and schools, and there is little work. A frontier lawlessness is pervasive.

The victors dine by candlelight, not for the sake of romance but because they have no electricity.

There is also little work for the tens of thousands of Serbs who now exclusively inhabit the conquered territory of eastern Croatia. With no gasoline for cars or buses and no power to run the factories, those who should be savoring their triumph in Yugoslavia’s ethnic battles instead survive on cold food bought with handouts from the Serbian government in Belgrade.

Schools are open only about one day in three, making a return to normal life impossible for families with children. Most of the region’s teachers were among the Croats and Hungarians driven away, and the steady thunder of guns in the distance makes venturing outdoors too hazardous. Classes have been canceled all but 20 days since the first of September.

Serbian guerrillas are the only authority in occupied Croatia, despite puppet governments and thousands of federal troops. Machine-gun-wielding irregulars control the streets, shops and black markets, doling out favors and boasting of actions in which they “liquidated” returning Croats.

Drunk with success as well as with whiskey, the protectors of the peace in the newly proclaimed Serbian Autonomous Region of Slavonia, Baranja and West Srem fire their weapons into the air to draw friends’ attention or for the sport of scaring passers-by.

“There is no law here. There is complete anarchy,” confided a fearful Serbian woman whose own family includes guerrilla fighters. “It’s worse now than it ever was under communism.”

A frontier lawlessness pervades eastern Croatia, where looters have discovered it is open season on the homes and businesses abandoned by Croats. Some Serbs regret the nationalist mania that has driven away their neighbors and destroyed their way of life. But in the prevailing atmosphere of excess and bombast, they feel it prudent to keep doubts to themselves.

Most disturbing for many left to scrabble a living out of the chaos is the corrupting influence of the conquest on fellow Serbs whom they would never have expected to become bandits.

“It’s local people who are doing the looting, not just the fighters,” said a disbelieving elderly woman in the town of Beli Manastir. “Serbs who have lived here all their lives are going into their neighbors’ houses. Some feel that if the Croats next door had something better than they did, that now they have the right to just take it.”

Makeshift bazaars have sprung up throughout the occupied territory, selling videocassette recorders and stereo sets and lingerie plundered from the homes of the vanquished.

While bargains abound, few have much money to spend.

With the collapse of industry and social order, a system of wartime provision and rationing has been imposed. Families buy groceries with coupons supplied by Belgrade, and men earn another 5,000 dinars (about $120) a month by joining the local Serbian guard.

Baranja’s regional council chairman, Georgy Latas, proudly maintains that Serbs could get by forever in his agricultural stronghold, even if Serbia is thoroughly ostracized by the West for pressing on with the fight.

“I don’t know if we will be able to supply people with money for long, but this is a farming region, so people have grain and meat. There will be no shortage of food,” said Latas, seated with gloves and coat in his unheated office. “We may run out of fuel, but people can use fat from the pork farms to heat their homes.”

Pleasant two-story brick and stucco homes line the main streets of the region, most equipped with modern electric or natural gas heating. But a regionwide blackout that is a consequence of the continued fighting has forced homeowners to burn coal in their fireplaces, coating walls and furnishings with sooty residue and filling the air with acrid smoke.

Baranja, a fertile plain stretching between the Danube and Drava rivers along the border with Hungary, has been in Serbian hands since September, but much of the coveted area to the south and west remains locked in deadly combat.

Federal army cannon fire on the city of Osijek, a key objective that lies midway between Erdut and Beli Manastir, shakes the ground throughout the conquered area and resonates on the smoky horizon.

Some towns and villages in the newly proclaimed province, such as Erdut, suffered little damage when they were taken by Serbian fighters earlier this fall. Only the Roman Catholic church sustained serious bombardment, its yellow brick steeple torn off by a powerful blast.

But the federal army’s drive westward through Croatia knocked out a major power station in the village of Ernestinovo in late November, blacking out most of the captured territory as well as its target, the Croatian stronghold of Osijek.

In the cold and dark of Maxim’s tavern, the sole open watering hole in Beli Manastir, soldiers and rebels crowd around forests of green bottles to talk of their Croatian enemies until the 8 p.m. curfew, after which they tumble out to face them. Those on night patrol fortify themselves with harsh local brandies and profess their readiness to press on toward Zagreb to free fellow Serbs.

Fighters such as Nebojsa, a paralegal worker before the war gave him a new profession, contends that his native Baranja region had to be cleansed of those who supported Croatian independence, which he equates with a vote for Serbian genocide.

“This war could last forever,” the guerrilla said unemotionally, warning that foreign intervention into Serbian-controlled regions like Baranja would do more to escalate violence than to end it.

That view is underscored by Arkan, a renowned guerrilla leader and reputed Belgrade underworld figure whose elite Serbian Tigers claim to fight fascism and take no prisoners.

“Let the peacekeepers go to Zagreb. They aren’t needed here,” said the camouflage-clad rebel leader, whose followers carry shoulder-mounted rocket launchers and AK-47 machine guns. “We are ready to go to Zagreb, if that is what it takes to defeat fascism.”

Arkan, whose real name is Zeljko Raznjatovic, accuses the Croats of plotting to kill the 600,000 Serbs in the republic.

“The Ustashe will not stop short of their goal of genocide of the Serbian people,” insisted the rebel from Belgrade, using the name of the Croatian fascists of World War II. “It’s either us or them, and we will not be victims of genocide again.”

Many Serbs in rural communities such as Erdut see Croatian independence as a prelude to annihilation of Serbs because of the widespread ethnic atrocities carried out by the last independent state of Croatia. Under the Nazi puppet regime installed in 1941, hundreds of thousands of Serbs, Jews and Gypsies were slaughtered by Croatian fascists.

In Erdut, where Arkan’s guerrillas have converted an abandoned vineyard into their training base, Serbs who have weathered the region’s fighting or returned after fleeing look to the irregular militia to restore order to their fractured lives.

“Yes, I know, you want to know when your phone will be hooked up,” Arkan said to an angry homemaker, smiling like a politician pressed on his campaign promises.

Political leaders installed by Belgrade to impose a facade of civilian rule contend that the area is more stable now and that those areas destroyed in the armed “liberation” can be rebuilt.

Goran Hadjic, who serves as prime minister of the disputed Serbian province inside Croatia, has vowed to restore the shattered city of Vukovar and make it the capital of his Serbian-occupied region.

For the time being, thinly veiled martial law is imposed by irregulars in those cities captured with little fighting and relatively unscarred. Although the occupied eastern territory is no wider than 50 miles, the surviving settlements have lost telephone links with each other and can be reached only after a perilous drive.

Despite the hardships and the prospect of a brutal winter for those who have been told they won their battle in an ever-worsening war, some in the Serbian-held territory say they feel more secure now than before the fighting.

Said Rade Sladakovic, a veterinarian and newly appointed animal husbandry minister of Baranja: “It’s best to be alive, even if we have no electricity.”