In Review : 1991: THE YEAR GONE BY : The Soviet Union went out of business; Saddam Hussein started a war he couldn’t finish; Israel and four of its historic enemies sat down for peace talks. But the dogs of war surfaced in Yugoslavia, and the letters BCCI spelled scandal in much of the world.

SOVIET UNION

Sudden Death: The year’s most momentous story was the rapid collapse of the Soviet Union, which seemed to implode and disappear into the black hole of history in less than five months. By the end of 1991, the 74-year-old Soviet superpower had ceased to exist. Rising from the ruins was the Commonwealth of Independent States, which linked 11 of the 15 former Soviet republics as sovereign states and was led by Russian Federation President Boris N. Yeltsin. Meanwhile, former Soviet President Mikhail S. Gorbachev was a man without a job.

Prelude to Crisis: The beginning of 1991 saw Gorbachev alternately loosening and tightening his grip on the rebellious republics as he tried to quell ethnic and labor disputes and just hold the nation together. In January, he reached agreement on revenue-sharing with the republics, but the Kremlin soon cracked down on the restive Baltics. Soviet troops seized Latvia’s main printing plant, then Lithuania’s radio and television center, killing at least 13, and finally Latvia’s Interior Ministry, killing at least four. The assaults sent shock waves through newly liberated Eastern Europe and infuriated Washington. Gorbachev, originator of glasnost (openness), cracked down further, proposing a government takeover of the news media, expanding the powers of the KGB to fight “economic sabotage” and ordering troops into the streets to preserve order. In response, Russian leader Yeltsin accused the Soviet president of trying to “set up a dictatorship.” At the Kremlin, Valentin S. Pavlov replaced Nikolai I. Ryzhkov as prime minister, and Alexander A. Bessmertnykh replaced Eduard A. Shevardnadze as foreign minister. An attempt by Gorbachev at monetary reform caused panic, and word came that the Soviet economy in 1990 registered its worst performance since 1945. All that, and it was still January.

Spring of Discontent: After his crackdown, Gorbachev turned conciliatory, appointing negotiators to meet with the Baltics to discuss their independence demands. But by April, voters in Lithuania, Estonia, Latvia and Georgia had overwhelmingly opted for independence. The country’ first national referendum, in March, was less than a smashing victory for Gorbachev: Three-fourths of the voters endorsed preserving the Soviet Union as a federal state, but six republics refused to participate in the vote. Workers, staggering under 60% proposed price boosts on food and triple-digit inflation, went on strike at coal mines and in Minsk factories. Gorbachev reacted by issuing an ambitious plan to privatize state enterprises, free up prices and lure foreign investment. But he also wanted to ban strikes and political protests, crush ethnic feuds and restore the national “chain of command.” Prime Minister Pavlov followed up with a disturbing call for “old-style coercion.” In Armenia, Soviet troops seized several villages in what they called a campaign to disarm illegal militias; republic leaders called it terrorism. On the political front, rightist attempts to dump Gorbachev and Yeltsin backfired. Both men won resounding votes of confidence--Gorbachev from the Communist Party and Yeltsin from the Russian Parliament. Gorbachev even got Yeltsin to back his economic reforms and his efforts to forge a new union treaty.

A Summer Break: With a new political lease on life, Gorbachev forged ahead with perestroika (restructuring). The Supreme Soviet toppled a socialist pillar--state ownership of the means of production--by voting to sell off state enterprises to private investors. The Central Committee gave a preliminary endorsement to Gorbachev’s new Communist Party platform of social democracy and the free market. And nine republics agreed to the union treaty. The president also scored diplomatic successes, winning a Western pledge to provide cooperation and technical assistance for his economic reforms. At the Kremlin, he and President Bush signed the historic START treaty July 31 after nine years of negotiations. It was the first time the superpowers had agreed to a verified reduction of strategic nuclear arsenals--in this case, by about one-third on each side. Meanwhile, Yeltsin raised political capital by trouncing Communist Party traditionalists in the Russian Federation’s first democratic presidential election. “There’s no doubt that the conservative dragon has been slain,” he announced.

The Failed Putsch: On Aug. 19, the dragon came back to life, shaking the country to its core and transfixing the world. Right-wingers moved to seize the Kremlin while Gorbachev was vacationing in the Crimea. Holding the president incommunicado, they claimed that he was ill, installed Vice President Gennady I. Yanayev as president and formed an eight-member State Emergency Committee to rule the nation. The committee included Defense Minister Dmitri T. Yazov and Prime Minister Pavlov. The usurpers suspended the activities of political and national movements and took control of the media. Thousands of Muscovites converged on the headquarters of the Russian Federation government to protest, setting up barricades and arming themselves with stones and Molotov cocktails during a tense standoff against threatening Soviet army tanks. Russian leader Yeltsin became a rallying symbol for the protesters and cemented his place as the Soviet Union’s most popular politician--eclipsing Gorbachev, whose office he was ostensibly defending. The United States and other Western nations swiftly denounced the putsch and suspended Soviet aid. By Aug. 22 the coup was over, the victim of popular opposition, internal discord and, some said, lack of will to be ruthless. An angry Gorbachev returned to Moscow and cleaned house, ousting disloyal Cabinet members and retaliating against the party that had betrayed him. He resigned as Communist Party general secretary, nationalized party property and disbanded its cells in state organizations. But even as he reclaimed his office, his power was slipping away. He was forced to create, in effect, a coalition government with Yeltsin, his newly powerful former nemesis. The union treaty, his hope for keeping the vast nation intact, was unraveling as republic after republic declared independence.

The Denouement: After the failed coup, events proceeded at a dizzying pace. In September, the Soviet Congress of People’s Deputies in effect abolished itself, shifted power to the republics and created three new bodies to run the nation until a union treaty could take effect. The Kremlin granted independence to Latvia, Lithuania and Estonia. Yeltsin, whose republic had the bulk of Soviet nuclear weapons, demanded “a finger on the button,” defying Gorbachev and leaving the world to wonder: Who was in charge? In October, the new Soviet State Council, headed by Gorbachev, disbanded and reorganized the security and espionage functions of the once-fearsome KGB, which had been implicated in the failed coup. Ukraine declared at least partial control of its nuclear weapons, alarming the United States, which threatened to withhold recognition of the new state. While the central government remained largely paralyzed, Yeltsin forged ahead with reforms and amassed more power. Russian legislators approved his plan to free prices and privatize state enterprises. Then, Yeltsin usurped the Soviet Finance Ministry, assigning its duties to a Russian counterpart and suspending shipment of oil and petroleum products to the other republics--treating them as foreign nations. In December, shortly after Ukrainians voted overwhelmingly for independence, Yeltsin sealed his place as Gorbachev’s successor at a hunting lodge in Belarus (formerly Byelorussia). Together with the leaders of Ukraine and Belarus, he declared the Soviet Union dead and established a new Commonwealth of Independent States with Minsk as its capital. Soon thereafter, the Central Asian republics joined the new commonwealth, and Washington finally agreed to deal directly with the republics, bypassing the Kremlin. A broken Gorbachev, his dream of a new union shattered after six years, delivered a valedictory to reporters: “I did all that I could. My life’s work has been accomplished. Maybe other people who come will do better. “ By year’s end, 11 of the 15 former Soviet republics belonged to the commonwealth--all but the three Baltic states and Georgia. Leningrad, scorning the founder of the Soviet state, had changed its name back to St. Petersburg. The empire was dead, and about 290 million former Soviet citizens faced a new year of economic and political uncertainty.

PERSIAN GULF WAR Brief but Costly: It lasted just six weeks. But that short time saw more than a million troops sent into battle, 30 nations mobilized, the largest naval operation since World War II, the biggest carpet-bombing campaign since the Vietnam War, one of the largest armored battles since World War II and, finally, the defeat of Iraqi dictator Saddam Hussein and withdrawal of his troops from Kuwait. It was called many things: the first TV war, the first “smart-bomb” war, a high-tech triumph, the opening shots of the “new world order.” But if the Persian Gulf War was brief, its effects were not. As 1992 arrived, Hussein remained in power, the Iraqi people continued to live under U.N. sanctions, the world worried about Iraq’s nuclear threat, Kurdish unrest continued and old Arab alliances were fractured.

No More Talking: Last year opened with Hussein under a Security Council ultimatum: Pull out of Kuwait, which he invaded in August, 1990, by Jan. 15 or face military force. As the deadline neared, Washington, Baghdad, Moscow and U.N. Secretary General Javier Perez de Cuellar negotiated fruitlessly. On Jan. 12, the U.S. Congress authorized war.

Raining Terror: In the pre-dawn hours of Jan. 17, a U.S.-led coalition of 29 nations launched a massive air attack on Iraq. In retaliation, Baghdad fired Scud missiles at Israel, hoping to win Arab allies by drawing the Jewish state into the conflict. That move failed but, by war’s end, 39 had hit home, killing at least two Israelis and wounding 200. Scuds also hit Saudi Arabia; debris from one struck barracks near Dhahran, killing 28 Americans. The allied air campaign, featuring the militarily successful debut of the F-117 Stealth bomber and other new technology, was relentless. In the first week alone, allies launched 15,000 sorties over Iraq and occupied Kuwait, honing in on military and industrial sites with “smart” bombs. By Feb. 23, the U.S. command said that 39% of Iraqi tanks, 32% of its armored vehicles and 48% of its artillery had been knocked out. The U.S. lost 52 planes downed or missing.

The 100-Hour Ground War: After five tense weeks of bombing to “soften up” the enemy, the allies started a lightning ground assault at 4 a.m. on Feb. 24 after Hussein ignored another deadline to withdraw from Kuwait. The devastating campaign, masterminded by Army Gen. H. Norman Schwarzkopf, chief of U.S. forces in the Gulf, was based on deception. First, bombing knocked out Iraqi radar. Then, the allies conspicuously deployed forces along the Kuwaiti border, spurring the Iraqis to concentrate their troops in the east. Finally, with the Iraqi command “blinded,” the allies transported massive numbers of troops and tons of materiel--apparently undetected by the enemy--far to the west. There, they launched their main attack, encircling and destroying the surprised Iraqi troops. Four days later, Marines entered Kuwait city, and President Bush declared the emirate liberated and halted combat. At its height, the conflict had mobilized about 545,000 Iraqi troops and more than 800,000 allied troops, including about 540,000 Americans. As of March, allied combat deaths stood at 182, including 121 Americans. Iraq’s fatalities were never fully tallied. Early allied estimates reportedly put them at up to 150,000.

Turbulent Aftermath: The war was over, but the bloodshed continued in Iraq. In March and April, Shiite Muslims in the south and Kurds in the north unsuccessfully revolted against Hussein’s rule. Hundreds of thousands of Kurds fled Hussein’s vengeful troops, flooding Turkey and Iran with refugees. Over the next four months, Hussein consolidated his control with crackdowns in the military officer corps, a revolving-door Cabinet that drew power ever closer to his immediate family and continued oppression of Iraqi Shiites. On April 3, the U.N. Security Council officially ended the Gulf War with a tough cease-fire resolution. It required Iraq to destroy all its weapons of mass destruction and pay for damage in occupied Kuwait and it extended an arms and trade ban. But Baghdad lied to and evaded U.N. inspectors, who found disturbing evidence of Iraqi nuclear and chemical weapons programs. As the year ended, the Iraqis were still barred from selling oil and making money. Allied warships were still patrolling the Gulf and the Arabian and Red seas, stopping vessels suspected of carrying prohibited cargoes to Iraq and leaving civilians to bear the brunt of economic sanctions. Kuwait remained plagued as well by the aftermath of Hussein’s “environmental terrorism”--a huge oil slick his forces unleashed in the Gulf and the flaming destruction of Kuwaiti oil wells. The United States emerged from the war as the great power in the Mideast, eclipsing the disintegrating Soviet Union. Pan-Arabism receded amid bitter divisions among nations that supported and opposed Iraq in the war.

MIDEAST Talking at Last: It took eight months of dogged shuttle diplomacy by Secretary of State James A. Baker III. But he finally put together the jigsaw puzzle that had baffled his predecessors and saw Israel, Lebanon, Syria, Jordan and the Palestinians sit at the same negotiating table for the first time. The historic Mideast peace conference, opening in Madrid in October, spawned more sessions in December in Washington. There were no agreements except to meet again in the new year. But the talks offered hope that the Gordian knot of Israeli-Arab hostilities might be cut after four decades.

Free at Last: A seven-year nightmare ended Dec. 4 when Muslim radicals released journalist Terry A. Anderson, the last American hostage held in Lebanon. Since 1984, Islamic Jihad and other underground groups had kidnaped 17 Americans. Fourteen were freed or escaped; three were slain.

The final flurry of hostage releases was brokered largely by Damascus and the United Nations. Besides Anderson, Edward A. Tracy, Jesse Turner, Thomas M. Sutherland, Joseph J. Cicippio and Alann Steen were freed, beginning in August. At year’s end, two West Germans were the only Western captives left in Lebanon.

The last week of 1991 brought a grim aftermath: The bodies of CIA station chief William Buckley and Marine Lt. Col. William R. Higgins, Americans killed by their kidnapers, were dumped in Beirut.

Israel’s Scuds and Settlers: For Israelis, the year began with threats to retaliate harshly if Iraq attacked during the Gulf War. But when the Iraqi Scuds hit Israeli cities, Yitzhak Shamir’s government, at the behest of the Bush Administration, did not strike back. The United States rushed Patriot antimissile batteries to Israel and staffed them with U.S crews--the first such American military presence in Israel’s history. Stepped up Israeli construction in the occupied territories enraged the Bush Administration, which threatened to curtail new foreign aid if the program persisted. Meanwhile, diplomatic relations between Jerusalem and Moscow, interrupted during the 1967 Mideast War, were formally re-established. But with the Gulf War and Israel’s inability to provide jobs and housing, only about 140,000 Soviet emigres arrived by year’s end--down more than a third from earlier predictions. Throughout the year, Palestinian extremists continued their intifada , ambushing civilian cars and military traffic in the West Bank, further altering the face of the Arab uprising--once a battle of stones, now increasingly one of guns in the shadows.

Arafat Under Siege: In a disastrous error for Yasser Arafat and his Palestine Liberation Organization, the PLO chairman supported Iraqi President Saddam Hussein in the Gulf War, alienating the wealthy Gulf nations that had helped finance the PLO. After the war, Kuwait, which had employed tens of thousands of Palestinians, accused them of sabotage and expelled them in droves amid international criticism that vengeful Kuwaitis were engaging in a campaign of anti-Palestinian human rights violations.

Progress in Lebanon: The newly reconstituted Lebanese army successfully disarmed the militias that once ruled Lebanon almost block by block and declared the end of the country’s 15-year-long civil war. Among the militias was PLO Chairman Arafat’s Fatah faction in the south, which gave up its heavy weapons after brief resistance in July. The only group still holding out was the radical Muslim Hezbollah, which insisted it is not a militia but a liberation force aimed at Israel. A devastating car bomb that killed 30 in a Beirut slum district on Dec. 30 served as a reminder that, formal peace declarations aside, violence remains near at hand.

Etc.: December was notable for balloting that cleared the way for the Arab world’s first freely elected Muslim fundamentalist government. The Islamic Salvation Front won nearly half the seats in Algeria’s National Assembly and appeared well on its way to gaining control in second round voting scheduled for this week. The collapse of the Soviet Union further devastated secular state economies like those of Syria and Iraq, exacerbating inter-Arab divisions left by the Gulf War. Jordan, trapped between Iraq and Israel, was economically crushed by the loss of Iraqi markets during the war and the postwar trade embargo. Other economic pressures included Palestinians returning from Kuwait and a continuing war-related tiff with the Saudis, who had once supplied the bulk of Jordanian oil and now send none. King Hussein’s fence-sitting during the war also lost him friends in Washington. By contrast, Syria curried favor in the West, even as it remained on the State Department’s list of countries harboring terrorists. It gained support in the Administration for its help in the Gulf War, its brokering of hostage releases and its joining in the Mideast peace talks.

ASIA

Momentous Accords: One of the bloodiest epochs in world history appeared to be drawing to a close in Cambodia in 1991 when four factions that had waged civil war there signed an Oct. 23 peace agreement. After signing the agreement in Paris, Prince Norodom Sihanouk, the deposed Cambodian leader, triumphantly returned home to head a new coalition government. But a political accord did not erase memories of the brutal 1970s. Amid the triumph, an angry mob attempted to lynch a leader of the Khmer Rouge, the Maoist faction that is blamed for the deaths of at least 1 million Cambodians by execution, torture and starvation when it ruled the country during the 1970s. Under the new agreement, Sihanouk will head a coalition government running the country with assistance from the United Nations for about two years until elections are held. Meanwhile, the Vietnamese, who had ousted the Khmer Rouge from Cambodia in 1979, patched up their relations in November with traditional adversary China, which had backed the Khmer Rouge guerrillas.

A Korean Rapprochement: Ending a 43-year diplomatic standoff, North and South Korea abandoned diplomatic claims to each other’s territory, accepted separate admissions to the United Nations, and agreed in principle to banning nuclear weapons from the peninsula. North Korea announced that it would join the United Nations only after South Korea had mustered sufficient support from Moscow and Beijing to ensure its admission to the world body. The move was a victory for South Korean President Roh Tae Woo, who had painstakingly established ties with nearly all Communist and former Communist Asian countries.

Historic Ripples in Japan: Fifty years after the bombing of Pearl Harbor, Japan assumed a larger international role. Widely criticized for offering too little too late in the Persian Gulf War, Tokyo finally contributed $11 billion to the war effort and $2 billion to front-line countries. Japan’s Parliament weighed a decision to allow the deployment of Japanese troops overseas for the first time since World War II, as part of U.N. peacekeeping missions. But in the end, the historic proposal, which had worried some Asian countries while being applauded by Washington, came to naught. With a $90-billion trade surplus, Japan remained the world’s No. 1 creditor. In November, the country got a new prime minister--Kiichi Miyazawa.

Small Steps in China: The international isolation imposed on China after the 1989 crackdown on pro-democracy protesters in Beijing’s Tian An Men Square was broken in August with a visit by Miyazawa’s predecessor, then-Prime Minister Toshiki Kaifu of Japan. Other Beijing visits ensued by a string of world leaders, including British Prime Minister John Major and U.S. Secretary of State James A. Baker III. Chinese leaders offered the Western dignitaries little in the way of human rights concessions. Earlier in the year, some leaders of the pro-democracy protests in 1989 were put on trial and given stiff jail sentences. Ideological controls and political repression continued.

Upheaval in the Philippines: Cataclysmic natural events seemed to single out the Philippines in 1991 as Mt. Pinatubo erupted in one of the worst volcanic disasters of the century. Three hundred people were killed outright, and hundreds more died of malnutrition and disease. A million lost their homes, farms or jobs. The oldest overseas American military base, Clark Air Base, was abandoned in a blanket of ash and turned over to the Philippine government, which said it did not have the money to clean it up. That country’s Senate, reacting to growing nationalism, rejected a 10-year extension of the lease on the huge Subic Bay Naval Base, which the United States has agreed to vacate by the end of this year. It was a year of numerous setbacks for President Corazon Aquino, whose attempts to recover billions allegedly stolen by the late President Ferdinand E. Marcos were rejected by courts in the Philippines and limited by courts in the United States. Imelda Marcos, the president’s widow, returned home and, despite charges of corruption and tax evasion, left open the possibility that she will join a list of six candidates running to succeed Aquino as president.

AFRICA

A Whiff of Democracy: Not since the 1960s had Africa seen a year of such momentous political change. In more than a dozen countries, stultifying single-party governments yielded to vulnerable movements offering a whiff of democracy. But rarely without bloodshed.

A Hesitant Handshake: Sixteen years of civil war that took 300,000 lives ended in June for the former Portuguese colony of Angola. Not until photographers demanded it did Marxist President Jose Eduardo dos Santos and CIA-funded rebel leader Jonas Savimbi shake hands after signing a peace agreement in Lisbon. The agreement left the former military rivals vying with each other in elections scheduled for this year. The victor will have a tough job; war left the oil-rich country on Africa’s southwest coast in economic ruin.

Violent Ends: The year did not begin so auspiciously in Somalia, where long-term dictator Mohamed Siad Barre had been driven out of office by armed rebels late in 1990. With the country in a state of virtual anarchy, rival clans began vicious battles in the capital city of Mogadishu, and the northern part of the country seceded at midyear. So unpredictable and bloody was the fighting in the capital that not even the hardiest of international relief organizations dared work there for most of the year. Three thousand Somalis died in November and December alone. Another regime meeting a bloody end was that of Mengistu Haile Mariam, a Marxist dictator who ruled Ethiopia for 14 years before fleeing as the rebel Ethiopian People’s Revolutionary Democratic Front closed in on the capital city of Addis Ababa. To the surprise of some, the rebels’ entry was peaceful. Quickly, they tried to set up a multiethnic representative transitional government. Still unclear was the future of the northern province of Eritrea, where Africa’s longest war this century ended after 30 years with a rebel victory in the spring.

Peaceful Beginnings: Zambia experienced a notably peaceful transition to increased democracy in October, when a quasi-socialist dictator ran for office for the first time--and lost. Forced by popular unrest to liberalize his policies, Kenneth D. Kaunda set up the elections that spelled his demise. He ceded power peacefully to Frederick Chiluba, a trade unionist who had previously been jailed for illegal political activity.

Goodby to Apartheid: In a historic advance, the South African Parliament destroyed the legal pillars of apartheid in 1991, leading to unprecedented negotiations between black and white leaders shortly before Christmas. Some suggested that 1992 might even be the year the country’s black majority finally gets the vote. The fact that President Frederik W. de Klerk and African National Congress President Nelson Mandela and others could talk about a more peaceful future did not erase visions of violence that had plagued the country earlier in the year, however. More than 2,000 people, almost all black, were killed in township clashes and brutal massacres of innocent commuters and mourners at funerals. That violence stemmed from a deep animosity between the ANC and its rival black organization, the Inkatha Freedom Party. Inkatha’s reputation was tarnished when the government admitted--in a scandal promptly dubbed “Inkathagate”--that police had been secretly helping fund the organization. De Klerk exorcised Cabinet members implicated in the scandal, but even as he mended fences on the left, right-wing whites stepped up militant attacks.

LATIN AMERICA

A Pyrrhic Draw? It cost 75,000 lives, wreaked economic havoc and created more than a million refugees, but civil war in El Salvador finally appeared over as the rightist government and leftist guerrilla front reached a peace agreement on New Year’s Eve. The agreement was a final victory for Javier Perez de Cuellar, who helped mediate the talks before retiring from the post of U.N. secretary general at midnight. If the agreement holds, a cease-fire will take effect Feb. 1. The rebel army will be disbanded and integrated into what is left of the economy. The United States, which had propped up a series of military governments with more than $4 billion in aid since 1979, will be called on to help rebuild the devastated country. If details are not worked out by this Friday, both sides agree to abide by a U.N.-imposed compromise.

The Haitian Quandary: Hopes of economic and political stability for Haiti after decades of corrupt, brutal dictatorships evaporated Sept. 30 when a group of military officers, supported by key sectors of the business community, staged a military coup. Forced into exile was President Jean-Bertrand Aristide, a charismatic priest who had become the country’s first freely elected president just 10 months before. A controversial populist who brought Haiti’s impoverished masses into the streets, he had alienated the wealthy accustomed to unblinking support from the government. Even as the coup-makers charged Aristide with violating human rights and extorting business, they launched a brutal terrorist crackdown in Port-au-Prince slums. The Organization of American States responded with a total economic embargo that has been steadily destroying what little industry existed in the hemisphere’s poorest country. The rulers were refusing to agree to the OAS’s demand that Aristide be allowed to return before the boycott is lifted.

Economic Progress: After a decade in the dumps, battered by withering inflation and suffocating foreign debt, Latin America enjoyed an economic turnaround in 1991, achieving moderate but promising growth while other regions of the world languished in recession.

The U.N. Economic Commission for Latin America and the Caribbean said in a December report that the regional economy expanded by 3% while average annual inflation fell to about 200% from six times that level. Also, for the first time in a decade, more financial resources flowed into the region than drained out. The regional record would have been better but for tough times in Brazil, which, as Latin America’s biggest country, accounts for about one-third of the regional averages.

EUROPE Killing Field: A Continent torn by war twice in this century saw its ever-present fears of new bloodshed become deadly reality in the tumultuous Balkans, where a bitter civil conflict raged through much of the year in Yugoslavia, claiming as many as 10,000 lives and raising fears that violence could spill over into neighboring countries. By yearend there was hope that a new cease fire brokered by an anxious United Nations might hold. But that hope was tempered with fear that this peacemaking effort would fare no better than 14 others before it during the year.

Moving for Independence: Created for geopolitical convenience in the wake of World War I, the Balkan nation of Yugoslavia is riven by historic animosity between Eastern Orthodoxy and Catholic Europe, between Serbs long ruled by Ottoman Turkey, and Croats and Slovenians ruled by the Austro-Hungarian Empire. And those tensions mounted visibly as 1991 began with Slovenia and Croatia moving to transform their territorial reserve forces into republic militias. The Serbian-dominated Yugoslav People’s Army threatened to use force to break up what it deemed illegal paramilitary units, and the two independence-minded republics went on full alert. At subsequent peace talks, Slovenia and Croatia proposed that Yugoslavia be realigned into a loose confederation of sovereign states, but Serbia, recalling the crimes of a World War II Nazi puppet regime in Croatia, rejected the idea. At the end of February, the predominantly Serbian region of Krajina declared that it was seceding from Croatia, and when that republic’s nationalist president, Franjo Tudjman, sent Croatian security units to the area to take over the reins of authority, fighting flared between those units and Serbian rebels. Outright civil war began at Borovo Selo on May 2, when 13 Croatian policemen and three Serbian rebels died in a daylong shootout. Two weeks later, Croats voted overwhelmingly to secede, even in the face of strong opposition by the West, which was not keen on dealing with a bevy of small Balkan states. The army read a demand by U.S. Secretary of State James A. Baker III for “unity and democracy” as a green light for action. When Slovenia and Croatia declared independence on June 25, the army attacked Slovenia.

Victory for Slovenia: Though hopelessly outmanned and lacking any tanks or military aircraft, Slovenia handed federal troops a humiliating defeat and won army agreement to withdraw from the republic. On July 8, the European Community succeeded in brokering a cease-fire which held in Slovenia, but not Croatia, where fighting continued throughout Serbian-inhabited areas. Backed by the federal army, thousands of guerrillas from Serbia entered the conflict, fighting in roving bands. Atrocities were reported on all sides of the conflict. Terrified civilians-both Serbs and Croats-became refugees after they were driven from their homes. Much of eastern Croatia was engulfed in chaotic combat, which destroyed entire towns and villages. Federal gunships shelled the historic walled city of Dubrovnik, on the Adriatic coast. On Oct. 7, a federal army jet bombed Croatia’s presidential palace. By November, Serbs held one third of Croatian territory, and army assaults bogged in winter ice and passionate Croatian nationalism. Both sides agreed to the use of a U.N. peacekeeping force, but there continued to be disagreement over where the troops should be deployed. And special U.N. envoy Cyrus R. Vance said no U.N. forces would be sent in until there was a lasting cease fire.

Eastern Europe: In most of the formerly Communist countries of Eastern Europe, 1991 was a year of painful economic decline, leadership crises, and dashed hopes for any swift integration with their Western neighbors. Hungary, however, defied predictions of financial doom to emerge as the region’s wealthiest and most stable nation. It seemed a fitting celebration when 50,000 Soviet troops departed in June. Poland held its first, full free parliamentary elections in October and awarded seats to representatives of no fewer than 29 different political parties, none of which garnered more than 20% of the vote. Czechoslovakia found itself similarly torn politically, as the grass-roots organization which fomented the overthrow of communism in 1989 split on the issue of economic reform. Albania held its first ever free election on March 31, resulting in a resounding victory for the little-reformed Communist party. However, economic paralysis spurred pro-democracy demonstrations and the toppling of the government by June. A new coalition set up shop, but only lasted until early December, and by year’s end the country was engulfed in food riots and a widespread energy shortage. Bulgarians, having forced out a Socialist leadership, also finished the year with a unstable coalition government and an economy so shaky electricity was shut off to one home in four after a winter cold snap. Romania, with no major debt and rich natural resources, seemed to suffer at its own hand throughout 1991. Persistent unrest and political infighting frightened away foreign investors. New elections this spring could worsen fractionalism.

Union Amid Disunion: As much of Eastern Europe seemed hopelessly divided, Western Europe took major strides toward political and economic union. The 12-nation European Community, anchored by Germany, France and Britain, set its course toward the creation of a gigantic free trade zone of 380 million people by the end of 1992. In October, the EC and the seven-nation European Free Trade Assn. also agreed to create a “European economic area” to reduce trade barriers. Eventually, EC and EFTA are expected to merge. At a summit in the Dutch town of Maastricht in December, the 12 EC nations set Jan. 1, 1999, as the date by which a single currency will replace the national currencies of member nations. They also gave the EC a broader role in forming continental foreign and defense policy. France got its first woman prime minister, the combative Edith Cresson, while neighboring Germany staggered under the problems of reunification. By year’s end, $100 billion had been transferred to help sustain and rebuild the unified country’s five, formerly Communist states. The same two countries annoyed England and the United States by announcing plans to create a joint Franco-German army corps to begin preparation for European self-defense after the anticipated withdrawal of American troops from the Continent. The announcement was seen as a direct slap at the U.S.-led NATO alliance.

INTL. BUSINESS Scandal in Japan: A series of stock scandals tore away at confidence in the Japanese stock market. In June, it was revealed that Nomura Securities was helping gangsters manipulate stock prices, and recommending those stocks to clients. Then, it turned out, Japan’s brokerage houses spent over $1 billion to compensate big, favored clients who had lost money on the market. A final embarrassment came when a prominent restaurateur went bankrupt with $3 billion in debt, most of which she had borrowed from a prestigious bank using fake certificates of deposit. The scandals prompted a series of resignations by top officials of brokerage houses and banks.

BCCI: A broader banking scandal led to charges of fraud, influence-peddling, and racketeering on almost every continent around the globe. To the surprise of many people who had never even heard of the Luxembourg-based Bank of Credit & Commerce International, regulators moved in July to shut down the shadowy institution that was accused of using depositors’ money to cover as much as $15 billion worth of its own mistakes, payoffs and bad loans. In December, BCCI officials agreed to plead guilty to sweeping U.S. racketeering charges and forfeit a record $550 million.

Mystery at Sea: In November, the mysterious death at sea of Robert Maxwell, along with the collapse of his publishing empire, caused a scandal that eclipsed even BCCI in England. Investigators are still trying to unravel the knots, but it is clear that the publisher looted fortunes from his healthy companies and pension funds to prop up his weaker businesses.

Free Trade?: In Latin America, Mexico’s President Carlos Salinas de Gortari mounted a high-profile campaign to press for free trade with the United States while making unprecedented moves away from a state-protected economy at home. Rewriting history that dated back to the Mexican Revolution, Salinas sold state-owned banks and steel complexes. He also announced sweeping agrarian reforms that could give communal farmers the right to mortgage or sell parcels that make up half the country’s farmland.