Serbs Use Trade Loopholes to Skirt U.N.’s Sanctions : Yugoslavia: Fuel and grain arrive by road and river. International embargo has largely failed, diplomats say.

Loopholes in U.N. sanctions against Yugoslavia are big enough to drive the proverbial truck through, which is precisely what legions of black marketeers have been doing.

Highways that used to be clogged with carloads of vacationers in August are empty this year save for the speeding tankers and giant double-trailer rigs of the sanctions busters.

Midway along the 300-mile route between Budapest and Belgrade, fully loaded trucks bearing the markings of Serbian companies clear cursory customs checks at the Hungarian-Serbian border because they are outfitted with Bosnian license plates.

Tankers of Jugopetrol, the Yugoslav national oil company, filled with precious gasoline speed their way toward Belgrade and Nis on the otherwise abandoned highway from Greece and Macedonia.

The Danube River, wholly unmonitored because it passes through countries other than sanctioned Yugoslavia, has become a virtual freeway for forbidden exports of grain and imports of fuel.

“Control can’t be 100%. Our borders are not so easy to monitor,” said Belgrade economist Jurij Bajec, who predicts little discomfort from the sanctions before the onset of winter, if then. “A lot of goods supposedly destined for other countries seem to be getting lost somewhere in Serbia.”

Nearly three months after the United Nations slapped Serbia and Montenegro with a trade ban and oil embargo for fomenting violence in Bosnia-Herzegovina, city shops and roadside produce stands in Serbia are still the envy of Eastern Europe when it comes to selection.

Ice-cream vendors offer more than a dozen varieties of frozen confections to pedestrians plying the streets these scorching summer days. Outdoor cafe waiters are still able to inquire whether patrons want local BiP beer or a Western European brew. Shops with foreign sponsors, such as Italy’s Benetton and a midtown French bakery, continue to offer wares that the local managers insist were ordered in advance of the sanctions.

At a single convenience store in Belgrade’s residential Vracar neighborhood, a private shopkeeper offers every conceivable necessity, as well as imports ranging from Samsonite luggage to Dutch beer to German chocolate milk mix to Bic lighters. The owner said some of her merchandise was left over from stocks purchased before the sanctions were imposed May 30 but conceded that almost everything is still available on the thriving black market.

“It’s just the high prices that discourage small-enterprise owners from restocking,” she said.

Bajec and other economists watching the Yugoslav economy slide ever deeper into chaos say it is impossible to estimate how much of the normal supply has been restored by sanctions-busting.

Gasoline is now rationed for private cars, prompting many would-be drivers to dust off their bicycles. But that is one of the few tangible hardships, and authorities say they will be able to meet ration demands at least until October.

Sanctions have largely failed, say Western diplomats here, because huge holes were left in the economic wall that the United Nations tried to build around Serbia and Montenegro, the only two former Yugoslav republics still united under that name.

The vast opportunity for war profiteering has been an even greater factor, making millionaires of the warlords who have access to fuel, vehicles and hard currency to build smuggling empires that thrive in the chaotic environment they helped create.

The sanctions allow shipping through Yugoslavia, but not to it. That means truckers need only present foreign border authorities with doctored papers indicating that their cargoes are destined for some country beyond Serbia.

One Belgrade man who buys cooking oil in Hungary and sells it in Serbia at a huge profit confirms that any truck with Bosnian registration easily clears customs inspections because only Serbia and Montenegro are subject to the sanctions.

Access to Bosnian plates is easy, with two-thirds of the republic occupied by Serbs. Almost any auto body shop can custom-make the plates from sheet metal, and in the undeveloped Balkan region, there are no computer registers for customs agents to check.

In another shortcoming of the sanctions, diplomats and other observers point to the Danube, whose traffic is exempt from monitoring because the river is an international waterway.

A flotilla of U.S. and European naval vessels staged a high-profile show of policing Montenegro’s short Adriatic coastline last month, ostensibly to stare down blatant attempts at sanctions-busting, although they lacked any authority to stop or board suspected violators.

Meanwhile, the mouth of the Danube on the Black Sea has been open to all cargo ships and fuel tankers, and Romanian authorities have reported steady traffic from Russia and Ukraine offloading on the southern--Yugoslav--bank of the river. Romania itself is widely suspected of breaking the trade blockade.

German television last week carried a series of reports documenting widespread violations by Greece, which is separated from Serbia by the unrecognized state of Macedonia, another former Yugoslav republic. The broadcast suggested that Serbia has pressured Macedonia to look the other way or risk unpleasant consequences.

“Sixty percent of Macedonia’s trade was with Serbia. They are in a very vulnerable position,” one Western diplomat observed. “They are faced with a food blockade if they don’t cooperate, so the Serbs have a lot of leverage.”

Asked which countries were openly violating the sanctions for their own benefit, the well-informed envoy drew a circle in the air around an imaginary map of Serbia to suggest that every country on its border has been ignoring the prohibitions when it chose to.

If the sanctions have had any effect at all, they have provided a convenient rug under which Serbian strongman Slobodan Milosevic has swept every failing of his nationalist regime.

Inflation was already galloping at 100,000% a year when the United Nations took action to pressure Belgrade to end support for Bosnian Serbs engaged in a rebellion that has taken at least 35,000 lives since April, by most reports. But ask any Serbian why average monthly income has fallen from more than $2,000 two years ago to less than $40 now, and he will blame the crisis on the sanctions.

Belgrade television and other media loyal to Milosevic have carried numerous stories claiming that children are dying in poorly supplied hospitals due to the sanctions and warning that pensioners may freeze to death if the fuel embargo is not lifted before winter.

“This is sheer propaganda,” one Belgrade-based diplomat said. “The hospitals were a mess before the sanctions. Humanitarian aid is exempted, and frankly, the threat of hardship is the point of the measures.”

Most Western analysts predict that harsher measures will have to be applied to force Serbia to sever support for fellow Serbs fighting against Bosnian independence.

‘ETHNIC CLEANSING’ LEGACY: There are no winners in the Bosnian conflict. A24