In Serbia, Hopes Lift Along With Sanctions : Balkans: End of punitive measures will bring enormous economic change. Some warn that expectations are unrealistic.

Mile Tudorovic bent over a pot of brick-red fish soup simmering on an open fire in a vacant field near New Belgrade’s vegetable market, sipped his morning wine and mused about a future he hopes will be brighter.

Surely, he said, war in the Balkans must be over, and last week’s lifting of economic sanctions that have battered the rump Yugoslavia’s economy will create jobs and force down prices.

“Look at our standard of living!” Tudorovic said, spooning a taste of the soup as fish heads bobbed. “My son is 20 years old, and the way it’s been, he has no future. During [former dictator Josip Broz] Tito, we had everything, we lived well. But my son, he too should have a chance to live well.”

As reward for his cooperation in the U.S.-brokered peace agreement initialed last week in Dayton, Ohio, Serbian President Slobodan Milosevic secured an immediate suspension of punitive economic sanctions slapped on Yugoslavia--made up of Serbia and its tiny ally, Montenegro--three years ago.

The U.N. sanctions, imposed because of Belgrade’s role in fomenting the war in Bosnia-Herzegovina, froze Yugoslav assets abroad, banned most international trade and exacerbated the country’s economic crisis. Inflation soared to dizzying levels; half the nation’s factories were shut down from lack of raw materials; hundreds of thousands of workers were furloughed.

With the lifting of sanctions, this Serb-dominated country is about to undergo enormous economic change. But the expectations of ordinary Yugoslavs are unrealistically high, analysts say, and resistance is expected from some black marketeers and war profiteers who have benefited from the economic chaos and who now form a growing class of nouveaux riches.

In a first post-sanctions step over the weekend, the federal government announced a comprehensive economic reform package. National Bank Gov. Dragoslav Avramovic ordered a 70% devaluation of the national currency, the dinar, to bring it in line with black-market rates and took limited steps to liberalize foreign trade by reducing import duties.

But the government has stopped short of a privatization program that Avramovic and other experts say will be necessary to revive the economy.

Independent economists point out that only part of Yugoslavia’s trouble can be blamed on the sanctions. The country missed out on the capitalist revolution that has swept most of Eastern Europe, sticking with a centralized economy dominated by state monopolies. The inflation, for example, was fueled by the government’s decision to print dinars to finance the war in neighboring Bosnia and to pay more than a million pensioners.

But for Milosevic, the desire to have sanctions removed is widely seen as the motive that transformed him from instigator of nationalist warfare to peacemaker keen on forcing his Bosnian Serb allies to end the fighting.

Many of the Serbs of Serbia, for whom sanctions were their only taste of the war engulfing Bosnia, found ways to circumvent the restrictions. Gasoline and fuel were the biggest problems; they could not be imported legally but had to be smuggled in from Bulgaria, Macedonia or Hungary. Countless items, from cigarettes to clothing, were also smuggled in.

“Even with sanctions, we managed,” said Ljubica Debeljkovic, a pensioner clad in a furry winter hat who stopped by to inspect Tudorovic’s fish soup. “We were not at war. I don’t understand why sanctions were imposed in the first place. It was unjust. It is good that peace has come.”

Inside the market in New Belgrade, one of this capital’s major suburbs, shoppers moved from stall to stall, some commenting on the likelihood that prices will soon come down.

During sanctions, “everything was expensive,” said Slobodan Djordjovic, an apple farmer who was selling his latest harvest at the market. “Tires, spare parts, [agricultural] chemicals. You could buy everything, but it was very expensive.”

Vlado Protic is one of the hundreds of young men who, since the imposition of sanctions, have sold smuggled gasoline and diesel fuel on the side of the road. Almost overnight, with the lifting of sanctions, the price of a liter of gas fell about 30% to the equivalent of one dollar. People like Protic will soon be out of business.

“It is better that they sell gasoline [legally] at the pump than that I should work” in the black market, the 23-year-old Protic said. “Now we will be able to go back to our regular jobs . . . with better wages.”

Protic and others said they are confident that state companies that have had to cut back production will come back up to speed and soon be able to pay prewar wages. Four years ago, Protic earned 1,500 German marks a month in his job as a veterinary technician. In the same job, he now earns 120 marks, forcing him to supplement his income smuggling and selling gasoline.

While major players got rich off such activities, the black-market activity has meant survival for many ordinary Yugoslavs. They stand to lose income, at least initially, with the lifting of sanctions and economic reform.

Other social costs are likely, economists said. As factories and companies restructure to become more efficient and more competitive, many jobs will be eliminated.