U.S., Allies Slap Serbia With Ban on Investments

Stepping up pressure on Yugoslav President Slobodan Milosevic to end violence in Serbia’s Kosovo province, the United States and Western Europe’s four leading nations Saturday slapped new sanctions on the Belgrade government while Washington deployed one of its most valued trouble-shooters.

Richard Holbrooke, the American diplomat who brokered peace in Bosnia-Herzegovina, arrived in Belgrade, the capital of Yugoslavia and Serbia, on an emergency peace mission Saturday afternoon and immediately warned of “a wide conflagration” in the Balkans.

Holbrooke’s surprise mission came as the United States and its principal European allies agreed to ban all new foreign investment in Serbia as a way to force Milosevic to accept international mediation of the fast-deteriorating crisis in the Albanian-majority province of Kosovo.

The move, taken during a meeting of foreign ministers from the Group of 7 leading industrial nations and Russia--together known as the Group of 8--is the latest in a series of punitive measures aimed at forcing Milosevic to open talks with ethnic Albanians who dominate Kosovo and are demanding independence.

Unlike many previous actions, the investment ban is expected to have a serious impact on the Serbian economy, already devastated by years of war and international isolation.

To drive the point home, U.S. Secretary of State Madeleine Albright said Holbrooke and President Clinton’s special envoy for the Balkans, Robert Gelbard, would attempt to persuade Milosevic to submit the Kosovo crisis to mediation.

“They are going to try to follow through,” Albright said. “They are going to try to explain to President Milosevic that the international community wants this dialogue to take place.”

In Belgrade, Holbrooke conferred Saturday evening with Milosevic, but the two reached no agreement, according to the official Tanjug news agency. “There are elements of extreme danger and volatility, which if not reversed and checked can spread across international borders,” Holbrooke said of Kosovo when talking to reporters.

State television and radio largely ignored Holbrooke’s visit and portrayed the new sanctions as another cross for Serbia to bear. Most state media focused on celebrations marking the anniversary of the end of World War II, noting that Serbs “won against fascism five decades ago” and can fight fascism again.

In London, the eight foreign ministers also decided to implement a freeze agreed to earlier on international funds held by Yugoslavia, the rump state that today includes only Serbia and its small neighbor, Montenegro.

The sanctions were announced in a 16-page communique issued by the ministers that dealt with a series of regional conflicts and global issues, including a broad-based action plan aimed at preserving the global environment.

Albright, together with her counterparts from Britain, France, Germany, Italy, Japan, Russia and Canada, held two days of meetings here, mainly to prepare for next weekend’s summit of the G-8 country leaders in Birmingham, England.

The investment ban against Serbia hits at the heart of Milosevic’s strategy to keep his economy afloat by selling off state-owned companies, mainly to European investors in return for hard currency.

He has already negotiated the sale of the country’s telephone company and had hoped to raise an estimated $1.5 billion through privatizations and foreign investment this year.

The impact of the ban was blunted by Russia’s refusal to go along, although Albright stressed that Moscow agreed as to the seriousness of the crisis in Kosovo.

“They believe President Milosevic reacts better without this type of sanction,” Albright said. “We believe he does react to pressure, but there was no disagreement with the assessment of the dangers, and the danger that Kosovo could destabilize the region.”

In Moscow, however, a Foreign Ministry official warned that new sanctions could destabilize all of Europe.

Linked to Serbia through Slavic and Orthodox Christian roots, Moscow has consistently urged a softer line toward the Balkan country.

The decision to freeze investment came after five foreign ministers from the six-nation Contact Group responsible for monitoring the shaky peace in the Balkans reached agreement on the fringes of Saturday’s meeting of G-8 ministers.

Unlike earlier, prolonged, tortuous meetings, Albright and her counterparts from Britain, France, Italy and Germany appeared to move quickly on the investment ban. Russia disassociated itself from the investment sanction.

The decision was made easier because it came barely 24 hours after Milosevic had summarily rejected mediation after days of hinting that he might accept it.

Former Spanish Prime Minister Felipe Gonzalez, already named as a special international mediator, had been waiting in Brussels, prepared to fly to the region immediately.

In addition to the opening of unconditional dialogue with the aid of foreign mediation, the international community is demanding that Milosevic withdraw his heavily armed special police from Kosovo.

Kosovo, a predominantly Albanian region controlled by Serbs, has long been recognized as an ethnic tinderbox that could quickly ignite further violence across the Balkans.

The latest crisis erupted in February, when a group of armed Albanian radicals advocating independence for Kosovo ambushed Serbian police, triggering a brutal Serbian crackdown.

On Saturday, Serbian police closed Kosovo’s main east-west highway after fighting with separatist guerrillas killed at least four ethnic Albanians, Albanian sources said.

The dead included a child and an elderly shepherd caught in the middle of fighting Friday in the village of Balinca and a guerrilla killed in Iglarevo. A fourth Albanian died in separate fighting around Decani in southwest Kosovo.

More than 20,000 ethnic Albanians chanted support for the guerrillas of the underground Kosovo Liberation Army in a peaceful demonstration in the provincial capital, Pristina, on Saturday.

Although remote, sparsely populated and of marginal strategic importance, Kosovo has an important emotional place in Serbian history, a fact that makes it difficult for Milosevic to submit its fate to outside mediation.

Efforts to force Milosevic to a conference table on the Kosovo issue began two months ago in London, when ministers agreed to a package that included a ban on the sale of heavy police equipment that could be used to repress civil dissent and a request for the United Nations to invoke a comprehensive arms embargo against Yugoslavia.

Since these efforts began, conditions in Kosovo have steadily deteriorated as repressive tactics by Serbian authorities to contain the unrest appear to have radicalized an increasing proportion of the Albanian population there.

For Albright, the failure to win international mediation in Kosovo capped a week of frustrating diplomacy that began with equally futile efforts to bring Israeli and Palestinian leaders together for a meeting in Washington aimed at reviving the battered Middle East peace process.

The G-8 communique expressed deep concern at the lack of progress toward a Middle East settlement. U.S. officials said they expected the issue will be taken up next weekend by the G-8 leaders.

Although a lengthy communique issued by the G-8 ministers also welcomed recent political developments in Iran, reaffirmed the international effort to win Iraqi compliance with U.N. weapons inspections and addressed a total of 17 regional flash points, its first 11 points dealt with the task of protecting the global environment and promoting “sustainable development” at a time when many large Third World nations are beginning to experience rapid economic growth.

The ministers endorsed a series of measures aimed at encouraging forest management, conservation and sustainable use of the open seas, and protecting freshwater ecosystems. They also declared that they will work with developing nations “to help put in place relevant sustainable development strategies by 2002 and have implementation underway by 2005.”

“The environment for the first time has really taken a front-and-center position as a major foreign policy issue,” noted Stuart Eizenstat, U.S. undersecretary of State for economic affairs.

Although the U.S. held out until the final moment late last year before signing the Kyoto treaty to reduce global warming, it has pressed hard to bring developing nations into regimes for sustainable economic growth.

Albright recently instructed the State Department to make environmental issues part of its daily diplomatic activities.

On her recent trip to China, aides said up to a quarter of the six hours of discussions with Chinese leaders was devoted to resolving potential conflict between economic growth and environmental protection.

In London, the U.S. also pushed for a commitment on the part of the eight nations to incorporate environmental standards into the lending practices of all government credit agencies.

Times Vienna Bureau Chief Tracy Wilkinson contributed to this report.