West to ration carrots for Yugoslavia change

By Paul Taylor

LONDON (Reuters): Despite elation at the overthrow of Yugoslav President Slobodan Milosevic, Western governments are moving cautiously in easing pressure on Yugoslavia until the remnants of the old regime are thoroughly swept away.

The United States and the European Union are eager to help new President Vojislav Kostunica while maintaining the necessary economic and political leverage to ensure that democratization is complete, and that Milosevic and his aides are ultimately brought to justice.

EU foreign ministers demonstrated that mixture of caution and encouragement on Monday, lifting an oil embargo and an already defunct ban on flights to Belgrade but stopping short of removing an investment freeze and a visa requirement until it is clear that Kostunica has consolidated his power.

U.S. officials said Washington was likely to follow suit in the coming days, but keep in place for now the so-called "outer wall" of sanctions that bar Yugoslavia from membership of and credit from international financial institutions.

"It's going to be a delicate balancing act, and Kostunica may throw us some new challenges, especially over Kosovo, but it's a damn sight better than having to continue dealing with Milosevic," one senior Western policy maker said.

In hindsight, many Western analysts see the toppling of Milosevic by his own people as vindicating NATO's decision to wage an air war against Yugoslavia last year over Kosovo.

The military campaign was criticized at the time for cementing the Serbian strongman in power and inflicting damage on the Serb people rather than their rulers.

But it now seems clear that losing the fourth Balkan war in a decade helped precipitate his downfall.

The EU's much-maligned common foreign policy can take some credit for bring about the transition, which is still fragile.

Speaking with a single voice, EU governments promised Serbs a place in Europe if they voted Milosevic out of power, then swiftly recognized Kostunica's victory and backed the opposition as it thwarted government attempts to rig the result.

Now the West will need to adapt its carrot-and-stick policy to help ensure that the old guard is swept out of the federal and Serbian governments and parliament and the security services, diplomats say.

Once Milosevic is completely removed from politics, the West has an array of levers it can use to coax the new Yugoslavia towards economic and political reform, and cooperation with the UN war crimes tribunal.

They range from control over major multilateral loans and reconstruction aid for the desperate Yugoslav economy to the prospect of rejoining international organizations, an association agreement with the EU and possible membership of NATO's Partnership for Peace program.

Diplomats acknowledged differences among Western nations over how fast to lift sanctions on Belgrade and how much aid to provide at this early stage, when Kostunica's grip on power is still uncertain.

Close neighbors Italy and Greece are keen to remove all sanctions and pour in aid to help the reformers, arguing that Milosevic's supporters may yet regroup and regain a foothold if the economy deteriorates further and the West holds back.

France, which holds the rotating EU presidency, is also eager to reward Kostunica quickly.

The United States and Britain, on the other hand, are much more cautious about easing the pressure. Some officials voiced concern privately about what deals may have been made with the security forces to allow Kostunica to take office.

Above all, London and Washington are determined to ensure Milosevic is eventually put on trial by the UN war crimes tribunal in The Hague, even though they acknowledge that now is not the right time to press Kostunica on the issue.

The new president has said he will not hand Milosevic over to the tribunal and has questioned its legitimacy, but Western officials believe a gradual questioning of Serbia's own recent past will change the mood in Belgrade within a few months.

"Sealing last week's victory is the name of the game for now. But Western governments are scrutinizing closely what actually happened in Belgrade last week," said Jonathan Eyal, Balkans expert at the Royal United Services Institute. "There is a whiff of underhand deals in Belgrade that dictates caution."

Western governments are heartened by Kostunica's pledge to seek agreement with Montenegro, which had threatened to secede from Milosevic's rump Yugoslavia, on a new division of powers in the federation.

The West, which has championed Montenegrin President Milo Djukanovic and repeatedly warned Milosevic against attempts to destabilize Serbia's junior sister republic, is now urging Montenegro to cooperate with Kostunica.

"Djukanovic is going to be under enormous Western pressure to go back to the negotiating table with Belgrade. He now has a chance to redraw the constitution of the Yugoslav federation with Kostunica," Eyal said.

Diplomats said Western governments faced their biggest challenge in dealing with Kostunica over Kosovo.

In his inaugural address as president, he vowed to bring the rebel Serbian province populated by a majority of ethnic Albanians, which has been under UN administration since last year's war, "more under our sovereignty".

Eyal said Kostunica could invite the Kosovo Albanians to send a delegation to Belgrade to negotiate on the province's future status, as envisaged by UN resolution 1244 that ended the conflict.

He might express willingness to revive the Rambouillet peace plan which the ethnic Albanians accepted in March 1999 but Milosevic rejected, leading to the NATO air campaign, or even make a dramatic gesture of offering to go to Pristina and meet ethnic Albanian leaders.

While such moves would draw some international support, they would almost certainly be rejected by the Kosovo Albanians who are united in demanding nothing short of independence.

The change in Belgrade has thus complicated the stakes in UN- organized local elections due later this month in Kosovo, with the province's politicians vying to outdo each other in defiant nationalism and refusal to deal with Serbia.