Kostunica still does not control levers of power

The images from Yugoslavia are certainly exhilarating: crowds storming the parliament building, soldiers and demonstrators joining…

The images from Yugoslavia are certainly exhilarating: crowds storming the parliament building, soldiers and demonstrators joining hands. The fall of another dictatorship, the last direct relic of communism in Europe, is certainly good for all the continent. But the excitement of the crowds in Belgrade is likely to prove only a small part of the real story: the big fight for power in Yugoslavia is still being conducted behind the scenes. And the task facing President Vojislav Kostunica, the country's new leader, remains awesome.

It is clear that the crowds which rushed on to the streets did not topple the regime; the massive presence of demonstrators merely persuaded the security services and the military to abandon Mr Milosevic. They did so at a price: a guarantee that Yugoslavia's generals will not be handed over to an international war crimes tribunal, and that they will not be held to account for their previous misdemeanours. President Kostunica congratulated the Serbs for their democratic victory. But he must have been fully aware that many of Mr Milosevic's criminals are still likely to ride on the country's democratic wave.

Nothing better illustrates the difference between appearances and the murky reality than the confusion surrounding the whereabouts of the old dictator. In all probability Dr Kostunica knew all along that Mr Milosevic remained in the capital, but it was not in his interests to reveal this as long as he was not sure of the support he could expect from the security services, the real mainstays of the old regime.

The option of providing Mr Milosevic with asylum in another country was only relevant as part of an arrangement which ensured a smooth and peaceful transition of power in Yugoslavia. But power has already been transferred, and no country is likely to consider Mr Milosevic's residence application now. The only choices which the dictator faces are either the international tribunal in The Hague, a trial at home or a swift death, the latter being the solution applied to his friend Nicolae Ceausescu in neighbouring Romania a decade ago.

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Dr Kostunica ruled out the first option, while the other two alternatives depend on what the Yugoslav security services may stomach. Mr Milosevic's decision announced brazenly last night, according to which he intends to remain in Yugoslavia and "take part in politics", should not be taken too seriously; Mr Milosevic himself knows that this will be impossible.

But it is an indication that a standoff between the new and old governments continues, and it may also amount to a direct appeal from Mr Milosevic to his old spies to remain loyal, pending a return of his rule. Either way, it is clear that Dr Kostunica, although in power, still does not control all the levers of power.

In all other areas, however, the new Yugoslav government can afford to move fast. For President Kostunica, there are two key priorities: the elimination of his country's international isolation and the reform of Yugoslavia's internal economy. Yet again, the omens are good: Dr Kostunica wishes to re-establish relations with key Western countries (broken off during the Kosovo war last year), and he appears to be committed to the creation of a market economy.

The West is likely to reciprocate quickly. Most of the sanctions on Yugoslavia will be lifted early next week, and there will be many offers of financial help. But soon thereafter, the real questions will begin.

Yugoslavia suffers from the least reformed communist economy in Europe, and from the ravages of NATO's war last year. Even with the best will in the world and huge injections of Western cash, it will take years before the people of that country start enjoying the benefits of prosperity.

More importantly, the fall of the last dictatorship in the Balkans raises much bigger question about the West's priorities throughout the region.

Much of the economic assistance pledged to the Balkans was predicated on the assumption that Yugoslavia would remain beyond reach for many years to come; the transport infrastructure which the EU is funding in the Balkans explicitly bypasses Serbia.

Most of the cash pledged for the region's states is already committed. But if Yugoslavia is now to be supported, money will either have to be diverted from existing projects or the aid budget will have to be substantially increased. A dispute between the Americans and the Europeans over the reconstruction of the region is therefore inevitable.

Some of these problems may be alleviated by the growth in Balkan co-operation which is likely to ensue. The Danube river, blocked since the Kosovo war last year, will be cleared for navigation, and all the region's states will be at peace with each other, for the first time since the end of communism.

But even here, the gain is more theoretical than real, for all Balkan countries suffer from similar problems. They all compete for scarce Western investment, they all have a decrepit industrial base and a large but poor agricultural sector, and they all seek to join the same European institutions. President Kostunica will therefore discover quickly that he will be welcomed to his region, but then expected to compete with his neighbours from a position of inferiority.

The coalition which propelled Dr Kostunica to power is a motley crew of no fewer than 18 parties, covering the entire spectrum of politics from the extreme left to the extreme right. Their sharpest disagreement is precisely over economic reform.

Dr Kostunica has a huge popular mandate to do more or less as he pleases, at least in the near future. But he is aware that he is facing huge odds: all the mafias which built their fortunes out of smuggling forbidden goods during the years of the embargo on Yugoslavia and all the factory managers appointed by Mr Milosevic will be against him. Any meaningful economic reform will have to start by breaking up this class of parasites. And it will entail the creation of millions of unemployed.

Nor are foreign relations a particularly promising field for Dr Kostunica. The new Belgrade government wishes to regain control over Kosovo. It can do so through the simple expedient of inviting the Albanians of the province to start negotiations about the creation of a new Yugoslav federation. Such negotiations were explicitly envisaged in the UN Security Council resolution which governs the presence of NATO troops in Kosovo, and Western governments will be unable to refuse Belgrade's offer.

But the West will also be unable to persuade the Albanians of Kosovo to return to the negotiating table. Nor is there going to be much progress on the question of the return of Serb refugees evicted from Croatia or Bosnia in previous wars, another demand which a democratic Yugoslav government is likely to reinstate.

The West, mainly in the shape of NATO, will do its best to drag out the negotiations on these thorny problems. But NATO itself is likely to be plagued by a dispute about its future military commitment in the Balkans; Mr George W. Bush, the Republican presidential candidate, has already suggested the withdrawal of the US contingent.

All in all, the Balkan wars are now over. But they will be replaced by periodic diplomatic standoffs and a cold peace. And hanging above the entire process will be the matter of extraditing war criminals, an issue on which any post-Milosevic regime will be unable to deliver much.

The people of Yugoslavia have achieved a great deal in the last few weeks: they have proven that, after decades of dictatorship and brain-washing, a civil society yearning for democracy can flicker, even in that dark corner of the Balkans.

Dr Kostunica's reputation inside his country is that of a ponderous academic, devoid of much charisma. This may be an asset: the people of Yugoslavia have had too much fiery charisma from Mr Milosevic. But Dr Kostunica will need nerves of steel for the battles which lie ahead.

He should enjoy the honeymoon with his electorate, for it is guaranteed to be short.

Jonathan Eyal is director of studies at the Royal United Services Institute in London