Milosevic sounds retreat from Greater Serbia

Bosnia/ returning to normality

RADOVAN KARADZIC, the psychiatrist turned ethnic-cleansing leader of the Bosnian Serbs, looked more like one of his own patients last Wednesday. Dishevelled, forlorn, his eyes struggling to rise out of the baggy pouches above his cheeks, he was babbling about why he had decided to set free more than 100 UN peacekeepers taken hostage 11 days previously.

His incoherence was understandable. Twice in the space of five days,he had undergone perhaps the most chilling experience any Serb civilian politician can imagine - a remorseless examination at the hands of the chief of Serbia's state security police.

Jovica Stanisic, whose thin lips and shark-like eyes make him look like an updated Balkan version of Beria, Stalin's secret police chief, had travelled to Pale, the Bosnian Serb headquarters, to spell out to Mr Karadzic why he must give up the hostages.

Exactly what threats Mr Stanisic made may never be known. But the conversations were evidently brutal in their simplicity, for on both occasions he secured the release of a large group of hostages - and by Wednesday morning, Mr Karadzic was a crumpled wreck, watching his dream of a Greater Serbia disintegrate around him.

Much of last week's drama was played out behind closed doors in Pale and Belgrade, but non-governmental Serbian analysts and Western diplomats agree Mr Karadzic was the big loser.One telling sign was the absence from public view all week of General Ratko Mladic, the Bosnian Serb military commander.

The general, known to be contemptuous of Mr Karadzic's failure to impose order on the anarchical gangland that is the self-styled Bosnian Serb Republic, chose last week to let the part-time poet write his own epitaph.

The seizure of the hostages has been a diplomatic catastrophe for Mr Karadzic, for it has shored up the West's will to act more resolutely in Bosnia, it has angered Belgrade, and it has cost him the support of key Bosnian Serb leaders. By Friday even the hard-line speaker of the Bosnian Serb assembly, Momcilo Krajisnik, was calling for peace negotiations,in accordance with the line dictated by the most important man of all - President Slobodan Milosevic of Serbia.

It is to Serbia's internal condition that one must look to discover why Mr Milosevic is anxious to see the remaining hostages released and a Bosnian settlement drawn up quickly. Today Serbia is unrecognisable as the paranoiac, inflation-ravaged country of 1992 and 1993. The price of foreign cigarettes has gone down and there is petrol in cars. The ultra-nationalists are in prison and the president is talking peace. People are tired of warmongering. They have lost interest in the fate of their fellow Serbs in Bosnia and Croatia.

"There has been such an improvement here in the last two years," said Mirjana Popovic, a Belgrade secretary married with two children. "Money means something again, and we are all hoping that terrible war in Bosnia is going to stop."

Life can never be entirely normal as long as UN economic sanctions, imposed in 1992, and crime, black-marketeering and mismanagement gnaw at the heart of Serbia's economy. A lack of fuel, raw materials, machinery, and spare parts, caused by theft as well as by sanctions, means only one factory in five is working at full capacity. But in contrast to the Serbia of the early war years, when the press and television thundered against anti- Serbian plots, newspapers now devote pages to summer holidays abroad. Everything from South Korean electronic equipment and Austrian skiing gear to Italian shoes and German beer is available in swish Belgrade shops and there are queues outside expensive nightclubs.

Belgrade is far from typical of Serbia as a whole, and living standards for the majority of Serbs,are at or below the levels of the mid-1960s. But with a characteristically Balkan sleight of hand, Serbia has emerged superficially unscathed from a crisis that less than two years ago involved isolation and the highest inflation in recorded history - a 15-digit figure or thousands of billions per cent a year.

Clouds are gathering, however. Hospitals have suffered shortages of medicines and sanitary equipment for several years, the death rate is rising, life is harsh for pensioners and schools lack adequate materials More ominously, inflation is creeping back. According to the newspaper Politika, the cost of living rose 50 per cent from May 1994 to last month. The so-called "super dinar", introduced in January last year at parity with the German mark to suppress inflation, was being exchanged on the Belgrade black market last week at 2.2:1 to the mark.

The return of inflation is one factor behind Mr. Milosevic's keenness to secure a rapid end to the UN embargo. The most important sanction has always been the denial of access to international credit markets, and without fresh credit to support the currency Serbs could face another period of hyper-inflation. It is not certain this time that their patience would hold.

For the embargo to be lifted, Mr. Milosevic must meet the Western demand that he recognise Bosnia as an independent state in its pre-war frontiers. This would mean, in effect, telling the Serbian people that it was no longer a goal of state policy that all Serbs - in Serbia, Montenegro, Bosnia and Croatia - should be united in one country.

Such an announcement ought in theory to outrage Serbs, whohave endured four years of immense hardship in the name of the Greater Serbia project. Yet Mr. Milosevic has prepared his ground methodically and looks capable of getting away with one of the great Balkan policy reversals of this century.

Last weekend he engineered the arrest of Vojislav Seselj, the leader of the ultra-nationalist Serbian Radical Party, who had been touring the country denouncing him as a traitor for selling out the Croatian and Bosnian Serbs. Practically no voices were raised in protest.

He has also ensured that his supporters maintain tight control of the main media. As a result, public opinion has been largely at the mercy of Mr Milosevic as he turns off the propaganda of hate and turns on the propaganda of peace.

Predictions are hazardous in the Balkans, but increasingly it seems that Mr. Milosevic is no longer prepared to prop up the rebel Serb client states that he helped create in Croatia and Bosnia. When Croatian forces overran the Serb-held enclave of Western Slavonia last month, he did not lift a finger to help the local Serbs, and the Belgrade media tamely accepted what in previous years they would have termed a national disaster.

Even so, there is one question Mr. Milosevic has yet to answer. If, after four years of war, tens of thousands killed and millions displaced, the situation is reverting to what it was in 1991, then what was it all for?