First up, naked capitalism, February 6:
Serbia has resisted various forms of pressure since NATO began its war against Russia in Ukraine and remains the only European country refusing to join in Western sanctions on Russia.
Washington and Brussels have apparently had enough and issued Belgrade an ultimatum in January. The exact contents of the proposal haven’t been made public, but statements from Serbian officials hint at the following:
Carrot
Serbia must normalize relations (as opposed to full recognition) with Kosovo and accept its membership in international organizations like the UN, NATO and the Council of Europe. (NATO seized Kosovo from Serbia in 1999, following the bombing of the country. Most EU countries and the US support Kosovo independence, which was unilaterally declared in 2008. Serbia continues to view the region as part of its territory.)
In return Serbia would supposedly get some financial rewards and join the EU in 2030.
It remains unclear if joining sanctions on Russia is part of the ultimatum. One of many reasons that Belgrade and Moscow enjoy close ties is that Russia routinely blocks Kosovo’s UN membership, which it could still do even if Serbia recognized Kosovo.
Serbian President Aleksandar Vučić believes the ultimatum is more the result of the West’s agenda, “which includes the defeat of Russia and everything that stands in the way on this agenda, will be crushed.”
Stick
Should Belgrade refuse the ultimatum, it can expect the following:
EU and US investment in the country evaporates.
Serbia’s EU candidacy dies.
A ban on lending by European banks, the European Bank for Reconstruction and Development, the World Bank and the IMF....
....MUCH MORE
And at Serbian Monitor, former World Bank head of research, Branko Milanović, January 23:
Can Serbia survive EU’s economic ultimatum?
(I am writing this article in English although my main audience is in Serbia. But I am doing it also because very few people in the world, preoccupied by other world crises, such as the war in Ukraine, US-China issues, Covid and the like, know what is happening in the Balkans and what is the nature of the EU game there. Branko Milanovic)
The current EU ultimatum, delivered three days ago, to Serbia and Kosovo, whose exact content is unpublished (at the request of the EU delegation) is the result of more than 20 years of frustrations in the relations between EU and Serbia (and also between EU and Kosovo).
The essential reason is disappointed expectations. EU has less and less to offer to Serbia and other non-members simply because the membership cannot any longer be promised with any credibility and all other advantages are small. So, the EU can only offer sticks. No carrots. And in Serbia, the support for EU membership is now consistently below 50%..
EU reminds me of the bullies that were roaming the area around my high school in Belgrade. They would accost younger pupils and offer to sell them…a brick. The kid would say, “But I do not need the brick”. Ah, the bully would retort, “Yes, I know that you do, and it would cost you ten dinars”. The poor kid would pay 10 dinars knowing that the refusal would lead him to be beaten, hit in the head, kicked – and yet the ten dinars would be taken from his pocket.
That’s how the EU comes to Serbia today. Everybody of normal intelligence would say, “You have nothing to sell and we do not want to buy the brick”. But the EU then begins to list the ultimatums. We do not know the text of the ultimatum, but it does not take great imagination to realize that threats must range from the suspension of EU negotiations, elimination of EU support funds (that Serbia gets as a candidate member), reintroduction of visas, discouragement of EU investors, to possibly additional financial sanctions (say, no access to short-term commercial loans), a ban on long-term lending by the European banks, EBRD and possibly the World Bank and the IMF, and for the very end elements of a true embargo and perhaps seizure of assets. Serbia does not have oligarchs but it does have National Bank reserves and many companies that keep money in foreign banks in order to finance trade.
The question then becomes: can the country survive such sanctions that may last from five to ten to twenty years? Perhaps even longer. First, one needs to realize that such costs are imposed on 99% of the population for whom the acceptance of the ultimatum does not make any economic difference. Perhaps only 1% of the ethically Serbian population, those who live in Kosovo, might lose some rights due to the non-economic requests contained in the EU proposal. One needs to be clear on that fact: rejection means a loss for 99% of people to provide some, perhaps illusory, protection for 1%.
But what would be the consequence of rejection? Domestically, it will further stimulate the growth of nationalism. Not only–nationalists will say—that we knew all along that Europe does not want us and hates us, but now it is clear that they want to destroy us. Under such conditions, all kinds of crazy schemes would be hatched. Russia will support this craziness, not because Russia much cares about it, but because it has the incentive to create as many problems at any place in the world to make the West get busy working on something other than Ukraine.There would be thus an explosion of nationalism under the conditions of reduced GDP. The loss could be, depending on the severity of sanctions, up to 5-10% of GDP in the first year. This would divide the public. Although currently all parties are in favor of the rejection of the ultimatum, and the pro-European parties, having been cheated by Europe many times, have taken a strongly anti-acceptance stance, seemingly stronger than the government, it is likely though that after a few years, the body public would seriously split between the “party of rejection” and the supporters of new negotiations with the EU. If such parties become equal sides and start violently accusing each other, it might end in a civil war....
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Related on Serbia:
January 2022: "Skullduggery In Serbia"
December 2022: "Will Europe's Largest Lithium Deposit Ever Be Developed? A View From Serbia"
January 2023: "The Inside Story of Europe’s Weirdest Crypto Mining Boom"
January 2023: "Rio Tinto–backed firm InoBat plans to build battery gigafactory in Serbia"
Milanović wraps up his piece with a bit of a history lesson:
....To accept the deal does not mean that you have to like it. Serbia has thrice rejected similar ultimatums. In 1914, when in fact it accepted 9 out of 10 points of the Austro-Hungarian ultimatum (and asked for the clarification on the tenth), only to be attacked by the Austrians. The second time it accepted membership in the Axis in 1941, for a grand total of 72 hours, and then, after a military coup, de facto rejected it. As a punishment it was brutally attacked by Germany, leading to massive bombing of Belgrade, occupation, break-up of the country, four years of war, and more than 1 million deaths. The third time Serbia rejected NATO ultimatum in Rambouillet in 1999, and was duly bombed for three months until it accepted another version of the same thing. These are the antecedents one should keep in mind. They are not very cheerful.
