Yugoslav authorities found themselves in the line of fire last week after a Belgrade company was linked to illegal arms dealings with Iraq. After October's inspection of Orao, located in Bijeljina in the Republika Srpska entity of Bosnia, the international community concluded that the factory had assisted Iraqi military experts through Belgrade's Jugoimport SDPR company, which imports and exports arms.

The same company was unsuccessfully targeted by NATO during the 1999 air strikes against Yugoslavia. NATO hit instead the Chinese Embassy, claiming the error was due to bad intelligence. On 26 October, the U.S. Embassy in Sarajevo sent a diplomatic protest letter, its second. In its first letter, the U.S. government had threatened sanctions against Bosnia if it failed to identify those responsible for the alleged dealings with Iraq. "This puts you in the position of assistant to Iraqi forces. The fact that SFOR [Stabilization Force in Bosnia and Herzegovina] found documents in the Orao factory now calls into question the credibility of Republika Srpska," read the second letter.

In October, Britain's Sunday Times and the Belgrade daily Blic published stories about the Yugoslav and Bosnian companies' illegal dealings with Iraq; both companies were alleged to have violated the UN arms embargo against Iraq. In Republika Srpska, the Banja Luka daily Nezavisne novine published two documents found by SFOR at the Orao facility. The first document, translated from Arabic into English, said that in October 2000, Belgrade's Jugoimport company signed a contract with a Baghdad company called Al Bashair for $8.5 million. The second document contained correspondence between Jugoimport and another Baghdad company called IBN Firnas. In the correspondence, the director of Jugoimport's branch in Baghdad, Krsto Grujovic, asks the company's Iraqi partners to hide all evidence that Orao and Jugoimport have been dealing with Iraq in case of a UN inspection.

[an error occurred while processing this directive]On 25 October, a Republika Srpska Defense Ministry special commission released a statement to the press admitting that it had discovered evidence at the Orao factory that proved the company was conducting illegal business with Iraq. Earlier, the ministry had said there were no such documents. A few days later, the government of Republika Srpska called a special session to discuss the crisis. During that session, the director of Orao, Milan Prica, and two high-ranking Republika Srpska Army officials were suspended. On 28 October, Republika Srpska Defense Minister Slobodan Bilic resigned along with the chief of the Republika Srpska Army, Novica Simic.

In Belgrade, the Yugoslav Defense Ministry, which is responsible for approving all types of military cooperation, denied the accusations. Serbian Interior Minister Dusan Mihajlovic, who is also the president of Jugoimport's board of directors, likewise denied any knowledge of assistance to Iraq, stating that there were no documents suggesting any kind of cooperation. Montenegrin President Milo Djukanovic also denied any knowledge of the issue.

Still, the detailed account of the companies' cooperation with Iraq published in Blic had an unexpectedly strong impact. Following the publication of the British and Yugoslav articles, the Yugoslav government sacked Jugoimport head Jovan Cekovic and Yugoslav Army General Ivan Djokic, who also serves as assistant to the Yugoslav defense minister. Djokic was responsible for controlling the movement of arms and military equipment.

Yugoslav President Vojislav Kostunica and Serbian Prime Minister Zoran Djindjic offered different perspectives on the recent crisis. According to Djindjic, the Iraqi affair is seriously damaging the country's international image. Djindjic pointed to the lack of civilian control over the Yugoslav Army as a grave problem. Kostunica, on the other hand, said that though he condemned the violation of UN sanctions and though the Iraqi affair was significant, he doubted it would damage Yugoslavia's image. Kostunica called on those responsible to be brought to justice, referring to Jugoimport's illegal dealings as "hazardous and highly irresponsible business moves."

Kostunica also said that the Iraqi affair was being used to attack Yugoslav institutions and his own political career, referring to criticism from political parties within the ruling Democratic Opposition of Serbia (DOS) coalition, led by Djindjic. Nenad Canak, president of the Vojvodina regional parliament, publicly stated that Kostunica should be held responsible for the crisis.

[an error occurred while processing this directive]