Western firms cut `D-Day' deals with Serbia

ANXIOUS not to be left out in the cold, Western companies are lining up to reestablish trading links with their Serbian counterparts, in the event that a sudden breakthrough in the peace process lifts United Nations sanctions.

The damaging economic embargo remains firmly in place, and hopes for a negotiated peace treaty rise and fall with every new attack. But the general willingness of President Slobodan Milosevic to cooperate with international mediators is prompting Western firms to seek Serbian business partners. Sticking to the letter of the sanctions, deals are being struck that would go into effect once the embargo is lifted.

So far, local businesses here have signed several hundred so-called ``D-Day'' contracts with foreign companies, according to Serbian officials. Some transactions are worth as much as $100 million. ``D-Day'' refers to the Allied invasion of Normandy in World War II.

``This county is going to be a tiger in Europe. Everyone knows our products are good,'' says Serbia's Small Business Minister, Radoje Djukic, himself a successful businessman. ``Once the sanctions are lifted a lot of people will want to buy from us - even if they think we're monsters.''

While most western observers disapprove of ``D-Day'' contracts, which violate the spirit if not the letter of the sanctions, they concede that such contracts are legal so long as neither goods nor money are exchanged.

``Officially, we do not support such trade, but we have to be realistic,'' says a European diplomat. ``Things are moving in a certain way, and we are trying to use the lifting of sanctions as a carrot.''

Firms from Italy and Germany - two of former Yugoslavia's principal trading partners before the war - are spearheading the business drive, competing for import/export deals and public-works projects.

Other western European countries have been slow out of the blocks. Some embassies here are still trying to get guidance from their governments on the legality of the ``D-Day'' business deals. ``It's outrageous - we're being left behind,'' says one diplomat.

Despite its pariah image and proximity to conflict, Serbia has managed to attract foreign companies because of its agricultural, industrial, and commercial potential.

The northern province of Vojvodina possesses some of the most fertile land in the region. Coal mines and hydroelectric plants in the South provide a surplus of energy; and small- to medium-sized businesses, now experts at beating the embargo, have proliferated under sanctions.

Although the economy remains in a parlous state - with industrial production running at about 30 percent - a stabilization program that the government introduced earlier this year has modestly improved economic performance.

Textile and furniture firms have benefited most from the upturn, and they are the focus of Western business interests.

Simpo, a leading furniture company, ranks among the more successful at picking up ``D-Day'' business. So far, it has signed five new contracts with Italian and German partners.

``We were strong in western Europe before sanctions,'' says Svetislav Ljubic, Simpo's deputy director. ``So when they were imposed, we kept in touch with our old customers continually traveling abroad.... That has now paid off.''