Serbia throws "monkey wrench" into West's plans for Kosovo

By bne IntelliNews October 9, 2008

Dominic Swire in Prague -

The UN General Assembly has voted in favour of Serbia's bid to refer the issue of Kosovo's independence to the International Court of Justice. The move is a major diplomatic victory for Serbia's pro-EU government, which faced strong accusations earlier this year that they would not fight hard enough to maintain the country's territorial integrity.

The vote took place in New York on Wednesday, October 8, with 77 countries voting in favour of the move, six against and 74 abstaining. The International Court of Justice (ICJ) will now be asked to deliver an advisory, non-binding opinion on the legality of Kosovo's declaration of independence, a process that could take around two years.

The move "could throw a monkey wrench into the West's plans for Kosovo," warned James Lyon, a senior associate at the Democratization Policy Council, a Washington-based think-tank, just hours before the actual vote took place. Less than 50 states have recognized Kosovo's independence since its unilateral declaration on February 17, a figure far less than was originally hoped for. Lyon says the UN's decision is likely to grind further recognition to a standstill. "Many members of the EU who have not yet recognized Kosovo simply won't do so now because of the legal issue; and those that have will be increasingly reluctant to continue funding [the EU's mission to Kosovo] EULEX without a UN Security Council mandate," Lyon told bne.

The UN's decision will be seen as a major disappointment for Kosovo's ethnic-Albanian population, many of whom believed the corner had finally been turned this summer with the signing of a constitution that saw power transferred to Kosovo's institutions, and a donor conference in Brussels that raised over €1bn of investment. Tensions are likely to run high as a result.

Political stability

The latest move is in stark contrast to recent events, which appeared to be going the West's way. The Serb administration that pushed through the UN vote is strongly pro-EU. Prior to the general elections in May, the ultranationalist Radical Party, whose leader Vojislav Seselj is currently on trial in the Hague War Crimes Tribunal, was the favourite to take power. If the nationalists had won, both Kosovo and the EU would undoubtedly have a lot more to worry about.

Since then, Serbia's new coalition led by charismatic President and leader of the Democratic Party Boris Tadic has been commended for its rapid implementation of policy, the highlight of which was the shock arrest of war crimes fugitive Radovan Karadzic in July. Another huge achievement was the ratification of the Stabilisation and Association Agreement with the EU in September, a move that tore the country's nationalists apart with acting leader of the Radical Party, Tomislav Nikolic, leaving to form his own party in support of EU membership.

This has led to more optimistic noises coming out of the investment community. "Overall, we conclude that the degree of political risk is significantly lower than six months ago and that Serbia is on a stable EU track," states a recent assessment of politics in Serbia from Austria's Erste Bank.

Erste highlights a number of other positive surprises, including a falling unemployment rate from 18.8 to 14% in October (albeit helped by a new methodology), coupled with employment rising from 41.8% to 44.7% and GDP growth of over 7% for 2007, which should be replicated this year. Erste's analysts believe Serbia will be shielded from the brunt of the global credit crisis predicting GDP growth for 2009 will still be a respectable 6%. Investment has also started to flow in, with the most notable deal being Italian carmaker Fiat's $1bn takeover of the Zastava plant in central Serbia.

Certainly, it seems Serbia's politicians finally have something to cheer about. But Lyon warns that the most recent achievement in the UN is more likely to prolong agony than accelerate progress. "In the short term, Serbia's politicians will get brownie points from the electorate having done something about Kosovo. In the long term, in reality, it won't help Serbia. This will just maintain Kosovo as an open wound."

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