Serbian oil dilemma

The North Atlantic Treaty Organization is reluctant to send ground troops into Kosovo and sees cutting Serbia's oil supplies as a key strategy.

As reports continue to appear about "ethnic cleansing" of Kosovar Albanians by the forces of Serbian President Slobodan Milosevic, NATO has been bombing oil supply installations and is looking to curb tanker shipments.

On Apr. 29, for example, Yugoslav state news agency Tanjug reported that NATO fired missiles near Kosovo's provincial capital of Pristina, hitting a fuel store 3 km north of the city. Around the same time, NATO aircraft fired two missiles at a refinery in the Serbian city of Novi Sad.

NATO also said it would prevent tankers from delivering crude oil and products to Yugoslavia, but on May 2 denied it is planning a naval blockade to prevent tankers from reaching Yugoslavia's Adriatic Sea ports.

Instead, NATO said it will rely "primarily on a wide-reaching voluntary embargo" to shut down seaborne oil supplies to the Serbs and plans to set up a "visit and search" operation to stop tankers in the area. NATO estimated that 10 tankers deliver oil to Yugoslavia each day.

Serb supply/demand

In 1998, Serbia produced an average 18,000 b/d of crude oil and consumed 52,000 b/d, according to the U.S. Department of Energy.

Italy and Greece were the main exporters of crude oil and products to Yugoslavia last year, but other NATO members, including the U.K., regularly supplied the Serbs.

These countries agreed to a potentially more effective squeeze on Milosevic-a voluntary curb on oil exports to Yugoslavia, as part of a European Union ban on the delivery of crude and products to the Serbs beginning Apr. 30.

A NATO official said of the exports ban: "This is going to make it much more difficult for President Milosevic to get oil, and it's going to vastly drive up the price that he is going to have to pay on the black market for the small amount that he might still be able to get his hands on."

EU sanctions

In addition to the squeeze on oil exports to Yugoslavia, EU also extended a current freeze on funds and investment in Yugoslavia to include repairs to infrastructure damaged by NATO forces.

Italy and Greece were apparently persuaded to join in the EU exports ban only the addition of an exemption allowing supply of oil and products for humanitarian purposes and to aid EU diplomatic missions.

After signing U.K. legislation for the EU exports ban, U.K. Secretary of State for Trade and Industry Stephen Byers said, "The oil embargo will have a major effect on the ability of the Belgrade war machine to sustain military operations. Milosevic must understand that there will be no let-up in NATO's campaign to end his policy of ethnic cleansing in Kosovo."

However, one oil trader based in Piraeus, Greece, and quoted in London's Financial Times, raised doubts that the EU exports ban would prevent Milosevic from finding fuel for his forces.

"Be sure oil will still get to Yugoslavia," said the trader, "whatever the EU decides. The profits will be immense. And the way the Greeks feel about what's happening to the Serbs, they'll make sure they send it."