Nearly ten months after the end of the Kosovo war, Slobodan Milosevic’s hold on political and economic power in Yugoslavia seems as strong as ever. Diplomatic isolation and economic sanctions have not significantly weakened his authority, in part because they have not been well enforced.

Today’s new report by the International Crisis Group reveals the important role played by the Serbian grain trade in sustaining the Belgrade regime. Grain exports – made possible in part by international food aid - account for fully 25 per cent of Serbia’s hard currency, and are bartered for oil and gas elsewhere. The report studies in detail the mechanisms used by the Milosevic regime to manipulate this trade: how it is used to generate vital foreign exchange, and thereby undercut the effectiveness of sanctions designed to dismantle the regime’s financial underpinnings.

ICG exposes the three main companies that act as Milosevic’s agents by regularly exporting Serbian grain in exchange for hard currency, Russian gas, or oil from Libya, Syria, or Iraq. The grain trade with Iraq – permitted under the UN oil-for-food program -is handled exclusively by the Yugoslav military’s defense procurement firm, a distinctly non-agricultural concern with a long history of cooperation with Iraq in the development of weapons technology.

ICG recommends that the new, more closely targeted sanctions developed by the European Union and effective as of 15 May be expanded to ban all EU trade in Serbian grain. The paper also argues for neighbouring non-EU countries to cease their involvement in this trade, and to be appropriately compensated for so doing by Western governments.

The new report also questions the wisdom of the international humanitarian assistance program for Serbia, through which grain continues to be delivered to this wheat-surplus nation, thereby freeing Serbia’s own grain for export.