Opening Kosovo to foreign capital

by Michel Chossudovsky (3-3-00)

Copyright March, 2000. Please see end of article for conditions-for-use

Michel Chossudovsky is Professor of Economics at the University of Ottawa and author of The Globalization of Poverty, Impacts of IMF and World Bank Reforms, Third World Network, Penang and Zed Books, London, 1997.

In occupied Kosovo under the mandate of UN peace-keeping, State terror and the "free market" go hand in hand. The concurrent criminalisation of State institutions is not incompatible with the West's economic and strategic objectives in the Balkans. Notwithstanding the massacres of civilians, the self-proclaimed KLA administration has committed itself to establishing a "secure and stable environment" for foreign investors and international financial institutions.

The Minister of Finance Adem Grobozci and other representatives of the provisional government invited to the various donor conferences are all KLA appointees. In contrast, members of the KDL of Ibrahim Rugova (in duly elected parliamentary elections) were not even invited to attend the Stabilization Summit in Sarajevo in July 1999. More recently UNMIK Head Bernanrd Kouchner has called for the dissolution of Rugaova's parliament.

"Free market reforms" have been envisaged for Kosovo under the supervision of the Bretton Woods institutions largely replicating the structures of the Rambouillet agreement. Article I (Chapter 4a) of the Rambouillet Agreement stipulated that: "The economy of Kosovo shall function in accordance with free market principles". The KLA government will largely be responsible for implementing these reforms and ensuring that loan conditionalities are met.

In close liaison with NATO, the Washington based financial institutions had already analyzed the consequences of an eventual military intervention leading to the occupation of Kosovo: almost a year prior to the beginning of the War, the World Bank conducted "simulations" which "anticipated the possibility of an emergency scenario arising out of the tensions in Kosovo". 1

While the bombing was still ongoing, the World Bank and the European Commission were given a special mandate for "coordinating donors' economic assistance in the Balkans"2. The underlying terms of reference did not exclude Yugoslavia from receiving donor support. It was, however, clearly stipulated that Belgrade would be eligible for reconstruction loans "once political conditions there change".3.

With regard to Kosovo, the World Bank rather than providing loans to rebuild the province's infrastructure has focussed its intervention on providing "assistance in designing the reconstruction and recovery program" as well as so-called "policy advice in economic management" and "institution building" namely "governance" 4. In other words, an army of lawyers and consultants have been sent in to ensure Kosovo's transition to a "thriving, open and transparent market economy." 5

Support granted to the KLA provisional government would be geared towards "the establish[ment] [of] transparent, effective and sustainable institutions" 6. An "enabling environment" for foreign capital is to be established alongside suitably devised "social safety nets" and "poverty alleviation programs".

Meanwhile, Yugoslav State banks operating in Pristina have been closed down. The Deutschmark has been adopted as legal tender and the banking system has been handed over to Germany's Commerzbank A.G which is the sole private shareholder in Micro Enterprise Bank (MEB) formed in early 2000 at the initiative of the World Bank's International Finance Corporation (IFC), the European Bank for Reconstruction and Development (EBRD) together with the Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden (FMO), Germany's Internationale Micro Investitionen (IMI) and Kreditanstalt für Wiederaufbau (KfW). Commerzbank AG will gain control over commercial banking functions for the province including money transfers and foreign exchange transactions.7

The Trebca Mines

The "reconstruction" of Kosovo financed by international debt largely purports to transfer Kosovo's extensive wealth in mineral resources and coal to multinational capital. In this regard, the KLA had already occupied (pending their privatization) the largest coal mine at Belacevac in Dobro Selo northwest of Pristina. In turn, foreign capital had its eyes riveted on the massive Trepca mining complex which constitutes "the most valuable piece of real estate in the Balkans, worth at least $5 billion." 8 The Trebca complex not only includes copper and large reserves of zinc but also cadmium, gold, and silver. It has several smelting plants, 17 metal treatment sites, a power plant and Yugoslavia's largest battery plant. Northern Kosovo also has estimated reserves of 17 billion tons of coal and lignite.

The management of some of the State owned enterprises and public utilities were taken over by KLA appointees. In turn, the leaders of the Provisional Government of Kosovo (PGK) have become "the brokers" of multinational capital committed to handing over the Kosovar economy at bargain prices to foreign investors.

In the wake of the bombings, the Zvecan smelter (belonging to the Trebca Complex) located northwest of Mitrovica, however, remained under Serb management.9 In July 1999, UNMIK head of mission Bernard Kouchner issued a decree to the effect that: "UNMIK shall administer movable or immovable property, including monetary accounts, and other property of, or registered in the name of the Federal Republic of Yugoslavia or the Republic of Serbia or any of its organs, which is in the territory of Kosovo".10.

In November 1999, the International Crisis Group(ICG) a think tank supported by Financier George Soros, issued a paper on "Trepca: Making Sense of the Labyrinth" which advised the United Nations Mission in Kosovo (UNMIK) "to take over the Trepca mining complex from the Serbs as quickly as possible and explained how this should be done" prior to their eventual privatization.11<7a>

Meanwhile, the George Soros Foundation for an Open Society had opened a branch office in Pristina establishing the Kosovo Foundation for an Open Society (KFOS) as part of the Soros' network of "non-profit foundations" in the Balkans, Eastern Europe and the former Soviet Union. Together with the World Bank's Post Conflict Trust Fund, the Kosovo Open Society Foundation (KOSF) will be providing "targeted support" for "the development of local governments to allow them to serve their communities in a transparent, fair, and accountable manner."12 Since most of these local governments are in the hands of KLA appointees, this program is unlikely to meet its declared objective. Out of the 20 million dollars budget for this program, only one million dollars is being provided by the World Bank.


1. World Bank Development News, Washington, 27 April 1999.

2 World Bank Group Response to Post Conflict Reconstruction in Kosovo: General Framework For an Emergency Assistance Strategy, undated).

3. Ibid

4. Ibid

5. Ibid

6. World Bank, The World Bank's Role in Reconstruction and Recovery in Kosovo,, undated)

7. International Finance Corporation (IFC), International Consortium Backs Kosovo's First Licensed Bank, Press Release, Washington, 24 January 2000.

8. New York Times, July 8, 1998, report by Chris Hedges.

9. See Diana Johnstone, How it is done, Taking over the Trepca Mines: Plans and Propaganda, Emperors Clothes, 28 February 2000.

10. Quoted in Johnstone, op. cit.

11. See Johnstone, op cit. For the ICG report see

12. World Bank, KOSF and World Bank, World Bank Launches First Kosovo Project, Washington, November 16, 1999 News Release No. 2000/097/ECA.

C Copyright by Michel Chossudovsky, Ottawa, February 2000. All rights reserved. Permission is granted to post this text on noncommercial community internet sites, provided the essay remains intact and the copyright note is displayed. The text can also be photocopied for non-commercial distribution. To publish this text in printed and/or other forms contact the author at or fax: 1-514-4256224.

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