Serb-Kosovo trade hits hurdles, smuggling thrives

By Ivana Sekularac and Shaban Buza

BELGRADE/PRISTINA (Reuters) - The red box of the buttery 'Plazma' cookie, one of ex-Yugoslavia's best-loved snacks, offers a quick introduction to the dilemma of businesses trapped in the political tussle between Serbia and Kosovo.

Belgrade, which vows never to accept the secession of the Albanian-majority territory, wants product labels to refer to Kosovo as part of Serbia, drawing on its constitution and on laws that ban "false advertising".

Kosovo, however, insists that all products on sale in the new state must include details for the 'Republic of Kosovo', the name it took at its February 17 independence proclamation.

In a strange compromise, the Plazma box lists the cookie's Kosovo distributor under the country section for Albania. It is a sign of the uncertainty and confusion that has cut the robust trade between Serbia and Kosovo by half in a single month.

"According to our figures, trade between Kosovo and Serbia dropped by 50 percent since February 17," said Milovan Spasic of the Kosovo Chamber of Commerce, a Belgrade-based Serbian government office that treats Kosovo like any other province.

"The decline is due to uncertainty over how institutions on either side will react and what regulations will be introduced."

Kosovo is recognized by 30 states, but its United Nations membership is blocked by Serbia's ally Russia. Meanwhile, firms either side of the border play cat-and-mouse with bureaucrats, or take the easy way out by smuggling.

In a rival "Kosovo Chamber of Commerce" in Kosovo's capital Pristina, an official said Serbian goods were entering Kosovo

"easier than before", especially since ethnic Serbs in north Kosovo had burnt customs posts in protest at the secession.

"Trade is like water, it finds a channel," said the official, who spoke on condition of anonymity. "For example, we know that some 20 fuel tanker trucks enter Kosovo each day from the north with no papers."

COWS, DRUGS, JEANS

There is no single reliable estimate of the volume of trade between Serbia and Kosovo.

Serb sources say that in 2007 it was $200 million, mostly Serb exports of construction material and machinery, with smuggling accounting for an additional $50 million a year.

Kosovo estimates are much higher at around $750 million, $450 million of that illegal.

"The most commonly smuggled goods are cattle, narcotics and jeans," said Dejan Jovovic of Serbia's Chamber of Commerce.