Black cloud over the Balkans

The status of Kosovo was supposed to be the last obstacle to solving the problems of the Balkans. Fa

Most people in the Balkans have seen the Kosovo train wreck coming for the past two years. But now that it is upon us, apart from some dark warnings, few have been able to spell out what the failure of talks on Kosovo's final status actually means.

The international significance of a debacle that reflects poorly on all participants is, by contrast, very clear: Russia and the United States have combined to humiliate the European Union. "They are clearly trying to undermine the EU - of that there is no doubt," a senior Brussels official told me recently.

For several months, both Russia and the US have in effect supported the maximalist demands of their chosen proxies in the Balkans: Serbia and Kosovo. This neutered the most recent negotiations of the US-EU-Russia troika, which were a last-ditch attempt to hammer out a compromise between Belgrade and Pristina. Serbia knew Russia would block Kosovo's independence in the United Nations, while Kosovo was secure in American support for a unilateral declaration of independence. Neither side had any incentive to compromise, and the EU was exposed again as incapable of managing a political crisis in its own backyard, while its taxpayers will be compelled to clear up the resulting mess.

Over the past decade, Brussels has channelled incalculable diplomatic and financial resources into the Balkans (far more money than either Washington or Moscow). The reasoning behind this expenditure is eminently sensible: as a consequence of the Yugoslav wars of the 1990s and the troubled transition from communism, the entire region has suffered from stunted development. This has enabled corrupt economic interests, chiefly from within the Balkans, but also from the EU and Russia, to turn the region into a playground for asset-grabbing, money laundering and other criminal activities.

By offering the inducement of huge infrastructural and financial support, the EU has persuaded the new leaderships in the Balkans to embark on far-reaching economic and political reforms. The EU's commitment has already had a stunning transformational impact on its two Balkan members, Romania and Bulgaria, not to mention Slovenia, the former Yugoslav republic that is now almost indistinguishable in character from Austria.

But the Kosovo crisis is casting a big black cloud over the hope that the remaining former Yugoslav territories would follow Slovenia's smooth passage into the EU. Croatia is likely to slip in before the door shuts. But the constitutional mess of Kosovo and Serbia may well keep that door closed, probably temporarily but perhaps for many years, as the crisis reverberates in Bosnia and Macedonia, and less directly in Montenegro and Albania.

So what happens now? In the long term, the question keeping EU officials awake at night concerns Serbia's membership of the EU. The enlargement commission and several key European foreign ministries have believed for some time that Serbia's admission is crucial for long-term stabilisation of the region, given its situation at the geographical heart of the Balkans.

Nonetheless, the major EU member states feel they have no choice but to follow Washington in recognising the UDI that Pristina is preparing. But most of them are doing so reluctantly - they know that, privately, UN officials in Kosovo predict that some 50,000 Serbs living south of the Ibar River will head to northern Mitrovica, the Serb enclave in Kosovo bordering on Serbia that is in effect governed from Belgrade; and that the recognition of an indep endent Kosovo will also result in the territory's de facto partition.

The sight of impoverished peasants throwing their worldly belongings on to the back of carts and trucks will make for an unedifying spectacle to accompany independence. But, though all sides in this dispute have long understood that partition would be a consequence of almost any solution, diplomatic cowardice has ensured that nobody has been prepared to articulate this clearly in public. So the independent state will be divided, with Belgrade retaining absolute control in the northern enclave.

Inelegant though a divided Kosovo might be, both sides can probably live with it. The epicentres of potential political earthquakes lie elsewhere. Zone one is Bosnia-Herzegovina, where the rule of a series of omnipotent European high representatives has disguised the profound weakness of the state fashioned in Dayton, Ohio. At stake is the very viability of Bosnia.

The most depressing symbol of the Bosnian Federation, which joins Catholic Croats and Muslim Bosniaks, is Mostar, the capital of Her zegovina. After 12 years, the two communities on either side of the Neretva River have nothing in common except a high school that Croat children attend in the morning and Bosniaks in the afternoon.

Meanwhile, the leadership of the Serbian entity in the east and north, Republika Srpska, reacts with open hostility to attempts by the current EU Special Representative, the Slovak Miroslav Lajcák, to centralise in anticipation of transferring more power to the government in Sarajevo. Serbia's prime minister, Vojislav Kostunica, is encouraging this intransigence as well as contributing to the outbreak of Putin-mania in both Serbia and Republika Srpska. The dour face of the Russian president stares down from kiosks throughout the two territories as the presumed new saviour of Serbia's interests.

The Bosnian state will feel the strain of Kosovan independence as Serbia, backed by Russia, toys with demanding the same rights of secession for Republika Srpska as the west has granted Kosovo.

What neither Kostunica nor other Serbs care to mention too often is how Russia was the main international sponsor of another "betrayal" of Serbian interests - the recent independence of Montenegro. Renamed Moscow-on-Sea by local wits, Montenegro has invited Russian oligarchs to replace cigarette smuggling as the profoundly corrupt state's main source of income. According to the Podgorica weekly magazine Monitor, Oleg Deripaska, Russia's aluminium king, now owns 40 per cent of the new country's indust rial capacity.

But apart from becoming the new money-laundering paradise of the Balkans, Montenegro presents fewer potential problems than southern Serbia and Macedonia. Here we must wait to see whether Kosovo's independence further discombobulates the fragile relationships between large Albanian minorities and the Slav majorities. Despite being an EU candidate member, Macedonia is coming under renewed pressure from Greece in the ludicrous dispute about the former country's official name. The argument may be arcane, but with Greece administering a veto on Macedonia's progress towards European and Nato integration, the implications are very serious.

And in Kosovo itself? The great headache is the economy - under UN and EU administration, the province has experienced a precipitous decline in GDP and frightening levels of un employment. This is a dismal record that underlines the hopeless inadequacy of the west's post-intervention policies. The territory is now thoroughly criminalised as a consequence, and it is hard to see how independence will change this in the short term.

Two to three years ago, the EU was on the way to solving the fundamental problems of the Balkans. Kosovo's status was the final, albeit very complex, obstacle to circumnavigate. The collective failure to do so has cast the region back into uncharted, choppy waters, where lie several concealed rocks.