United Nations

A/50/423


General Assembly

Distr. GENERAL  

12 September 1995

ORIGINAL:
ENGLISH


Fiftieth session
Item 20 (b) of the provisional agenda*


         STRENGTHENING OF THE COORDINATION OF HUMANITARIAN AND DISASTER
         RELIEF ASSISTANCE OF THE UNITED NATIONS, INCLUDING SPECIAL
         ECONOMIC ASSISTANCE:  SPECIAL ECONOMIC ASSISTANCE TO INDIVIDUAL
COUNTRIES OR REGIONS

Economic assistance to States affected by the implementation of
the Security Council resolutions imposing sanctions against the
Federal Republic of Yugoslavia (Serbia and Montenegro)

Report of the Secretary-General


CONTENTS

  Paragraphs  Page

I.  INTRODUCTION .........................................1 - 33

II.  BACKGROUND:  RECENT ACTION TAKEN BY THE SECURITY
  COUNCIL ..............................................4 - 233

  A.  Action taken by the Security Council .............5 - 104

  B.  Action taken by the Security Council Committee
      established pursuant to resolution 724 (1991)
      concerning Yugoslavia ............................11 - 185

  C.  Follow-up to "An Agenda for Peace" ...............19 - 238

III.  INFORMATION REGARDING ECONOMIC ASSISTANCE TO THE
  AFFECTED STATES ......................................24 - 689

  A.  Information received from States .................26 - 3910



______________________

  *  A/50/150.

95-27591 (E)   290995/...
*9527591*
CONTENTS (continued)

  Paragraphs  Page

  B.  Response of the United Nations system ............40 - 6214

  C.  Follow-up to regional initiatives and assistance
      arrangements .....................................63 - 6819

IV.  CONCLUSIONS ..........................................69 - 7321

I.  INTRODUCTION


1.   In its  resolution 49/21  A of  2 December  1994, the  General Assembly
expressed concern  at the persisting  special economic problems  confronting
States,  in  particular the  States  that  border  the  Federal Republic  of
Yugoslavia  (Serbia and  Montenegro), the  other Danube  riparian States and
all  other States  adversely affected  by  the  severance of  their economic
relations  with  the  Federal Republic  and  the  disruption  of traditional
transport and  communications links  in that part  of Europe.   At the  same
time, the Assembly recognized the urgent  need for a concerted response from
the international  community  to  deal  more effectively  with  the  special
economic problems of the affected States in view of their magnitude and  the
adverse impact of the sanctions on those States.

2.  In the same  resolution, the General Assembly  invited the international
financial institutions to continue to pay  special attention to the economic
problems  of the  affected States  arising  from  the implementation  of the
sanctions and their adverse  social impact and to consider, inter alia,  how
the existing  facilities of the International  Monetary Fund  (IMF) might be
helpful to the States  concerned, with a  view to alleviating their  special
economic problems, and how consultative group  meetings of the International
Bank  for Reconstruction  and Development  for  the countries  in  question,
scheduled for 1995, might further help  to mobilize additional resources  to
mitigate  the losses  and costs incurred  by those countries.   The Assembly
also requested the competent organs,  programmes and specialized agencies of
the United Nations system to take  into consideration, in programming  their
development activities,  the special  needs of  the affected  States and  to
consider  providing  assistance   to  them  from  their  special   programme
resources.   Further, the  Assembly renewed  its appeal to all  States on an
urgent  basis  to  provide  immediate  technical,  financial  and   material
assistance to the affected  States to mitigate  the adverse effect on  their
economies   of  the  application  of  the  sanctions,  inter  alia,  through
consideration of  the  provision of  assistance  for  the promotion  of  the
exports of the  affected countries and for  the promotion of investments  in
those countries.

3.   Furthermore, the  General Assembly,  in the  same resolution, requested
the Secretary-General to continue to seek,  on a regular basis,  information
from States  and the concerned  organs and  agencies of  the United  Nations
system on  action taken to  alleviate the special  economic problems of  the
affected States and to  report thereon to  the Security Council, as well  as
to submit a report  on the implementation of the resolution to the  Assembly
at its  fiftieth session.  The present  report was  prepared in  response to
that request.


II.  BACKGROUND:  RECENT ACTION TAKEN BY THE SECURITY COUNCIL

4.   The report of  the Secretary-General prepared  pursuant to  the note by
the President  of the Security Council  (S/25036) regarding  the question of
special economic problems of  States as a result of sanctions imposed  under
Chapter  VII  of  the  Charter  of  the  United  Nations  (A/48/573-S/26705)

contains  a section (see  paras. 39-46)  on the initial action  taken by the
Security Council,  under the  provisions of  Article 50  of the  Charter, in
response to  requests for assistance submitted  by eight  States affected by
the  sanctions against  the  Federal  Republic  of  Yugoslavia  (Serbia  and
Montenegro).    Moreover,  the background  information  on  the  matter  was
updated for the period ending  1 August 1994  in the previous report of  the
Secretary-General  on  "economic  assistance  to  States  affected  by   the
implementation  of  the  Security  Council  resolutions  imposing  sanctions
against  the  Federal  Republic  of  Yugoslavia  (Serbia  and   Montenegro)"
(A/49/356, chap. II).   Since then, the  Security Council and its  Committee
established pursuant  to resolution  724 (1991)  concerning Yugoslavia  have
taken  a series of steps that may  have a direct or indirect  bearing on the
neighbouring and other affected States.   The relevant decisions adopted  by
the Council and the  Committee from August 1994 to August 1995 are  reviewed
below.


A.  Action taken by the Security Council

5.  During  the period under review, the  Security Council adopted a  number
of decisions aimed at fine-tuning the  sanctions regime against the  Federal
Republic  of Yugoslavia (Serbia  and Montenegro)  with a  view to maximizing
its  political   impact  and  minimizing  its   collateral  damage  to   the
neighbouring and  other affected countries.   As regards the  latter, it has
been the Council's practice to grant partial or  limited exemptions from the
sanctions  under exceptional  circumstances, on  a case-by-case  basis,  and
under  appropriate forms of  monitoring or control.   In several cases, such
measures  were  taken  by  the  Council in  response  to  requests from  the
neighbouring and other Danube riparian States.

6.  By its resolution 943 (1994) of 23 September 1994, the Security  Council
decided, inter  alia, to  suspend, for  an initial  period of  100 days  and
subject  to the effective  closure of  the international  border between the
Federal Republic of Yugoslavia (Serbia and  Montenegro) and the Republic  of
Bosnia and Herzegovina with respect to  all goods except foodstuffs, medical
supplies  and  clothing  for  essential  humanitarian  needs,  the  relevant
restrictions relating  to (a)  all civilian  passenger flights  to and  from
Belgrade;  (b)  the ferry  service between  Bar in  the Federal  Republic of
Yugoslavia (Serbia and Montenegro) and Bari  in Italy; and (c) participation
in  sporting and cultural exchanges. Subsequently, the  Security Council, by
its resolutions 970  (1995) of 12 January 1995, 988 (1995) of  21 April 1995
and  1003  (1995)  of  5  July  1995,  extended  the   suspension  of  those
restrictions until 18 September 1995.

7.  In a letter  dated 14 December  1994 (S/1994/1418) from the Chairman  of
the  Security  Council Committee  established  pursuant  to  resolution  724
(1991)  concerning  Yugoslavia,   the  Council  was   informed  of  a  major
resurgence of  diphtheria in several countries  in central  Asia and eastern
Europe, and  of the  fact that  the only  available stocks of  anti-serum to
combat that  serious  condition were  located  in  the Federal  Republic  of
Yugoslavia  (Serbia   and  Montenegro).     In   view  of  the   exceptional
humanitarian circumstances of  the situation, the Security Council  adopted,
on the same day, resolution 967  (1994) permitting, for a period of 30 days,
the  export  of 12,000  vials  of  diphtheria  anti-serum  from the  Federal
Republic of  Yugoslavia (Serbia  and Montenegro)  as an  exemption from  the
mandatory sanctions against  that country, in particular from subparagraph 4
(a) of resolution 757 (1992).

 8.   Following  another recommendation  of  the  Committee, contained  in a
letter  dated  8 May  1995  (S/1995/372)  from  its  Chairman, the  Security
Council made a  temporary exemption from  the provisions of paragraph  16 of
resolution  820 (1993) relating  to the  restrictions for  navigation on the
Danube  River.  By  its resolution  992 (1995) of 11  May 1995, the Security
Council  decided, inter alia,  to permit  the use by vessels  of the Federal
Republic of  Yugoslavia (Serbia  and Montenegro) of  the locks  of the  Iron
Gates  I system  on the  left-hand bank  of  the  Danube while  repairs were

carried out to the locks on  the right-hand bank.  This  measure was adopted
in view  of the  exceptional circumstances  and at  the request  of Romania,
supported  by other Danube  riparian States,  the Danube  Commission and the
European   Union/Organization  for   Security  and  Cooperation   in  Europe
(EU/OSCE)  Sanctions  Coordinator, who  stressed  the  importance  for  safe
international  navigation on  the Danube  of the  Iron Gates I  system being
properly  maintained and repaired in  a timely manner.   The resolution came
into force  on 23 June  1995 and, upon the expiration  of the initial period
of  60  days, has  remained in  effect  for  another period  of 60  days (22
August-20 October 1995), after the Committee  had notified the Council  that
such  further period was  required for  completion of  the necessary repairs
(S/1995/705).

9.  In the  same resolution, the Security  Council recalled statements  made
by its President on the freedom of navigation  on the Danube, in  particular
that made  on 13  October 1993  (S/26572), and  noted that  flag States  may
submit  claims to  the authorities  in  the  Federal Republic  of Yugoslavia
(Serbia  and Montenegro)  for reimbursement  of tolls  illegally imposed  on
their vessels transiting the section of the  Danube that passes through  the
territory of the Federal Republic.

10.   In  other related  developments,  the  Security Council  requested, on
several occasions,  that its  Committee established  pursuant to  resolution
724 (1991)  concerning Yugoslavia  adopt appropriate  streamlined procedures
for  expediting  its  consideration of  applications  concerning  legitimate
humanitarian  assistance,  as  well  as  proposals   aimed  at  making   the
procedures of  the  Committee more  transparent.    By its  resolution  1003
(1995), the Security Council noted with  satisfaction that the Committee had
adopted   streamlined  procedures   for  expediting   its  consideration  of
applications concerning  legitimate humanitarian  assistance, as  well as  a
number of  measures facilitating  legitimate transshipments  via the  Danube
River.  These steps are outlined below.


         B.  Action taken by the Security Council Committee established
             pursuant to resolution 724 (1991) concerning Yugoslavia

11.  The Security Council Committee  established pursuant to resolution  724
(1991) concerning  Yugoslavia has the  central responsibility of  monitoring
the compliance with, and assisting in  the implementation of, the  mandatory
sanctions  imposed  on  the  Federal  Republic  of  Yugoslavia  (Serbia  and
Montenegro). 1/  In accordance with  the revised consolidated guidelines for
the conduct of its work, the Committee deals  with a wide range of  incoming
communications, including those  that contain notifications to, or  requests
for authorization  by, the Committee for  certain activities  with regard to
the Federal Republic.  A substantial  proportion of those applications comes
from  the neighbouring  countries, the  Danube riparian  countries and other
affected countries in the region, and involves their economic interests.
  12.   During the period under review, the Committee authorized, as limited
exemptions  from the  sanctions regime  under exceptional  circumstances,  a
number of  specific requests from several  States adversely  affected by the
sanctions. These include:

  (a)   A  request  from Albania  for  the transit  passage  from  Bulgaria,
Romania and  Turkey, through the electric power grid of the Federal Republic
of Yugoslavia (Serbia and  Montenegro), of 10 million kilowatt hours per day
for the period of one month;

  (b)   Requests from Hungary for  the activities  of Hungarian ice-breakers
on  the  Yugoslav  reaches of  the Danube  River, and  for  the supply  of a
certain amount of fuel  for the operation of those ice-breakers; and for the
transshipment  through  the  Federal  Republic  of  Yugoslavia  (Serbia  and
Montenegro)  of a dredging  vessel from Slovakia,  via the  Danube and Tisza
Rivers;

  (c)   A  request  from Romania  to  deliver  to  the Federal  Republic  of

Yugoslavia (Serbia and Montenegro) certain amounts  of fuel oil, diesel  oil
and motor oil for the exclusive  purpose of ensuring the  normal functioning
of the Iron Gates hydroelectric and navigation system on the Danube;

  (d)    Requests from  the former  Yugoslav Republic  of Macedonia  for the
removal of 13,000 tons  of welded steel pipes  from the Federal  Republic of
Yugoslavia (Serbia and Montenegro),  where the consignment was blocked since
August-September 1992, while in transit; for  the transit of three  electric
motor  trains  through  the  Federal  Republic  of  Yugoslavia  (Serbia  and
Montenegro);  and  for the  transshipment through  the  Federal Republic  of
Yugoslavia (Serbia and Montenegro) of 10,500  metric tons of railway  tracks
from Ukraine.

13.    By  its resolution  943  (1994),  the  Security  Council  invited the
Committee   established  pursuant   to  resolution   724  (1991)  concerning
Yugoslavia to  adopt appropriate streamlined  procedures for expediting  its
consideration    of   applications    concerning   legitimate   humanitarian
assistance.  By Security Council  resolutions 970 (1995) and 988 (1995), the
Committee was requested to  expedite that work  and to give priority to  its
consideration    of   applications    concerning   legitimate   humanitarian
assistance.

14.  In response, the  Committee set up an informal working group to  devise
appropriate  streamlined  procedures.   On  1 February  1995,  the Committee
decided  that   applications   from   international   and   non-governmental
humanitarian  agencies, as  well  as applications  concerning  the  personal
belongings of individuals, should be processed on a  priority basis.  It was
also  decided that requests from international humanitarian agencies for the
transshipment  of humanitarian  items through  the territory  of the Federal
Republic of Yugoslavia (Serbia and Montenegro)  by land would be  considered
under the "no-objection" procedure.

15.  On 27 June 1995, following its 126th meeting,  the Committee approved a
series   of  additional  recommendations   of  its   working  group  on  its
streamlined rules and procedures, which should  be read in conjunction  with
the revised consolidated guidelines of the Committee for  the conduct of its
work.  The first  group of these improvements, aimed at expediting  matters,
includes the following measures:
    (a)  As of 1 August 1995, the  Committee's application forms for exports
to, or transshipments through,  the Federal Republic  of Yugoslavia  (Serbia
and  Montenegro)  have  been  amended  to  include:     (i)  space  for  the
itemization of  goods and  information on  their end-use  or end-user;  (ii)
space for  inclusion of the  appropriate six-digit harmonized  international
tariff  code; and  (iii) a  notice  indicating  that applications  should be
accompanied  by   supporting  financial  information   such  as  bona   fide
contracts,  letters of credit or other documentation demonstrating a similar
intent   to  enter   into  a   transaction.  Applications   providing   this
information,  when   appropriate,   receive  priority   processing  by   the
Committee,  with a view  to speeding up their  consideration and the passage
of goods at the authorized border-crossing points;

  (b)  Kalotina and  Dragoman in Bulgaria  are now treated by the  Committee
as a single border-crossing point;

  (c)   The period of validity of the Committee's letters of acknowledgement
and approval has been extended from three to six months, with no  extensions
permitted  (however,  fresh  applications  for  the  same  goods  could,  if
necessary, be made at the end of the six-month period).

16.    Of particular  importance  to  the  neighbouring  and other  affected
countries in the region  is a second  group of measures, which are  intended
to facilitate legitimate transshipments via the  Danube River.  In  response
to  information  and  assurances  received  from  the  Sanctions  Assistance
Missions Communications Centre (SAMCOMM) in Brussels, the Committee  decided
to consider requests  from States for  authorizations for specified shipping
companies to transship unlimited quantities  of certain materials  along the

Danube  under a set  of specific  conditions designed  to ensure appropriate
monitoring and control.  Among them,  a potentially positive economic impact
on the affected countries may have the following provisions:

  (a)    Goods that  can be  considered  for authorization  under these  new
procedures are  iron  ore and  aggregates (sand,  gravel, slag),  non-coking
coal, steel coils and  slabs.  Goods should  be described on applications in
accordance  with normal customs  procedures; the  Committee will  review the
list  after three  months;  if  no  violations  take  place  under  the  new
procedures, it may decide, at that time, to extend them;

  (b)   Shipping companies  making applications  to transship  goods via the
Danube  under the new procedures must have a clear record of activity on the
Danube; the  Committee will  rely on  the advice  of States  and bodies  and
organizations such as the Danube Commission and SAMCOMM for this purpose;

  (c)  States,  with the assistance of SAMCOMM,  must continue to make  full
inspections  of all  vessels and  shipments  on the  Danube.   The Committee
requests   States,  with  the  assistance  of  SAMCOMM,  to  undertake  full
monitoring at  Calafat (Romania)/Vidin (Bulgaria)  and at Mohacs  (Hungary).
Vessels inspected  at loading and sealed  by the  Ukrainian authorities with
the assistance of SAM  Ukraine at Ismail need not be reinspected unless this
is  considered  necessary  by  the  local   authorities  on  the  basis   of
information supplied by SAMCOMM or for other reasons;

   (d)   The Committee does not  require the presence  of monitors on  board
vessels  authorized by it to transship the products permitted under this new
procedure.   However, the shipping companies concerned should instruct their
ship  masters   to  provide  information   to  SAM/Western  European   Union
debriefing teams.

17.   By a note  verbale dated  3 July 1995 (SCA/8/95(11)),  the Chairman of
the Committee apprised all  States of the adoption  by the Committee  of its
streamlined rules and procedures and of  the Committee's decision to  review
all those  procedures after a three-month  trial period.   Under cover of  a
letter  dated  17  July  1995,  the  Under-Secretary-General  for  Political
Affairs  communicated,  on behalf  of  the  Committee's Chairman,  the  same
information to the  competent organs, programmes and specialized agencies of
the  United  Nations system  as  well  as other  international organizations
concerned.   It  was the  Committee's belief  that the  new procedures would
significantly  reduce  the  delays  in  its  consideration  of  applications
concerning   legitimate   humanitarian   assistance  and   would  facilitate
legitimate trade  on the  Danube.  The  Committee also  decided to  consider
further ways  in which  humanitarian deliveries  could be  expedited and  to
keep the  question  of  restrictions  on trade  on  the Danube  under  close
review.

18.  At its 126th meeting, held on 27 June 1995,  the Committee put in place
a  number  of measures  aimed  at  making  the  Committee's procedures  more
transparent,  as recommended  by  the Security  Council in  the note  of its
President  dated 29  March 1995  (S/1995/234).   To that  end, the Committee
decided, inter  alia, to  increase the  practice of  issuing press  releases
reflecting the  most  important matters  discussed  at  the meetings.    The
Committee also decided to make available  to any delegation lists indicating
the status of  communications processed under the "no-objection"  procedure,
as  well as  lists  of  major decisions  adopted  by the  Committee  at  its
meetings,  to be  prepared on  a monthly  basis.   An annual  report to  the
Security Council on the Committee's activities  would also be prepared.  The
implementation  of   these  measures   should  significantly   increase  the
transparency  of the Committee's  procedures in the conduct  of its work and
further  enhance the Committee's  effectiveness in  carrying out the mandate
entrusted to it by the Security Council.


C.  Follow-up to "An Agenda for Peace"

19.  In the document entitled  "Supplement to an Agenda for Peace:  position
paper of the Secretary-General on the  occasion of the fiftieth  anniversary
of   the   United   Nations"   (A/50/60-S/1995/1),   the   Secretary-General
highlighted, inter alia, key issues in the area  of sanctions as one of  the
instruments  for  peace  and security  "where  unforeseen,  or  only  partly
foreseen, difficulties have arisen and where there is  a need for the Member
States to  take the 'hard  decisions'" (para. 6).   In  paragraph 73  of the
report, the  Secretary-General  noted that  "there  is  an urgent  need  for
action to respond to the expectations raised by  Article 50 of the  Charter.
Sanctions  are  a  measure  taken  collectively  by  the  United  Nations to
maintain or restore international peace and  security. The costs involved in
their application, like other such costs  (e.g., for peacemaking and  peace-
keeping activities), should be borne equitably  by all Member States and not
exclusively by  the few who have  the misfortune to  be neighbours or  major
economic partners of the target country".
  20.   In  order  to address  the problems  in the  area of  sanctions, the
Secretary-General  suggested  the  establishment   at  the  United   Nations
Secretariat of a mechanism to  carry out several important functions in that
regard.  In particular, the proposed mechanism  would assist the Council  to
assess  the potential impact of  sanctions, to measure their  effects and to
explore  ways of  assisting  Member  States  that are  suffering  collateral
damage and  to evaluate  claims submitted by  such States under  Article 50.
To this  end, it  should  be empowered  to utilize  the expertise  available
throughout the  United Nations  system, in  particular that  of the  Bretton
Woods institutions.

21.   The Security  Council considered the position  paper of the Secretary-
General  (A/50/60-S/1995/1) at its  3492nd and  3503rd meetings,  held on 18
and 19 January and 22 February 1995, respectively.

22.   In  a  statement  on behalf  of  the  Security Council,  made  by  its
President  on  22  February  1995  (S/PRST/1995/9),  it  was  the  Council's
position  that appropriate  consideration  should be  given  to  submissions
received from  neighbouring or  other  States affected  by special  economic
problems  as  a  result  of the  imposition  of  sanctions.    In  the  same
statement,  the Council  urged  the Secretary-General  to  take  appropriate
steps to reinforce those sections of  the Secretariat dealing directly  with
sanctions and their various  aspects so as to ensure that all these  matters
be addressed in  as effective, consistent  and timely a manner  as possible.
Further, the Council welcomed the Secretary-General's efforts  to study ways
and means of addressing the various aspects related to sanctions.

23.   In a  letter dated  31 May  1995, addressed  to the  Secretary-General
(S/1995/440), the  President of  the Security  Council  stated, inter  alia,
that the  members of the  Council welcomed the  recent increase  in staff to
support the  sanctions committees,  and looked  forward to  a report  in due
course on  whether that  increase had  decreased the  backlog in  processing
applications to these committees.


                III.  INFORMATION REGARDING ECONOMIC ASSISTANCE
                      TO THE AFFECTED STATES

24.  Originally,  the reporting procedure on information regarding  economic
assistance  provided by  the  international community  to  States  adversely
affected by the implementation of sanctions  imposed on the Federal Republic
of  Yugoslavia (Serbia  and Montenegro)  was  established by  the Secretary-
General pursuant  to the relevant  recommendations of  the Security  Council
(S/26040 and Add.1 and 2).  In a series of communications addressed,  during
1993-1994, to all States as well as to  the competent organs and specialized
agencies  of  the   United  Nations  system,  including  the   international
financial institutions  and the regional  development banks, the  Secretary-
General requested them to provide him, on  a regular basis, with information
on  action taken or contemplated  by them to alleviate  the special economic
problems of the affected States (see A/49/356, para. 10).

25.   Pursuant to  General Assembly  resolution 49/21  A, entitled "Economic
assistance to States affected by the  implementation of the Security Council
resolutions imposing  sanctions against the  Federal Republic of  Yugoslavia
(Serbia  and  Montenegro)",  a note  verbale  by  the  Secretary-General was
circulated  on 9 May 1995 to Governments inviting them to submit information
on the  matter. In  addition, by  a set of  letters dated  16 May 1995,  the
Under-Secretary-General  for  Economic and  Social  Information  and  Policy
Analysis  requested,  on behalf  of  the  Secretary-General,  the  competent
organs, programmes  and specialized agencies of  the United Nations  system,
including  the international financial institutions, as well as the regional
organizations  concerned,  to   furnish  him  updated  information  on   the
activities undertaken by them  in response to the relevant provisions of the
resolution.  Substantive features of the replies are outlined below.


A.  Information received from States

26.  As of 1 September 1995, the  Secretary-General had received replies  to
the  note  verbale from  seven  States,  namely, Belgium,  Finland,  France,
Germany,  Italy, Luxembourg  and the  United  Kingdom  of Great  Britain and
Northern Ireland.  In addition, five  affected countries, Bulgaria,  Greece,
the Republic  of Moldova, Romania  and Ukraine,  addressed, collectively  or
individually,  letters  to  the  Secretary-General  regarding  the  negative
impact of the sanctions on their economies, as indicated below.


1.  Affected countries

27.    In  a  letter   dated  18  April  1995  (S/1995/313),  the  Permanent
Representative  of  Greece to  the  United  Nations informed  the Secretary-
General  and the  members of  the Security  Council that  the  Ministers for
Foreign Affairs  of Bulgaria, Greece, the  Republic of  Moldova, Romania and
Ukraine had adopted,  on 14 April  1995, in  Athens, a  joint statement,  by
which they had agreed  to undertake a collective  demarche to the Secretary-
General and  the  Security Council  addressing  the  issue of  the  negative
impact of the sanctions against the  Federal Republic of Yugoslavia  (Serbia
and  Montenegro) both  on  the  affected countries  and on  the region  as a
whole.    In the  statement, the  Ministers asserted,  inter alia,  that, by
virtue  of  the geographical  situation  of  their countries,  the sanctions
against  the Federal  Republic  of Yugoslavia  (Serbia  and  Montenegro) had
caused significant direct and indirect losses  to their economies, and  that
the burden  of the sanctions was exceeding the reasonable  point of economic
and  social tolerance.   Moreover, the  implementation of  the sanctions, in
their  view, could  have a  considerable  long-term  negative impact  on the
overall political, economic,  security and social situation in the  affected
third countries and the region as a whole.

28.   In a  letter dated 18  May 1995  (A/50/189-S/1995/412), the  Permanent
Representatives of Bulgaria, Greece,  the Republic of  Moldova, Romania  and
Ukraine  to the  United Nations,  on behalf  of their Ministers  for Foreign
Affairs,  transmitted  to  the Secretary-General  a  letter  related to  the
special economic problems of  States directly affected by the implementation
of the Security  Council resolutions imposing  trade and  economic sanctions
against  the Federal Republic  of Yugoslavia  (Serbia and  Montenegro).  The
letter outlines a number  of steps that  should be taken, in their  opinion,
as  a matter of priority.   These include:   (a)  speeding up the procedures
for  processing the  applications, as  well  as  general enhancement  of the
capabilities of  the  Sanctions Committee,  with  a  view to  treating  most
expeditiously and  on  a priority  basis  the  numerous submissions  of  the
affected States;  (b) easing  the access  of companies  from the  interested
affected countries  to orders by  United Nations humanitarian  organizations
for rendering  humanitarian assistance  to Bosnia  and  Herzegovina and  the
Federal Republic  of Yugoslavia (Serbia and  Montenegro); (c) allocation  of
additional  financial resources  in order  to carry out  long-term transport
infrastructure  projects;  (d) additional  measures  or  special  assistance
projects  in  the   areas  of  telecommunications,  energy,  water   supply,

environment etc.; (e)  enhanced technical assistance and analytical  support
of the international  financial institutions  for the objective estimate  of
losses  and  their  impact on  the  balance  of  payments  and  the national
economies of  the  affected countries;  and  (f)  elaboration of  a  special
mechanism to address  effectively and systematically the adverse effects  of
sanctions on non-target States.   With regard to  points (c) and  (d) above,
the letter proposes to convene  a special meeting with  the participation of
the  relevant programmes  and agencies  of  the  United Nations  system, the
major donor countries and the interested affected States.

29.   Under cover  of a letter  of 27 June  1995 (A/50/259-S/1995/517),  the
Permanent Representative of  Ukraine to  the United  Nations transmitted  to
the Secretary-General  a letter  dated 8  June  1995 from  the President  of
Ukraine  concerning a  number  of  proposals for  alleviating  the  negative
impact  on third  countries of  sanctions  imposed  by the  Security Council
under  Chapter VII  of  the  Charter of  the United  Nations.   The proposed
economic measures  to be  undertaken by  the  international community  would
include:   (a)  opening  special  credit lines  by  international  financial
institutions  to render  direct financial  assistance to third  countries to
support technical projects  carried out in those countries; (b) introduction
by the  donor countries,  on a bilateral  and multilateral  basis, of  trade
preferences  for third countries, including promotion of  their exports; and
(c)  donor-country  support,  on a  bilateral  and  multilateral  basis,  of
investments in  the economies  of third countries, special  preference being
given to  the sectors  that sustain  direct losses  from the sanctions.   In
addition,  the  letter  draws  attention  to  an  urgent  need  for  further
consideration  at the United Nations of several other proposals, such as the
establishment of an  effective mechanism based on  Article 50 of the Charter
to  solve  special  economic  problems,  which  would  include  a  voluntary
compensation fund; reduction of the  affected countries' dues  for financing
peace-keeping  operations  by  the  amount  of  losses   incurred  by  those
countries as a  result of the sanctions regime;  and creation of a  standing
sanctions committee of the Security Council.


2.  Donor countries

30.    On  the  other  hand,  the  donor  countries  that  replied  to   the
SecretaryGeneral's note  verbale shared, in  general, the  concern about the
persisting special  economic problems of  States adversely  affected by  the
severance  of  their  economic  relations  with  the  Federal  Republic   of
Yugoslavia  (Serbia  and  Montenegro)  and  the  disruption  of  traditional
transport and communications links in the  region.  While reaffirming  their
strong commitment  to the  sanctions regime  as an  important instrument  of
preventive diplomacy, most of these countries recognized, in principle,  the
need to  provide assistance to the  affected States to  mitigate the adverse
effects of  the  sanctions on  their economies.    In  this connection,  the
critical role  of the international financial  institutions, as  well as the
special  regional arrangements  in support  of the  affected  countries, was
highlighted and welcomed in several communications.

31.   Some  donor States  (Belgium, France,  Germany,  Italy and  the United
Kingdom)  provided specific  information on  their financial  and  technical
assistance to the countries in question.  Some other countries (Finland  and
Luxembourg) stated  that they had not taken any specific action to alleviate
the special economic problems of the affected States.

32.   Belgium has focused  its relevant bilateral  assistance on  the former
Yugoslav Republic of Macedonia.  This  includes technical assistance in  the
amount  of   15  million   Belgian  francs   provided  for   border-crossing
development, as well as  a package of 50 million Belgian francs as financial
support  of the balance of  payments, rendered by  the Belgian Government in
the framework of the assistance plan of the  European Union, adopted at  the
Edimbourg Summit in December 1992.

33.   France has been  channelling its assistance to  the affected countries

in  the  region  through  the  PHARE  (Pologne-Hongrie:    Assistance  a  la
restructuration economique) programme,  in order to ensure aid  coordination
with  its  European Union  partners.    In  accordance  with the  particular
concerns expressed by the affected countries  at the relevant OSCE meetings,
these efforts  have focused  on infrastructure-development  projects in  the
countries  with economies  in  transition.   Since 1991,  the budget  of the
PHARE programme has been growing at an average annual rate  of 5.5 per cent,
and, for  1995, will reach a  total of 962  million European currency  units
(ECUs)  or  6.7 billion  French  francs.   The  French  contribution  to the
programme  will amount  to 1.3  billion  French francs.  At the  same  time,
France has  continuously stressed the need to improve the functioning of the
Security Council  Committee established  pursuant to  resolution 724  (1991)
concerning   Yugoslavia   through   strengthening    its   secretariat   and
streamlining its  procedures to expedite  its consideration of  applications
for  legitimate   humanitarian  assistance.     These  efforts  would   also
contribute to alleviating the economic difficulties of the affected States.

34.  As  a Danube riparian State, Germany  has stated that  it has also been
adversely  affected by  the economic sanctions against  the Federal Republic
of  Yugoslavia (Serbia and Montenegro).   From 1990 to  1993, German exports
to the  former Yugoslavia decreased  from 8.2 billion  deutsche marks to  DM
4.7 billion, and its  imports from this territory  also dropped, from DM 7.3
billion  to  DM  4.8   billion.    None  the   less,  Germany  has  provided
comprehensive assistance  to other  countries economically  affected by  the
sanctions, in particular to the countries  that border the Federal  Republic
of Yugoslavia  (Serbia and  Montenegro).  In  the context  of its  technical
assistance to these countries, Germany has  endeavoured to take into account
the effects of  the sanctions  by: (a) providing  technical support for  the
development  of   infrastructure  (the   most  important   example  is   the
construction of  the railroad line between  the former  Yugoslav Republic of
Macedonia and  Bulgaria); (b) organizing and  hosting events  to promote and
strengthen the export capacity of Bulgaria,  the former Yugoslav Republic of
Macedonia and  Hungary; (c)  fostering the development of  business contacts
(e.g., participation  in  trade fairs  in  Bulgaria  and Romania);  and  (d)
promoting  small and  medium-sized enterprises  (e.g., through  seminars  on
investment promotion, held recently in Albania and Hungary).

35.    Germany has  also reported  aggregated data  on its  direct bilateral
assistance, in  1993-1994, to  the following  countries:   Albania (DM  46.4
million), Bulgaria (DM 85.2  million), Croatia (DM  372.3 million),  Hungary
(DM  1,179.8 million), Romania  (DM 905.9  million) and  the former Yugoslav
Republic of Macedonia (DM 95.2 million).  In  addition, the German share  of
assistance provided by the  European Union is 28 per cent.  Accordingly, the
German  contributions  for the  period  1990-1994  in  this  context are  as
follows:  DM 260.4 million  for Albania,  DM 548.8 million  for Bulgaria, DM
935.1 million for  Hungary (from 1989),  DM 105.8  million for Slovenia,  DM
712.8 million  for  Romania and  DM 34.7  million  for  the former  Yugoslav
Republic of Macedonia.

36.   Italy has  expanded its  bilateral humanitarian  relief programmes  in
Bosnia  and Herzegovina  (in  the  amount  of 5  billion  lire), Croatia  (3
billion lire),  Slovenia (3 billion lire),  the former  Yugoslav Republic of
Macedonia  (5  billion lire)  and  Ukraine (2  billion  lire).    As regards
economic assistance, Italy is  the major bilateral donor for Albania in  its
current   cooperation   programme   focused   on   the   rehabilitation   of
infrastructure,    agricultural   development,   development   support   and
restructuring  of  the health  system.    Since  December  1994, the  former
Yugoslav   Republic  of  Macedonia  has  become  a   beneficiary  under  the
provisions  of Law  49/87 on  Italy's  development  cooperation; it  is also
expected  to  receive  balance-of-payments support  on  concessional  terms.
Initiatives have been taken in Bosnia  and Herzegovina to ensure  assistance
in the  reconstruction  of war-damaged  housing  facilities  and to  provide
shelter for  refugees.   To  facilitate  trade,  talks  are under  way  with
Bulgaria  to reopen  two  credit lines  (each for  $200  million)  that were
frozen in March 1990.

37.   In the  framework of  the European  Union, Italy  has contributed  1.8
billion lire  to a  fund to be  utilized for  a master  plan of  feasibility
studies  for the East-West transport corridor between the  Black Sea and the
Adriatic as an alternative  to the ground  and river routes via the  Federal
Republic of Yugoslavia (Serbia and Montenegro).   Other projects include the
starting up  of a monitoring  system of the  traffic flow  in central Europe
(at a  cost of  2.8 billion  lire), a  training programme in  commercial law
(3.7 billion  lire) and  a study  for the  creation of  industrial areas  in
Slovakia (initial contribution of 95 million lire).

38.   The United  Kingdom has provided  detailed data on  its assistance  to
Albania,  Bulgaria,  Hungary,  Romania,  the  former  Yugoslav  Republic  of
Macedonia and  Ukraine.  At the  bilateral level, budget  allocations to the
Know-how  Fund for 1995-1996  are as  follows:   L800,000 for  Albania; L2.6
million for  Bulgaria  (in addition  to  L2.2  million in  1994-1995);  L4.5
million for  Hungary (L5.5 million in  1994-1995); L4.5  million for Romania
(L4 million  in 1994-1995);  L800,000 for  the former  Yugoslav Republic  of
Macedonia;  and  L7  million  for  Ukraine  (L5.5  million  in   1994-1995).
Further,  a total of  more than  L1 million has been  allocated in 1994-1996
for  scholarships to  these six  countries,  and  their aggregated  share in
1994-1995 allocations  for BBC World Service  has amounted  to L6.6 million.
Furthermore,  British Council  allocations comprise  the following: L110,000
for  Albania  (1995-1996);  L2.1  million  for  Bulgaria  (1993-1994);  L5.6
million  for Hungary  (1994-1995);  L2.7 million  for  Romania  (1994-1995);
L760,000 for  the former  Yugoslav  Republic of  Macedonia (1995-1996);  and
more than L1 million for Ukraine (1995-1996).

39.  At  the multilateral level,  the United Kingdom has  been participating
in the  assistance programmes of  the European  Union and operations  of the
European Bank for Reconstruction and Development (EBRD),  as well as in  IMF
and World  Bank lending to  the affected  countries.   The United  Kingdom's
share of 16  per cent accounts for its  contribution to the PHARE  programme
in the  amount of  266.4 million ECUs  (L224.5 million) committed  for 1990-
1994  for  Albania,  Bulgaria,  Hungary,  Romania  and  the former  Yugoslav
Republic  of Macedonia, and  53.6 million  ECUs (L44  million) allocated for
1995 for the same group  of countries.  In the  case of Ukraine,  the United
Kingdom's  share (also  16 per  cent) in  the Technical  Assistance for  the
Commonwealth of  Independent States (TACIS)  programme totals L21.6  million
committed for 1991-1995,  and the participation of  the United Kingdom in EU
support  for  energy sector  reform,  food  and  medical  supplies loan  and
balance-of-payments assistance involves an additional 114.4 million ECUs.


B.  Response of the United Nations system

40.   As of 1  September 1995, updated  information on  the matter  had been
provided  by the Economic  Commission for  Europe (ECE),  the United Nations
Conference  on  Trade  and  Development  (UNCTAD)  and  the  United  Nations
Development  Programme  (UNDP),  as  well as  by  the  World  Bank  and  the
International Monetary Fund.


1.  World Bank

41.  The World  Bank has initiated wide-ranging programmes of support to the
countries of  central and  eastern  Europe that  have been  affected by  the
implementation  of sanctions  against  the Federal  Republic  of  Yugoslavia
(Serbia  and Montenegro).   Assistance to  the affected  countries - whether
they formally invoked Article  50 of the  Charter or not - is provided  in a
variety  of ways,  including balance-of-payments support,  project financing
and  technical cooperation.   In  view of  the appeals for  special economic
assistance, these programmes  have been reviewed,  on a  case-by-case basis,
to  make them  as responsive  as possible  to  the  particular needs  of the
affected  countries.   For example,  during the Consultative  Group meetings
for Bulgaria  and Romania  of May  1993, as  well as  the 1994  Consultative
Group meetings  for Albania and the  former Yugoslav  Republic of Macedonia,

the  assessment  of  the  cost  of  the  sanctions to  those  countries  was
discussed in  the  context of  the  need  to mobilize  additional  financial
resources.   Within  the priorities  of  the  investment programmes  of  the
affected  countries, several  projects  have been  redesigned  to  take into
account the need to upgrade and diversify alternate trading routes.

42.  In Albania,  the Bank has supported  economic reforms with its Critical
Imports Project, which  initially addressed the  shortages and  main supply-
side constraints,  and later provided support  for the  stabilization of the
economy and stimulation of  the supply response.   To support the balance of
payments,  a quick-disbursing operation  for enterprise and financial-sector
adjustment is being implemented.   The Bank is  also supervising a transport
loan, which  is mainly  aimed at  rehabilitating existing  roads and  should
contribute directly to  the improvement of the East-West transport  corridor
from Bulgaria to the Adriatic.  This first transport sector investment  will
be followed by a  second road project to improve the East-West corridor, and
an operation  to rehabilitate the port  of Durres,  Albania's principal port
of trade.

43.   In Bosnia and  Herzegovina, direct financial assistance  from the Bank
will not be possible until the issues surrounding Bank membership have  been
resolved. However,  the Bank is working,  together with EBRD, on a programme
of  technical assistance  and advisory  services  in planning  for  eventual
reconstruction and economic  recovery of the  country.   This work is  being
carried  out  with  the  support  of  resources  from  a  small  trust  fund
established at the initiative of the Netherlands.

44.  In Bulgaria,  the current Bank  strategy is to support market  reforms,
restore  external  creditworthiness,  define  a  comprehensive  approach  to
protect  vulnerable groups,  help  create and  maintain  infrastructure  and
foster a supply response by financing private investment.   In this context,
the Bank reimbursed  a portion  of the  upfront costs of  the Debt and  Debt
Service  Reduction (DDSR)  Agreement concluded  with  Bulgaria's commercial-
bank creditors  in July  1994, by  providing a  DDSR loan  of $125  million.
Bank support  was part  of a joint  effort with IMF  to replenish  partially
Bulgaria's international  reserves.   Moreover, agreement  has been  reached
with the Government on  a railway rehabilitation project (loan amount:   $95
million),  which  would support  the  railway  restructuring  programme  and
enable the railways to operate independently in a commercial manner.

45.  In Croatia, the Bank's assistance began with the approval  in June 1994
of  a  reconstruction  project  (loan  amount:    $128  million),  which  is
currently being implemented,  supporting the Government's priorities in  the
reconstruction  of  some war-damaged  infrastructure  (including  roads  and
railways),  agricultural  assets,  housing  and  community  facilities.    A
highway  project  approved  in  April  1995  (loan  amount:    $80  million)
addresses the overdue rehabilitation and remaining reconstruction of  roads.
The  Bank has  also been  heavily  involved  in supporting  the Government's
economic reforms:   a  health project  supporting public-expenditure  reform
was  approved  in  February  1995  (loan  amount:  $40  million);  a  public
expenditures  adjustment  loan  is in  preparation;  and  an enterprise  and
financial sector adjustment loan has recently been appraised.

46.   In  Hungary, the  Bank has  provided considerable  balance-of-payments
support.  In  the  transport  sector,  two  investment  projects  are  under
disbursement.  Although not  directly  addressing the  loss of  markets, the
1993 Roads  Project (loan  amount:   $90 million)  focuses on  improving the
efficiency  of public  expenditure on  roads by  supporting  improvements in
management, programming and planning  techniques, increasing the  proportion
of  works carried out by  competitive bidding, and addressing the backlog of
roads  needing rehabilitation. The  1989 Transport  II Project (loan amount:
$95 million) was  designed to reduce  transport costs,  increase system-wide
operational  efficiency  and raise  foreignexchange  earnings  by  providing
important  infrastructure, increasing  competition in  transport markets and
upgrading transport  technology.   Some funding  in these  two projects  may
still be reallocated for improvement of alternative border crossings.

47.  In Romania, the Bank  continues to provide balance-of-payments  support
through  adjustment  lending.    It  has   also  been  supervising  a  first
transportsector loan ($120 million), the  principal objectives of  which are
the rehabilitation and maintenance of roads.   While not designed explicitly
to deal with the  effects of the sanctions, the project seeks to  ameliorate
traffic  conditions  in  the East-West  corridor  that  has experienced  the
greatest increases  in passenger  and freight  traffic.   Under this  sector
loan, the  Bank stands  ready to  consider allocating  resources to  finance
appropriate  subprojects   with  a  strong   national  priority,   including
addressing the problems caused by the sanctions.

48.   In Slovenia, because  of its relatively  high per  capita income, Bank
support has  focused on  a few  high-priority activities.   Slovenia  had to
confront  several challenges,  including the  need to  establish fiscal  and
monetary  independence  and the  lack  of  access to  parts  of  the  former
Yugoslav  market.   Its  adjustment  to  these  challenges  has been  fairly
successful owing largely  to the country's  orientation to  western markets.
A  large  part  of  Bank  assistance  aims,  therefore,  at  supporting  the
Government's efforts  to complete  economic reforms,  through an  enterprise
and financial  sector adjustment loan ($80  million), which  was approved in
July 1993.

49.   In  the  former Yugoslav  Republic of  Macedonia,  the Bank  has  been
heavily involved  in supporting  the  Government's market-oriented  reforms.
In its  first operation, the  Bank approved, in  February 1994,  an economic
recovery   loan/credit  ($80  million),   half  of   which  came   from  the
International  Development  Association   (IDA)  and  which  is  now   fully
disbursed.    In  April  1995,  the  Bank approved  a  $24  million  transit
facilitation  project,  which  would  upgrade  portions  of  the   East-West
corridor,  and improve  the  country's  border  crossings with  Albania  and
Bulgaria.   In addition,  two operations  were approved  by the Bank  in May
1995 (all  on soft IDA  terms) in support  of the Government's  far-reaching
programme of reform in the enterprise, banking and  social sectors.  Such an
exceptionally high level of IDA resources  was made available in recognition
of  the country's special  circumstances, including  the adverse  effects of
the sanctions.  However, the first  Consultative Group meeting organized  by
the Bank in June  1994 did not succeed in mobilizing funds commensurate with
the  country's urgent  needs.  It  is important, therefore,  that the second
Consultative  Group  meeting,   planned  for  September  1995,  evoke   more
substantial  financial support  by the  international  community, especially
bilateral donors,  to this small country,  which is  most seriously affected
by the sanctions.


2.  International Monetary Fund

50.  The Fund has continued to assist the affected countries through  policy
advice, including  assessment of the estimated  impact of  the sanctions and
the  design  of  an  appropriate policy  response  in  the  context  of  the
country's overall economic  situation. 2/   The Fund  has also helped  those
countries prepare  estimates of the  financing requirements arising from the
application of the sanctions for presentation to donor and creditor groups.
  51.   By  the  beginning of  1995, all  of  the eight  countries  invoking
Article  50 of  the  Charter of  the  United Nations  -  Albania,  Bulgaria,
Hungary,  Romania, Slovakia,  the  former Yugoslav  Republic  of  Macedonia,
Uganda  and Ukraine - had  made use of  Fund resources  during the period of
implementation  of  the  sanctions,  in   support  of  programmes  aimed  at
addressing their balance-of-payments difficulties.   In the  second half  of
1994,  the Fund  approved a  new  Stand-by Arrangement  (SBA) and  a  second
purchase  under the  Systemic  Transformation Facility  (STF)  for  Slovakia
(total  access:    $264.3  million),  a  new  annual  arrangement  under the
Enhanced Structural Adjustment  Facility (ESAF) for Uganda ($176.8  million)
and a first STF  purchase for Ukraine  ($365.9 million).  In the  first half
of  1995, the Fund  approved additional financial assistance, totalling $1.8
billion, for the former Yugoslav Republic of Macedonia and Ukraine, in  each
case  involving a new  SBA and  a second  STF purchase.   Two other affected

countries - Albania and  Hungary - whose SBAs expired earlier this year, are
discussing new arrangements.

52.  From  May 1992 to June 1995,  Fund disbursements to  the eight affected
countries  amounted to  $2.3 billion,  including  drawings by  Albania  ($69
million),  Bulgaria  ($362.2  million),  Hungary  ($88.3  million),  Romania
($381.7 million),  Slovakia ($250.7 million),  the former Yugoslav  Republic
of Macedonia ($42.5  million), Uganda ($197.5  million) and  Ukraine ($901.4
million).   An additional  $1.9 billion  for six  countries of  the group  -
Albania ($17 million), Romania ($117.5 million), Slovakia ($130.6  million),
the former Yugoslav  Republic of  Macedonia ($30.4 million), Uganda  ($135.6
million) and  Ukraine  ($1.4  billion)  - had  been  approved and  could  be
disbursed according  to the  timetable adopted  under existing  arrangements
when conditions are met.

53.   In providing financial  assistance to the affected countries, the Fund
has taken into  account, inter alia, the  strength of the country's economic
policies and factors affecting its balance of payments, including  estimates
of the adverse effects  of the sanctions.   Relative to the member's  quota,
access to Fund resources  by most of the affected countries has been  higher
than the  average access  provided to  other countries.   In  many of  those
cases, resources have been  provided under the  Fund's recently  established
special facility, STF,  largely in recognition of the longer-term,  systemic
nature  of  the  disruptions  and  particular difficulties  related  to  the
transition to a market-based economy.


3.  United Nations Development Programme

54.   UNDP  provided  assistance  to  several affected  countries  (Albania,
Bulgaria,  Romania, Slovakia and the former Yugoslav  Republic of Macedonia)
in the preparation and  verification of data related to the economic  impact
of the  application  of the  sanctions imposed  on the  Federal Republic  of
Yugoslavia  (Serbia  and  Montenegro).    The  consultant  retained for  the
purpose submitted  a report  dated 15  April 1994,  and briefed  the working
group  (on  Article  50)  of  the  Security  Council  Committee  established
pursuant to resolution 724  (1991), at its  meeting on 22 July 1994,  on the
main  findings of  his missions  to  the  affected countries  (see A/49/356,
paras. 64-66).

55.  At  the same time, UNDP has been proceeding with  the implementation of
its respective regional and country programmes in the region.   In addition,
UNDP  has undertaken efforts  to mobilize  additional financial resources on
behalf of  the affected  countries.   Starting in late  1993, UNDP  received
from  the Government  of the  United  States  of America  several successive
contributions for a total  of more than $5.7 million in support of improving
border-crossing facilities and procedures at selected locations in  Albania,
Bulgaria, Romania and the former Yugoslav Republic of Macedonia.

56.   This programme  has been  undertaken in  the context  of the  OSCE/EU-
sponsored   initiative  to   provide  relief   to  critical   customs/border
bottlenecks to  commercial  traffic  around  the territory  of  the  Federal
Republic  of Yugoslavia (Serbia  and Montenegro)  (see A/49/356,  annex II).
It is executed by the United Nations Office  for Project Services (UNOPS) in
close  cooperation   with  the   local  UNDP  representatives,   Governments
concerned  and  other  donors.    The  construction  process  is  now  being
completed  at three  locations:   (a) Giurgiu/Ruse  (Romania/Bulgaria);  (b)
Deve Bair/Gyueshevo  (the former Yugoslav  Republic of  Macedonia/Bulgaria);
and   (c)  Kafasan/Qafa   e  Thanes   (the  former   Yugoslav  Republic   of
Macedonia/Albania).   Additional  construction  work and  studies  are  also
under way  in Vidin  (Bulgaria) and  Calafat (Romania),  as well as  in Novo
Sello  (the  former  Yugoslav  Republic  of   Macedonia),  and  port  Durres
(Albania).

57.  It  is noteworthy that Governments of  all the affected countries  have
made significant  contributions from their  own resources  to complement and

expand  the  above-mentioned   construction  projects  in  their  respective
countries.   For example,  Albania has  made a  cost-sharing contribution of
almost  $600,000 to cover  additional costs  related to  the construction of
the Qafa  e  Thanes border-crossing  point.    Therefore the  UNDP  Regional
Directorate for Europe and the Commonwealth  of Independent States, in close
collaboration  with  the  affected  countries  in the  region,  is  actively
involved in efforts to  mobilize additional internal  and external resources
to further alleviate the negative effects of the sanctions.


4.  United Nations Conference on Trade and Development

58.   UNCTAD has  been involved  in several  technical assistance programmes
with  regard  to  countries affected  by  the  implementation  of  sanctions
against  the  Federal  Republic of  Yugoslavia (Serbia  and  Montenegro), in
particular  in  the  areas  of  trade  facilitation  and  foreign-investment
promotion.   Thus, UNCTAD's Automated System  for Customs  Data (ASYCUDA) is
being implemented  in  Hungary, Romania  and  Slovakia.   Requests  for  the
installation  of ASYCUDA have  also been  received from  Albania, the former
Yugoslav Republic of  Macedonia (likely project  initiation in October 1995)
and Uganda (final negotiations currently under way).

59.  Within the context of  the UNCTAD-UNDP technical assistance  programme,
the Albanian  Centre for  Foreign Investment Promotion (ACFIP)  was provided
with  various equipment.   Financing was  also provided  for ACFIP  staff to
participate in  study tours  and meetings  concerning investment  promotion,
foreign investment  strategies, tourism and industrial development projects.
In addition, UNCTAD assisted ACFIP in  developing a promotional brochure for
foreign investment in Albania.


 5.  Economic Commission for Europe

60.   The  ECE Inland  Transport  Committee,  through its  Principal Working
Party on  Inland Water Transport, noted  an urgent need  for concrete action
to alleviate  the difficulties experienced by  Danubian and other  countries
in the  region as  a result  of sanctions  against the  Federal Republic  of
Yugoslavia  (Serbia  and  Montenegro).   At  its  thirty-eighth  session, in
November  1994, the Principal  Working Party  reiterated its  request to the
Inland Transport Committee and  ECE to take  urgent measures with a view  to
facilitating, to the extent possible, the transit  via the territory of  the
Federal  Republic  of  Yugoslavia (Serbia  and  Montenegro)  of vessels  not
entering Yugoslav ports and  thus reviving the freedom of navigation on  the
Danube without hindering the sanctions regime (TRANS/SC.3/135, para. 4).

61.    At  its  fifty-seventh  session,  in  January  1995,  the ECE  Inland
Transport Committee shared the concern of  its Principal Working Party  with
regard to an extremely difficult situation in Danubian shipping as a  result
of the sanctions, took note  of the proposals made in that regard and  asked
the Commission to come  back to that question with  a view to mitigating the
problem (ECE/TRANS/111,  para. 90).  Accordingly,  the issue  was brought to
the  attention of  ECE at its fiftieth  session, in April 1995,  in order to
consider the possibility of compensation for  the losses and costs  incurred
by the  affected countries.  However, the  Commission did  not consider  the
issue since it  was felt that the matter  was outside the competence of ECE;
it was,  indeed, taken  up directly by  the Security Council  (see chap.  II
above).

62.  ECE  is the executing agency  for Pan-European Transport Networks,  the
Trans-European Motorway (TEM) and Trans-European Railway (TER) projects,  in
central and  eastern European  countries.   As both  projects cover  several
countries affected by the sanctions,  efforts have been made  to ensure that
the  TEM and TER  projects provide road  and rail  infrastructures to bypass
the   territory  of   the  Federal   Republic  of  Yugoslavia   (Serbia  and
Montenegro).

C.  Follow-up to regional initiatives and assistance arrangements

63.   During the Special  Ad Hoc Meeting  of Senior  Officials, organized by
the Conference on Security  and Cooperation in Europe (CSCE) at Vienna  from
31  January to 1 February 1994, to identify international projects to assist
affected States  in the  region  to better  cope  with  the effects  of  the
sanctions  against   the  Federal   Republic  of   Yugoslavia  (Serbia   and
Montenegro) (see  A/49/356, paras.  68-71), several  parties, including  the
European Union  and its  member  States as  well  as  the United  States  of
America,  undertook to  ensure a  follow-up  to  a number  of infrastructure
projects presented  by neighbouring and other  affected countries.   To this
end, the contribution of  the European Union has  focused on the development
of the  infrastructure network  in the  region, financed  through the  PHARE
budget, as well  as coordination measures in the  framework of the Group  of
24  countries,  especially  its  Transport  Working Group,  chaired  by  the
European Commission.

64.  The European Union remains committed to  support the development of the
transport infrastructure  and  especially  the  development  of  alternative
transit routes in  the Balkan region.   In the 1994  PHARE budget,  some 100
million  ECUs was committed  (in addition  to approximately  30 million ECUs
allocated in  the 1992 and 1993  budgets) for the co-financing of short-term
projects in the region for the development/upgrading of the  infrastructure,
border-crossing   modernization   and   supply   of   customs   control  and
communication  equipment.   Thus,  the Copenhagen  co-financing  scheme  has
opened the  way for the  PHARE programme to  fund major road  rehabilitation
projects in  Bulgaria (10.6  million ECUs),  Hungary (15  million ECUs)  and
Romania  (22 million  ECUs).   Under the cross-border  cooperation facility,
the   PHARE   activities  also   include   a   multi-country   project   for
infrastructure upgrading  and border-crossing modernization  in the  Balkans
(12.3  million ECUs)  and  smaller-scale country  projects  for  Albania (20
million ECUs),  Bulgaria (10  million ECUs),  Hungary (8  million ECUs)  and
Romania (1 million ECUs).  3/  Implementation of  most of these  projects is
well under way and is expected to be finalized before the end of 1995.

65.   In order to  support the development  of realistic  priorities for the
longer-term  development of infrastructure in the region, the Commission has
financed  a  number  of  pre-investment studies  which  are  currently being
implemented.   These include:   (a)  the Balkan  Transportation Study, which
will develop a simplified transportation and  planning model for the  region
as  well as  carry out  a preliminary  analysis of  the feasibility  of  the
development  of a  number  of  transport  corridors;  (b)  a  study  on  the
development of  Danube navigability;  and (c)  a feasibility  study for  the
construction  of  a  new  Danube  bridge   between  Romania  and   Bulgaria.
Moreover, PHARE  co-financing of  a limited number  of major  infrastructure
projects  in  the  region  for  the  period  1995-1999  is  currently  being
examined.

66.  At a series of meetings held  in the second half of 1994  and the first
half  of 1995, the  European Commission  continued its  efforts to integrate
the short-term  priorities identified at  Vienna into the ongoing activities
and longer-term  projects included  in the  Trans-European Networks  (TENs).
This concerns, in  the first place, the functioning,  since 1 June 1994,  of
the two  customs corridors in the  Balkans that  were originally established
as  part of  a wider  initiative to improve  transit to and  from the Balkan
States  most  seriously  affected  by  the  sanctions  against  the  Federal
Republic of Yugoslavia (Serbia and  Montenegro).  Eleven countries (Albania,
Austria, Bulgaria, Greece, Hungary, Romania, Slovakia, Slovenia, the  former
Yugoslav Republic of  Macedonia, Turkey and Ukraine) are currently  involved
in  the   two  customs  corridors   designed  to  relieve  certain  critical
bottlenecks and accelerate the  transit of traffic  through selected border-
crossing points  in eastern  and central Europe.  4/  To  this end,  efforts
have been  focused simultaneously  on the improvement  of infrastructure  at
the frontier  posts,  supply of  necessary  equipment  to each  border  post
through  a tendering  process and  simplification of  customs procedures and
training of  staff.   A close  link has  been sought  between these  customs

corridors, the PHARE activities  in this area and the transport corridors in
order  to reduce  the  waiting time  at borders.    For example,  a  special
agricultural  regime aimed  at enabling  the  rapid transport  of perishable
foodstuffs from the Balkan  countries to markets in western Europe has  been
established.   As a result,  the situation has improved, but further efforts
remain necessary.

 67.  The second area of particular concern is the development of  transport
in the region.  The follow-up of the  CSCE Vienna meeting on  infrastructure
was  discussed during  the general  meetings of  the Group  of 24  Transport
Working Group, held at Brussels in September 1994 and January 1995, as  well
as the regional  joint meetings of  the Group  of 24  Transport and  Customs
Working Groups, held at  Sofia in December  1994 and at Bratislava in  March
1995.   Special attention should be drawn to  the important developments and
challenges  concerning  the  transport  corridors  as defined  by  the  Pan-
European  Conference of Ministers of Transport, held in Crete in March 1994,
and in particular those parts of the Balkans  that are covered by corridor 4
(Prague-Budapest-Constanta/  Thessaloniki), corridor  5  (Trieste-Ljubljana-
Budapest-Bratislava-Uzhgorod-Lvov),   corridor   7  (Danube),   Corridor   8
(Durres-Tirana-Skopje-Sofia-Varna),  and corridor  9  (Helsinki-Kiev/Moscow-
Odessa/Kishinev/Bucharest-Plovdiv).    The  discussions  on these  transport
corridors continue in the framework of  various meetings intended to  ensure
the technical and financial aspects of their effective functioning.

68.   At its summit meeting in Essen in  December 1994, the European Council
adopted a broad strategy for the preparation of accession by the  associated
countries of central and eastern Europe (CEECs) to  the European Union.  The
key  element  of this  pre-accession  strategy  is  the  preparation of  the
associated  countries  for  their  integration  into  the  European  Union's
internal market as outlined in the European  Commission's white paper on the
issue.   The  Council  further  stressed  the  importance  of  intraregional
cooperation between CEECs themselves and decided,  in this context, that the
Commission should  develop a multi-country  programme to eliminate delays at
the borders,  and that  the programming should  be done on  the basis of  an
indicative multi-annual budget. 5/ Accordingly, the Commission has  reserved
a budget of approximately 90-95 million  ECUs for 1995-1997 (including  some
30  million  ECUs on  the  1995  budget) for  the  implementation  in  PHARE
countries   of   a   "consolidated   border-crossing   programme    (transit
facilitation)", which deals with further  measures for modernization  of the
infrastructure of border-crossing points  on the major  transit and  customs
corridors and upgrading  of customs procedures, including training of  staff
and supply of  equipment.  The  programme also provides  for a  coordination
mechanism within  three regional  areas, including  the south  region, where
most of the affected countries belong.  It is envisaged that, by the end  of
1995, all  the  preparatory studies  and  priority  setting will  have  been
completed.


IV.  CONCLUSIONS

69.   In the  context of  its continued  efforts to  maximize the  political
impact  and to minimize  the collateral damage  of the  sanctions imposed on
the  Federal Republic of  Yugoslavia (Serbia  and Montenegro),  the Security
Council has adopted a number of decisions that are particularly relevant  to
mitigating  the  special economic  problems of  the  neighbouring and  other
affected  countries.   At  the  request  of  those  countries, the  Security
Council  and its  Committee established  pursuant  to resolution  724 (1991)
concerning  Yugoslavia  have authorized,  as  partial  exemptions  from  the
sanctions   regime   and   under   exceptional   circumstances,   designated
transactions or  services for  specific commodities  or products of  crucial
importance   to  the  neighbouring   States  as   well  as   the  safety  of
international navigation on the Danube.   Moreover, the new streamlined  and
more transparent procedures adopted by the  Committee should help reduce the
delays  in  its   consideration  of  applications   concerning  humanitarian
assistance and  should  facilitate legitimate  trade  on  the Danube.    The
Committee will  continue to consider further ways in which all deliveries of

humanitarian assistance,  including those  from the  neighbouring and  other
affected  countries,  can  be  expedited  and  will  keep  the  question  of
restrictions on trade on the Danube under close review.

70.   In  a series  of  communications  addressed to  the Secretary-General,
neighbouring and other affected countries in  the region have asserted that,
owing to their geographical location and  the structure of their  economies,
they  continue to experience  special economic problems  as a  result of the
severance  of  their  economic  relations  with  the  Federal  Republic   of
Yugoslavia  (Serbia  and  Montenegro)  and  especially  the  disruption   of
traditional transport  and  communications  links in  that part  of  Europe.
Although  no updated estimates  of the  incurred losses  and costs resulting
from the sanctions have been submitted  by the affected countries, the heavy
burden of the sanctions  and their adverse long-term  impact on the  overall
economic  and social situation  in those  countries have  been reaffirmed in
several  communications.  To  mitigate the  collateral damage  caused by the
sanctions regime to their economies, the  affected countries have  addressed
the international community at large  with a wide range  of far-reaching and
specific  proposals that  deserve consideration  as an urgent  and important
matter.

71.   Because of  the small  number of responses received  by the Secretary-
General from the donor States, it is not possible to assess fully the  level
of bilateral economic assistance provided to  the affected countries; nor is
it possible  in all cases  to identify distinctly  the amount  of assistance
directly intended to  address their special  economic problems  arising from
the  implementation  of the  sanctions.   A  large part  of the  information
provided  by  the  donor  countries  relates  to  their  ongoing  assistance
activities in  support of the transition  process in  the affected countries
and does  not indicate a  supplement of funds  to compensate  for the losses
and costs incurred by  the affected countries as  a result of the sanctions.
Although many reported projects had not  initially been intended as  special
assistance measures  directly aimed  at mitigating  the negative effects  of
the sanctions,  they should  have yielded  indirect positive  impact on  the
affected countries.

72.  The World Bank  and IMF, as well as relevant United Nations bodies  and
organs  (UNDP,  UNCTAD   and  ECE),  continue  to  implement,  within  their
respective   mandates,   existing   facilities   and  available   resources,
substantial  programmes  of  financial  and  technical  assistance  in   the
affected  countries.  In  view of the  renewed appeals  for special economic
assistance, these  programmes have  been reviewed, as appropriate,  in order
to  make them as  responsive as  possible to the particular  problems of the
countries  concerned.    In  recognition  of  the  adverse  effects  of  the
sanctions on the balance  of payments, IMF has  undertaken efforts to ensure
that  the  affected countries,  when eligible,  receive higher  than average
access to  the Fund's  resources and  that their  drawings be  made on  more
favourable  terms.  Within  the priorities  of the  investment programmes in
the  affected countries,  the  World Bank  has  contemplated,  as warranted,
redesigning the relevant  projects, reallocating funds under existing  loans
and credits  and expanding  lending, taking  into account  sanctions-related
concerns.   Most important,  however, remains the  need to  mobilize new and
additional  financial  resources from  all  potential  funding  sources,  in
particular bilateral donors and also the  regional development banks, with a
view to  mitigating, in an  effective and timely manner,  the adverse impact
of the sanctions regime.

73.   The  CSCE  initiative  to convene  a  special  meeting at  Vienna  has
resulted in a viable approach towards  supporting a number of infrastructure
projects in the affected countries and  integrating them into a  longer-term
regional  perspective  of  transport,   infrastructure  and   communications
development.    The full  and  timely  implementation  of donor  commitments
reached at the Vienna  meeting is essential to  help the affected  States in
the region  to cope  with the  disruption of  transit traffic caused  by the
sanctions.  However,  substantial additional  resources are needed to  carry
out  longer-term transport  and infrastructure  projects.   At  the regional

level, the PHARE and  TACIS programmes of  the European Union will  continue
to be  crucial in  unlocking funds  for new  projects to  be implemented  in
cooperation  with other donors  - notably  EBRD and  the European Investment
Bank  -   through  studies,   capital  grants   and,  increasingly,   direct
investment.  At the bilateral level,  continued financing by donor countries
of the improvement  of border crossings  in the priority corridors  would be
beneficial  to  all countries  in  Europe  whose  goods  and passengers  are
transiting through these  border crossings.  Participation of  international
financial  institutions  and  private-sector  involvement,  through  public-
private partnership  arrangements, in  such projects  should be  encouraged.
Moreover, serious  consideration  should  be given  to holding  a  follow-up
meeting  to the meeting  held at Vienna  in early  1994, in  order to ensure
that  the  affected  countries  continue  to  receive  the  support  of  the
international community in coping with the  adverse effects of the sanctions
regime.


Notes

  1/  The  Committee's present mandate  covers the arms  embargo imposed  by
the Security Council on  the former Yugoslavia in paragraph 6 of  resolution
713  (1991); the  mandatory sanctions  established by  the  Security Council
against  the Federal  Republic  of  Yugoslavia (Serbia  and  Montenegro)  in
paragraphs  4  and  9 of  resolution  757  (1992),  paragraphs  9  to 11  of
resolution 787 (1992), and  paragraphs 12 to 30 of resolution 820 (1993), as
amended by resolution 943 (1994); and the sanctions imposed by the  Security
Council in paragraphs 7 to 18 of resolution  942 (1994) against those  areas
of the Republic of  Bosnia and Herzegovina under the control of Bosnian Serb
forces.

  2/   An  internal document  entitled  "Impact  of implementing  the United
Nations sanctions  against the  Federal Republic of  Yugoslavia (Serbia  and
Montenegro)" was submitted to the IMF Executive Board in December 1994.

  3/   These  projects relate  to the  following border  stations:   Qafa  e
Thanes  and  Kakavia  in  Albania;  Ruse,  Vidin,  Gyueshevo  and  Kulata in
Bulgaria;  Nagylac,  Redics and  Artand in  Hungary;  and Calafat,  Giurgiu,
Nadlac and Bors in Romania.

  4/   At a  meeting held  at Thessaloniki,  Greece, in March  1994, all the
countries  and  agencies  concerned agreed  to  establish,  subject  to  the
necessary  infrastructure  improvements  and on  the  basis  of the  Customs
Convention  on International  Transport  of  Goods under  the T.I.R.  Carnet
(1975),  two  fast-lane customs  corridors:    first  (north-south)  customs
corridor:      Austria-Nickelsdorf/   Hungary-Hegyeshalom,    Slovenia-Dolga
Vas/Hungary-Redics,  Hungary-Artand/RomaniaBors,   Romania-Giurgiu/Bulgaria-
Ruse,  Bulgaria-Kulata/Greece-Promachon,  BulgariaKapitan   Andreevo/Turkey-
Kapikule;  second  (west-east)  customs  corridor:    AlbaniaDurres  (port),
Albania-Qafa e Thanes/the former Yugoslav Republic of MacedoniaKafasan,  the
former Yugoslav Republic  of Macedonia-Deve Bair/Bulgaria-Gyueshevo.  At the
third  evaluation meeting, held at  Bratislava in March  1995, it was agreed
to enlarge  the  first customs  corridor  by  adding the  following  border-
crossing    points:        Hungary-Rajka/Slovakia-Rusovce    and    Hungary-
Zahony/Ukraine-Chop.

  5/   The Essen  Council also decided  to increase the  possibility of  co-
financing major infrastructure projects from 15 to 25  per cent of the total
annual PHARE commitments.  The follow-up  discussions on the TACIS programme
have been going in the same direction.


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