Serb-Croat Enmity Flares as Refugee Crisis Rekindles Anxiety

  • Serbia bans Croat imports, Croatia blocks passengers, cargo
  • Spat undermines trade relations between ex-Yugoslav neighbors

The refugee crisis reverberating across Europe is threatening to undo 20 years of efforts by Serbia and Croatia to mend ties after the bloody breakup of Yugoslavia.

The two neighbors, both on one of the most-used routes for migrants heading toward Germany from the Middle East, introduced trade restrictions against each other and traded volleys of rhetoric as they struggle to cope with the persistent flow of migrants. Serbian Prime Minister Aleksandar Vucic has appealed to the European Union to “do something” to alleviate the conflict.

Serb-Croat Trade Links

The spat brings to the surface animosities over the 1990s Balkan wars as the EU seeks ways to deal with its biggest refugee crisis since World War II. More than 40,000 migrants, many of them refugees from Syria, have crossed into Croatia from Serbia since Hungary sealed off its border this month, while the two sides have accused each other of using the influx to reopen old hostilities.

“Both sides just needed an excuse to start the dispute,” Vladimir Gligorov, an analyst at the Vienna Institute for International Economic Studies, said by phone. “The longer the measures and countermeasures last, the more difficult it will be to remove them. It can get much more complicated.”

Serb and Croat benchmark Eurobonds fell on Thursday, lifting
their yields to the highest in three weeks.

Croat yields rise

Croatia, an EU member, on Wednesday banned Serb vehicles from entering except those with perishable goods. In retaliation, Serbia blocked imports of Croat products. Croatia also accused Serbia of having directed migrants to its territory since Hungary erected a razor-wire fence to stop the influx. The government in Belgrade rejected the allegation, saying it can’t influence the refugees’ route.

“In order to avoid a further escalation of the new situation Brussels should mediate and civil society organizations in both countries must help,” said Gordana Delic, the director of the Balkan Trust for Democracy. “I believe the situation between Croatia and Serbia has not gone that far yet, that it would be impossible to restore the good neighborly relations”

Croatian Prime Minister Zoran Milanovic said his nation “can’t handle such a huge inflow” and urged Serbia to take the “completely reasonable” steps of setting up registration centers and directing some of the refugee toward Hungary.

EU policy chief Federica Mogherini and Neighborhood Policy and Enlargement Commissioner Johannes Hahn are in close contact with Zagreb and Belgrade “to try and help them to find a solution together in order to restore trade flows as soon as possible,” Mina Andreeva, a spokeswoman for the 28-nation bloc’s executive, the European Commission, told reporters in Brussels on Thursday. Any trade restrictions must be “proportional, non-discriminatory and limited in time,” she said.

Stop Escalation

“Croatia shouldn’t have allowed this kind of escalation of the problem,” Nenad Zakosek, a political analyst and lecturer at Zagreb University, said by phone Thursday. “This problem can’t be solved by upping the ante by both sides. On the Croatian part, the reaction is also probably motivated by approaching elections.”

Croats go to the polls this fall, though the date of the election hasn’t been set. Support for Croatia’s Social Democrat-led bloc of Milanovic has slid as it battled the country’s longest recession on record.

Milanovic’s comments Thursday, which escalated the enmity with his counterpart Vucic, was directly as much toward more-radical Croatians as toward the neighboring government, said Florian Bieber, a professor at the University of Graz in Austria and director of the Centre for Southeast European Studies.

“The Croatian and Serbian governments have not been particularly cordial recently,” said Bieber in an e-mailed response to Bloomberg questions. “With elections in Croatia looming it appears that Milanovic is moving to the right to appeal to voters. It would seem hard to imagine a further escalation, but considering the rapid deterioration in such a short period of time, the dynamic is hard to predict. ”

Businesses across the region are also bracing for the economic impact of the spat. Agrokor group, Croatia’s largest company that also operates a retail chain in Serbia, has “already suffered great damage,” spokeswoman Anja Linic said by phone.

“We are convinced that the countries will soon reach a constructive agreement to the benefit of their economies,” she said.

Before it's here, it's on the Bloomberg Terminal.