ambassador rudolf v. perina - Association for Diplomatic Studies and ...

welcoming dinner in a restaurant and I couldn’t believe how it was paid for. The
economic counselor opened an attaché case that was just filled with stacks of bills, and he
paid for the dinner with all of these bills. He just put them on the table, and we had to
wait about 15 minutes while the waiters counted them. This inflation continued through
my tenure because of the sanctions. Currency was continuously being devalued and
reprinted in higher and higher denominations. The largest single bill that was issued in
my time there was 500 billion dinars, that’s billion and not million. I have never yet seen
a single bill of a higher denomination, even from the German inflation after World War I.
When this bill was issued it was worth about $10. Within a week it was worth a dollar
and within about 10 days it was worth a nickel. I have a stack of them which I kept as
souvenirs. Basically, Yugoslav money became meaningless. Initially, of course, some
people also profited by paying off debts and mortgages in worthless currency. There were
rumors that Milosevic had paid off the mortgage on his personal house for a few hundred
dollars.
Q: How did people survive?
PERINA: There was a black market primarily in German marks and to some degree in
dollars. Most shop owners wanted to be paid in marks. If a person only had Yugoslav
dinars, it was very difficult. A barter economy developed where people from the
countryside paid with produce for manufactured goods and so on. There continued to be a
stream of Western currency coming into the country from the many Serb guest workers in
Western Europe, and especially Germany, who sent money back to their families. This
basically sustained an entire black economy in hard currency. When I came back to the
Department on consultations a couple of times, I brought back examples of the Serb
currency—the bills denominated in millions and billions of dinars. People loved them,
and Warren Christopher even passed some around at one of his morning staff meetings,
as evidence of how the sanctions were working. But there was a flip side to the story. The
sanctions destroyed the currency but the economy continued to function in some
remarkable ways. For example, there continued to be a McDonalds’s in Belgrade through
the entire sanction period. It was no longer under franchise and had to procure the
ingredients for their products locally, but one could not taste a difference from any other
McDonald’s hamburger. If one had hard currency, it was still possible to buy almost
anything, including new Mercedes automobiles smuggled into the country. There were,
of course, many criminal elements who soon figured out how to make such a system
profitable for themselves through smuggling and similar activity. The sanctions thus
contributed to a real criminalization of the society. Gangsters and criminals became
wealthy and rose to the top, while average people suffered.
Q: How did the people eat and procure basic necessities?
PERINA: I think a lot of people relied on communities, on social contacts, on family.
People in the countryside could raise their own food and were relatively self sufficient.
They were less affected by the sanctions. Many city dwellers had come within one or two
generations from villages where they still had relatives who could help them get food.
Others relied on remittances from abroad for hard currency. Serbs are also very inventive
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