PRISTINA, YUGOSLAVIA — Despite its rich mines, fertile land, and a consumer market of 2 million people, the southern province of Kosovo appears to be a money loser for Serbia.
Yugoslav President Slobodan Milosevic has used Kosovo's economic potential as one reason to justify his costly campaign against ethnic Albanian separatists in Yugoslavia's poorest region. His police and military forces are spending an estimated $2 million per day in the five-month-old guerrilla war, according to Serbian media reports and analysts in Belgrade.
But the hefty price tag is unlikely to be earned back by Kosovo - even if a peace settlement is reached.
The region's factories are outdated, the infrastructure cannot handle the population, and pollution from the few working industrial plants limits agricultural potential.
"There is a lot of exaggeration about what Kosovo can give to an economy," says Ognjen Pribicevic, a professor of politics at Belgrade University. "The government wants to say Kosovo is economically valuable to justify the fighting. But that is not true."
According to Mr. Pribicevic, the myth of economic wealth in Kosovo is part of a campaign by Mr. Milosevic to convince his people, and the world, that Kosovo is the very heart of Serbia, the dominant republic of Yugoslavia.
Though Serbs view Kosovo as their spiritual and historical homeland, it is inhabited by a 90 percent ethnic Albanian population with centuries-old claims to the land.
The ethnic Albanian Kosovo Liberation Army (KLA) is fighting for independence in a low-level conflict that has already cost more than 400 lives, mostly ethnic Albanian civilians.
Diplomatic efforts to stop the fighting have been stymied by the KLA's lack of a political wing with which to negotiate.
But in a sign that ethnic Albanian leader Ibrahim Rugova may be open to working with the KLA, last week the Kosovo Albanian parliament, which is led by Mr. Rugova's Democratic League, recognized the KLA for the first time.
The KLA has begun to shift its military focus from villages to cities, claiming they will make their way to the provincial capital of Pristina. But last week they unsuccessfully tried to take the southwestern city of Orahovac, and Yugoslav forces have launched a counteroffensive.
FIGHTING has again escalated in recent days, with Serbian security forces reported to have retaken a key stronghold of ethnic Albanian guerrillas, who had blocked a major road. In another major development, Albanian and Yugoslav Army border guards reportedly exchanged fire.
Even without fighting, the Serbian economy would be in shambles. Yugoslav officials release scant economic information, making analysis nearly impossible. But international observers estimate that Yugoslavia has a $2 billion per year trade deficit.
It has begun paying pensioners and state workers by selling its state utilities to foreign investors. International sanctions, in response to Serbian aggression in Kosovo, compound the problem by blocking foreign investment.
Efforts to inflate the economic value of Kosovo are focused on the mining industry, which Serbian officials say could bring the country billions of dollars if it were brought up to full capacity. Milos Simovic, the dean of economics at Pristina University and a former governor of Kosovo, says the region's mines could be among the European leaders in lead, zinc, and nickel.
But Western economic analysts say the Serbian mining industry could barely stay afloat in a competitive, high-cost market.
"Maybe the mines could be more productive, maybe even profitable," says a Western economic analyst in Belgrade. "But I don't think there can be vast flows of millions of dollars."
Naip Zeka, a leading economic adviser to Rugova, says Kosovo's economy would be better off if some of the mining-industry-driven plants were shut down. Their pollution, he says, destroys the region's agricultural industry.
But while the poor economy is bad for the Serbs, it may be worse for ethnic Albanians. An independent Kosovo would be among the poorest countries in Europe, analysts say.
With no link to the sea, it would be surrounded by hostile Serbia, tiny Montenegro, and the impoverished states of Macedonia and Albania.