IN Belgrade's swank Hyatt Regency hotel last week, Alexander Knezevic answered a knock at his door. His visitor shot him five times. On the same day, a black Mercedes drew up alongside a streetcar in downtown Belgrade. Igor Popovic was just stepping off. He tried to throw a grenade into the Mercedes but whoever was in the car shot him first.
The two incidents were the latest in the mafia-style warfare that has risen up here in recent months as law and order has broken down.
The gangs are making fortunes by circumventing United Nations sanctions (smuggling goods across the border and demanding high prices), laundering money from the Bosnian war, and demanding protection money, according to Belgrade police and diplomatic sources.
A Belgrade police spokesman recently told the local newspaper, Borba, that the authorities were helpless to do anything about the rising wave of crime because old federal law-enforcement structures were breaking down.
"Yugoslavia has collapsed and the traditional links between the Serb and federal police no longer function - we know crime is growing but there is little we can do about it," the spokesman said.
An article in Borba even claimed that "Belgrade reminds people nowadays of Chicago of the 1930s."
One Yugoslav journalist who has been following the development of the gangs says "these are young men, mostly in their early 20s. Most of them have been fighting in Croatia or Bosnia in these paramilitary groups. A lot of them have looted and killed. They have taken a liking to the lifestyle and have carried it over into Belgrade. They are armed and nobody can control them."
In a sign of the power of the gangs, the night Knezevic was shot his followers forced Belgrade cafes to turn off their lights and music in respect and mourning for the slain gang leader.
Also, a security officer at one of the major banks admitted the bank had just paid 250,000 deutsche marks ($160,000) in protection money.
Serb authorities are encouraging people to circumvent the UN sanctions, diplomats say. The state has turned over gas stations to any private businesses that can find a way to bring in gasoline. Several gas stations have been taken over by one of the most notorious Serb paramilitary leaders, Zeljko Raznjatovic. Others are being run by some of the private banks that have opened - banks that many diplomats say are founded on spoils from the Bosnian war.
Circumventing sanctions has proved all too easy. Gasoline tankers and trucks with consumer goods can be seen queuing up at the borders. Their papers state that they are bound for Bosnia, which is not subject to sanctions. They simply unload in Serbia. The gas lines that were long just weeks ago have all but disappeared.
An official from the UN High Commissioner for Refugees (UNHCR) expresses frustration: "The UN sanctions committee is coming down hard on us, preventing us from making decent winter shelters for Serb refugees because we are employing Serb labor and therefore breaking sanctions. They are on our backs because we abide by the law. But just look at all these gangsters breaking sanctions under their noses and they don't do anything about it."
Diplomats are also critical of the private banks' activities. Long lines of customers snake out of these institutions onto the streets. It is hardly surprising: The in-terest rate is 10 percent a month for foreign currency, 70 percent for dinars. Serbs, most of whom are unemployed because of sanctions, are pouring what money they have into these banks.
"These banks are going to crumble like houses of cards one of these days, and who is going to lose? The people who are investing there," one Western diplomat says. "Sure, they can probably keep it up for a while. It's pretty sure they are laundering Bosnia loot - but it defies any kind of logic that they can keep it up."
The head of Dafiment Bank, one of the two major new banks, is defiant: "I don't deal with guns, drugs, or gold," she says. "I have gold reserves to cover any kind of tax you want to impose on me. I am doing a great service to people here. Without me, many of them would starve."
But as racketeers and profiteers get richer, ordinary people are getting poorer. Inflation is skyrocketing. Unemployment is soaring.
"I just don't know how I am going to get through the winter," says one woman who has finally found an office job after almost a year of being unemployed. Her salary is $30 a month - the price of one pair of children's shoes.
There is also the added worry of rising crime and an ineffective police force. One woman had her apartment broken into recently. Some foreign currency and an answering machine were stolen. When the police came, they did not take fingerprints or ask any serious questions.
"Your best protection is to buy a gun," the woman was told. "Come down to the station and we will help you fill out the forms to get one. We really advise you to do it because these thieves are bound to be back."