Folder 8
Divided States and Debts
By Nikidrea T. ReyInternational history is no stranger to border shifts, redrawn boundaries, and the rise and fall of sovereigns. The focus of such events often follows the development of emergent governments while the constants transferred from old states to the new rarely receive significant attention. Yugoslavia’s division into five distinct republics between 1990 and 1992 left the status of the predecessor state’s international commitments inconclusive. These involved primarily state-endorsed, bilateral and multilateral agreements and foreign debts. International law protects the failed state’s successor governments from forced entry into preexisting agreements, but financial relationships still remained unaddressed. The U.S. State Department’s 1968 memorandum to extend credit to Yugoslavia via the Export-Import Bank seemed to have fueled the growth of an obligatory relationship without dispensation.
The State Department’s request and President Lyndon B. Johnson’s subsequent approval of the memorandum to aid the communist state stemmed from the idea that Yugoslavia was in need of “extensive, mutually advantageous economic relations” with the United States. By 1992, Yugoslavia's aggregated debt to the Export-Import Bank totaled $795 million. This amount constituted only a fraction of what was owed to the International Monetary Fund ($15 billion) and the World Bank ($2 billion) in that same year; debts to other states and organizations remain unnamed here. The extension of credit and guarantees to Yugoslavia by the State Department opened these two large lenders to pump huge sums of money into the formerly communist territory, and those funds did not evaporate with the disintegration of the state.
Consequently, the onset and resolution of the Slovenian Independence War, eventually leading to the Yugoslav Wars of the 1990s, resulted in five new republics inheriting assets and massive debts. Yugoslavia’s account was divided and each of the republics - Bosnia and Herzegovina, Croatia, Macedonia, Slovenia, and Serbia-Montenegro. Each new state was designated to receive and repay a percentage of funds allocated to the former state. In the years leading to the separation, Yugoslavia experienced a period of debt addiction. The small communist state saw a nearly 20 percent annual debt increase from the 1960s through the 1980s, reaching an impressive high of $21 million owed to Western nations in 1988. The ensuing economic issues in part fueled the Yugoslav Wars that divided the country.