Kostunica gets boost from U.S., IMF

BELGRADE, Yugoslavia -- Supporters of new Yugoslav President Vojislav Kostunica have received a boost in their drive to secure their grip on power as the United States lifted sanctions and the IMF said it would reopen its doors to Belgrade.

President Clinton followed the European Union in ending an oil embargo and a flight ban imposed in 1998 and said Washington had a "strong interest" in backing Yugoslavia's new leadership.

But access to international funds was made conditional on Yugoslavia's transition to democracy continuing, a reminder of the challenges to new President Vojislav Kostunica's authority posed by hard-liners who have refused to quit the Serbian government.

IN-DEPTH Yugoslavia in Transition   • Balkan hotspots   • War crimes defendants   • Milosevic profile   • Kostunica profile   • Ambition and wealth   • Timeline 1945-2000   • Shrinking of Yugoslavia   • Message board   • Sanctions highlights   • Sick society   • Aftermath of an uprising   • Serbia: A day of change   • Protest in pictures     ALSO Mayor tells inside story of Belgrade uprising Inside Serbia: The watchdogs of democracy Struggling Serbian city awaits end of sanctions    VIDEO CNN's Nic Robertson reports on Yugoslavia's effort to redefine itself (October 12) Play video (QuickTime, Real or Windows Media) Yelimir Ilic, the revolt's mastermind, tells CNN's Alessio Vinci how he organized the protest and the takeover of key government buildings Play video (QuickTime, Real or Windows Media) CNN's Nic Robertson says the visit by Hubert Vedrin shows Yugoslavia's improving international relations Play video (QuickTime, Real or Windows Media)     TRANSCRIPT James Rubin on Yugoslavia

Kostunica has threatened to send his supporters back onto the streets if allies of Slobodan Milosevic continue to resist his bid to form a new administration.

His message came after Milosevic allies insisted they will stay in office in the Serbian parliament and the military warned of "negative consequences" if Kostunica attempts to replace an army chief.

In response to the move by the United States, which led an 11-week NATO bombing campaign against Yugoslavia last year, Kostunica said he wanted the two estranged countries to resume normal diplomatic relations.

"After this meeting we hope we will bridge that gap and our relations will normalize," said Kostunica after receiving the U.S. special envoy to the Balkans, James O'Brien, in the highest level contact between the countries since last year's air war.

"We have a strong interest in supporting Yugoslavia's newly elected leaders as they work to build a truly democratic society," Clinton said in a statement. "The removal of these sanctions (imposed by the U.S. in 1998) is a first step to ending Serbia's isolation."

"The victory of freedom in Serbia is one of the most hopeful developments in Europe since the fall of the Berlin Wall," the president said. "It ended a dictatorship and it can liberate an entire region from the nagging fear that ethnic differences can again be exploited to start wars and shift borders."

Yugoslavia urgently needs international lending to rescue an economy shattered by years of isolation and sanctions endured under President Slobodan Milosevic, who was ousted last week in a popular revolt, allowing Kostunica to take the presidency.

The International Monetary Fund said Yugoslavia could rejoin the lending body within months, paving the way for a restructuring of debt and an economic revival program.

Yugoslavia was expelled from the IMF and the World Bank in 1992 for its role in the Bosnian and Croatian wars.

But senior Yugoslav generals have warned against moves by Kostunica to purge military leaders appointed by Milosevic and one of the ex-president's allies -- Serbian Prime Minister Mirko Marjanovic -- has said he would be taking over direct control of the police.

Milosevic's party announced leadership changes Thursday as it struggled to stem the steady erosion of its power and influence to the newly elected president.

In a statement, the Socialists said their hard-line secretary-general, Gorica Gajevic, had been replaced by the more moderate Zoran Andjelkovic, head of the Serb-run Kosovo government.

Serbian President Milan Milutinovic was named the party's vice president. Milosevic apparently remains at the helm despite losing the presidency in the September 24 elections. The Socialists also called a party congress for November 25.

There were also signs of a rift between the Socialists and their neo-communist allies, the Yugoslav Left, the party of Milosevic's influential wife, Mirjana Markovic. Both parties said, unlike in last month's elections, their candidates would run independently in the next Serbian elections.

The shake-up could mean Milosevic is trying to regroup and consolidate his followers after their ouster from power so he can remain a political player.

Kostunica said despite "disruptive factors," the transition of power would go on and the "tensions and difficulties that exist in this society will be removed."

In Belgrade, CNN's Nic Robertson said Kostunica has the support of the police force and that they are "loyal to him -- although he does not have legal control over them.

Western diplomat Bodo Hombach, representing an international effort for Balkans stability while on a visit to Belgrade, said democracy has yet to take hold in Yugoslavia.

The Associated Press & Reuters contributed to this report.

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