New crisis emerged in south Serbia’s Presevo Valley with 7 January fatal shooting by Serb soldier of 16-year-old Albanian boy illegally crossing border. Albanian majority Presevo municipal assembly called for army to withdraw from south Serbia and for international military presence to replace it. Government attempted to reconstruct Coordination Body for south Serbia and to include Albanians, who remain hesitant. Shooting led to Belgrade internal debate as to whether army or police best suited for guarding border with Macedonia and Kosovo. U.S. government cut all financial assistance to Serbian government (U.S.$10m) and announced withdrawal of technical advisory personnel due to lack of cooperation with ICTY; EU foreign policy chief Javier Solana cancelled trip to Belgrade due to lack of Hague cooperation and deadlock over elections for state union parliament; EU commissioner for enlargement Ollie Rehn in Belgrade 25 January; warned failure to cooperate with Hague restricting progress towards EU integration. ICTY indictee General Vladimir Lazarevic announced 28 January he would surrender in early February.

U.S. Ambassador for War Crimes Pierre-Richard Prosper blamed PM Vojislav Kostunica for “zero cooperation” with ICTY. President Tadic’s call for early parliamentary elections criticised by other parliamentary parties. Heightened tensions with international community over High Rep. Paddy Ashdown’s moves against Bosnia’s Serb Republic and Kosovo Serb electricity cut-off. Army moved combat units south and transferred ground forces HQ unit from Belgrade to Nis. Hard-line Army Chief of Staff Branko Krga replaced by Dragan Paskas. Poll carried out by Montenegrin NGO indicated 73% of voters would vote in independence referendum, 2 thirds of them in favour. World Bank approved new 3-year arrangement for Serbia-Montenegro, worth $550m while International Monetary Fund approved 9th $95m instalment of current arrangement for bolstering hard currency reserves and balance of payments.

Apparent assassination attempt on President Boris Tadic 30 November as car tried to ram motorcade; Tadic unhurt; risk of further attempts as Vienna- based “Serbian Patriotic Organisation” issued death threats against Tadic, FM Vuk Draskovic and state union President Marovic. Serbian government rocked by scandals while Tadic in open conflict with PM Vojislav Kostunica; may try to bring down government. Serious questions arising about control over security structures. Hague Tribunal Chief Prosecutor Carla del Ponte briefed UN Security Council on 23 November - said Belgrade deliberately ignoring legal obligations. U.S. Congress conditioned Serbian aid for 2005 on arrest and extradition to ICTY of Mladic. Energy lobby leading to possible political shakeup in Montenegro. Relations between Belgrade and Podgorica increasingly frayed.

In highly publicised break with PM Vojislav Kostunica, President Boris Tadic called on Kosovo Serbs to vote in Kosovo's parliamentary elections and ignore Kostunica's boycott call - caused governmental crisis and beginning of parliamentary effort to recall Tadic. Highly influential "Godfather" of Greater Serbian nationalist ideology, Dobrica Cosic, published new book calling for partition of Kosovo. Democratic Party (DS) candidate Nenad Bogdanovic won Belgrade mayoral race in second round elections. More than month after local elections, discussions continued on forming municipal governments - Kostunica's Democratic Party of Serbia (DSS) seeming to show preference for coalitions with SRS and Milosevic's SPS. Milosevic trial adjourned 22 October due to lack of witnesses, and his court-appointed defender Steven Kay resigned, throwing entire proceeding into disarray. Justice minister Zoran Stojkovic said Serbia will not arrest 4 generals indicted by ICTY. Bosnian Serb war crimes suspect Ljubisa Beara appeared before ICTY 12 October after Serb police apprehended and transferred him to Hague.

Montenegrin politics continue to be overshadowed by allegations of smuggling and human trafficking.

Montenegrin politics continue to be overshadowed by allegations of smuggling and human trafficking.