POZAREVAC, YUGOSLAVIA -- Twice a month, a portly, smiling mailman comes to the three-room home of Gorica Stanojlovic and sits at her kitchen table to chat and have a drink of brandy while paying out her pension in cash.
On his visit last Wednesday, the mailman brought her what might seem like a jackpot: 100 billion dinars. But the 78-year-old pensioner was not pleased.
These days, 100 billion dinars is just enough for the woman, living alone, to pay her electricity, telephone and water bills and to buy milk and bread.
"I cannot buy meat at all," Stanojlovic said.
Sixteen months after the United Nations imposed sanctions on Yugoslavia for its support of Serbs in the Bosnian war, the country has reached a point of economic exhaustion, with millions such as Stanojlovic struggling to survive in the face of hyperinflation, acute food shortages, soaring prices and the coming winter.
The office of the U.N. High Commissioner for Refugees in Belgrade, the capital of Yugoslavia, estimates that more than 3 million of the 10 million people living in Serbia and Montenegro, the two republics that now make up the Yugoslav federation, are living at or below the poverty line. This includes 1 million pensioners such as Stanojlovic, another 1 million idled industrial workers, 750,000 people officially jobless, 200,000 on welfare and 490,000 mostly Serbian refugees from Bosnia.
Yugoslavs are screaming for relief and understanding. But the international community seems to be in no mood to listen to their pleadings as long as Sarajevo, Bosnia's capital, remains under Bosnian Serb siege and no peace plan is put forward that is acceptable to the Muslim-led Bosnian government.
"Instead of punishing the Muslims, who rejected the latest U.N. peace plan, we suffer under sanctions," said Ivica Dacic, a spokesman for President Slobodan Milosevic's ruling Socialist Party of the federation's dominant republic, Serbia. "But we supported the plan. Are we responsible because the Muslims didn't sign?"
Milosevic has made the lifting of the U.N. sanctions before the onset of winter his top foreign policy priority, according to Serbian and diplomatic sources.
"All these problems have convinced the government this is a very serious situation," a diplomatic source said. "It's not only an economic problem, it's a political one too. You cannot import anything unless you get rid of sanctions."
But Milosevic has strong reasons for placing the lifting of sanctions at the top of his domestic political agenda as well. He is facing a serious challenge from his former political ally, Vojislav Seselj, whose Radical Party has prompted a no-confidence debate in parliament, partly over the government's mishandling of the economic crisis and inability to halt hyperinflation.
The economy, already in a downward spiral before the sanctions, is now in a free fall. Industrial production and the gross domestic product have both fallen by about two-thirds from their 1989 levels, according to government statistics.
During the first nine months of this year, inflation was 48.5 million percent, and it rages on at 15 percent to 20 percent a day, according to Borisa Vukovic, the Yugoslav deputy minister for economic relations.
The 100 billion dinars Stanojlovic received were worth just $10 last Wednesday. Two days later, the sum was worth only $6.
"The only people who can live normally now are the Gypsies and the money-changers," Stanojlovic said.
Food stores often lack even bread, sugar and cooking oil. There is no gasoline at service stations, no meat at butcher shops, no cigarettes at kiosks and no money in the banks. Industrial production is expected to fall another 30 percent this year, and drought has badly affected the sugar beet and potato harvests.
Hospitals lack everything from gauze and cotton to antibiotics and film for X-ray and scanner machines.
"I doubt the U.N. Security Council would have decided on sanctions if they knew the impact would be so serious on our hospitals," said Dusan Scepanovic, director of Children's Hospital in Belgrade.
The collective nightmare gripping the country these days is of a cold winter and no heat. The government has applied to the U.N. sanctions committee to be allowed to import heating oil and gas for the winter, but has had no reply so far.
Yet it is not clear that the government is willing to make the sacrifices necessary to ease the crisis. Diplomats noted that 75 percent of Serbia's budget continues to be earmarked for the military, which keeps an estimated 100,000 troops mobilized.
"They certainly are putting a lot of their assets into military spending and subsidies for the Bosnian and Krajina Serbs," a diplomat said.
The Serbs in Bosnia and Krajina -- the 25 percent of Croatia under Serb control -- have declared separate "republics," which are dependent on Serbia for all supplies other than basic agricultural produce. Their heavy weapons come largely from Serbia, and their tanks and trucks run on Serbia-provided diesel fuel.
According to Serbian economists, the equivalent of 20 percent of Serbia's gross domestic product goes to supporting these two self-styled republics.
It is the Serbs of Serbia who are paying the price.
The government's monetary policy consists of printing money as fast as it can and dropping zeros from dinar bills from time to time. The day that the mailman came to Stanojlovic's house, he gave her nine 10 billion-dinar bills and a 100,000 "new dinar" bill that the government had just begun printing after removing six zeroes.
The day before Stanojlovic got her pension payment, the government raised the price of electricity 975 percent, cooking oil 280 percent and sugar 275 percent.
A few months ago, the government introduced price controls on basic food items such as milk and meat. But farmers, faced with ever-rising costs, rebelled and refused to sell to the stores.
Conditions here in Pozarevac, a city of 45,000 about 50 miles southeast of Belgrade, are as bad as in the capital, even though this was once a major food processing center.
Mayor Kosta Jermic said economic activity has fallen off 20 percent because "we cannot supply our factories with fuel, raw materials and spare parts any longer."
In fact, there appeared to be only one group here that was doing a brisk business under the U.N. sanctions: the black marketeers hanging around the central square.