The move restores the sanctions threat suspended by Brussels and Washington last month after the Yugoslav President, Slobodan Milosevic, agreed to talks with the leader of the Kosovo Albanians, Ibrahim Rugova. The US State Department spokes-man said the US was now proceeding with the sanctions because "the indiscriminate use of violence [by Serbian forces] over the past two weeks has undermined the basis of those talks". US officials said that the sanctions could hamper Yugoslavia's privatisation plans by curbing foreign investment.
Other sanctions imposed on Belgrade since March include a ban on exports of arms and lethal equipment, and a ban on government investment credits.
Meanwhile, in Kosovo itself yesterday, Serb forces were reported to have pounded several south-western villages near the Albanian border with helicopters and artillery.
Speaking after the Luxembourg meeting, at which Britain led the calls for a tougher line, Foreign Secretary Robin Cook said: "This is the last warning for Slobodan Milosevic. If he continues to cross the line and to use unacceptable military measures against civilians he should not be surprised by the options used against him."
Foreign ministers of the Contact Group on Balkan issues - Britain, France, Germany, Italy, Russia and the US - will meet in London on Friday.
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