By Neil MacDonald in Belgrade

Before Kosovo declared independence on February 17, Serbian officials warned that the new state would become a haven for gangsters and heroin smugglers on the doorstep of the European Union.

Officials in Kosovo’s government say much the same thing about the Serb-controlled north of their territory.

“The north [of Kosovo] has become a Serbian state-sponsored mafia zone, awash in arms and run by parallel structures,” said Muhamet Hamiti, a senior advisor to Kosovo’s president, Fatmir Sejdiu.

The UN drugs and crime office, in a May 29 report, said organised crime in the Balkans was on the wane. Yet the ethnic Albanian-dominated breakaway state cannot exercise control over its northern border zone, populated mainly by ethnic Serbs who still recognise Serbia as their only country.

Two customs checkpoints were destroyed by Serb protestors two days after independence. The crossing points, hower, remain open, allowing truckloads of oil, processed foods and other goods to cross the Serbia-Kosovo boundary daily without any inspection, EU and Kosovan officials say.

Although Nato-led peacekeepers maintain security, the UN administration has only put “mobile customs teams” a few kilometres inside Kosovo – an imperfect response, admitted Russell Geekie, UN spokesman.

“We’ve been calling on the UN for months to control the border or at least close those two crossings to commercial traffic”, Mr Hamiti said.

Smuggling from Serbia drains €15m each month from the Kosovo budget, according to local newspapers, whose claims Mr Geekie did not dispute.

But restoring control would require help from Serb leaders – especially to persuade the ethnic Serb staff in the UN-run customs service to return to work at the Jarinje and Zubin Potok checkpoints.

Neither Kosovo nor the UN will recognise the “illegal” Serb municipal assemblies formed as part of Serbia’s May 11 elections.

The UN administration, in place since the Kosovo war ended in 1999, has also been embroiled in a jurisdictional tussle with the EU, which is supposed to supervise Kosovo’s authorities under the constitution to take effect on June 15.

Brussels has delayed the deployment of the planned EU-led police mission in Kosovo as officials look for ways to cooperate with the UN, which cannot leave without a Security Council decision. Serbia’s ally, Russia, continues to reject independence for the disputed territory.

“After the 15th, we’ll be at least constitutionally in charge. We’ll see what we can do then to stop these brutal violations of our sovereignty,” Mr Hamiti said.

But Alex Anderson, Kosovo director for International Crisis Group, added: ”In this whole situation of lawlessness, there’s also a big [ethnic] Albanian element... driving the demand for contraband products.”

On the Serbian-run side of the boundary, police inspect trucks coming from Kosovo “as usual”, although taxable goods of Serbian origin frequently re-enter “through the woods”, local officials said.

The porous border costs Belgrade too, as truck drivers and southern Serbian residents have started buying untaxed gasoline in northern Kosovo for just 65 dinars (80 euro cents) per litre, about half of the legal domestic price. Black market gasoline – refined in Serbia and re-imported from Kosovo – sells for just 80 dinars.

Fuel in the northern zone is the cheapest in Europe, pushing prices down in the rest of Kosovo too.

Serbia’s pro-EU faction, now haggling with minor parties to form a new government, hopes for normal economic relations despite refusing to recognise Kosovo’s independence.

“Increasing trade is our goal,” said Mladjan Dinkic, minister of economy. “We would like to sell as much of our products in Kosovo as possible.”