mainly in Macedonia, but also in Albania and have a destabilising effect on both). Albanians back up separatist demands by force. If Albania's northern border were violated, the Greek government might come under pressure to protect Greeks in the South. Albanian troops reported to be massing on border with Kosovo.

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test of our mediation efforts. The conflict might spread beyond the borders of the old Yugoslavia for the first time. Any Greek involvement would pose problems within NATO and the EC.

and others have urged all concerned to remain cool. NB: We should be careful to discourage Albanians in Kosovo' from expecting international intervention.

7.

Yugoslavia: Macedonia: Several scenarios possible. Destabilisation follows refugee influx from the Kosovo, aggravating already chronic economic problems caused by sanctions against Serbia and Greek discrimination. Ethnic riots spark civil war, leading to armed intervention by any of Macedonia's four neighbours. Mitsotakis' government falls following EC recognition of Macedonia at Edinburgh.

8. Iraq: Saddam tests Clinton in first few months of his administration. Refuses to comply with ceasefire conditions and/or attacks Kurds. Rug pulled

out from under Operation Provide Comfort.

No direct interests. But any spread of conflict more widely in the Balkans is of course highly undesirable - spreading to border of NATO partner. EC will carry blame if Macedonia collapses from poverty, ethnic tension or external pressure. Instability could lead Greeks to introduce conscription, weakening Greek economy further and leading to pressures on EC budget.

It is important both for the UN's credibility and for long term stability in the Middle East that Saddam should not win.

The last FAC opened the way for economic assistance to any part of former Yugoslavia.

Continuous activity in the UN and Washington. Keeping Turkey

fully briefed (because of Operation Provide Comfort).

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