"The West does not understand Milosevic. His behaviour is anti-logical. He does not conform to the norms that western journalists and politicians apply."

I was drinking coffee with Nenad Djordjevic, once a close friend of Mira Markovic, wife of Yugoslavia's president, Slobodan Milosevic: "Milosevic thrives on isolation. The more the West applies sanctions, the stronger his position becomes."

I had travelled to Yugoslavia three months after the war over Kosovo to discover the fate of Milosevic and his powerful wife, Mira Markovic. Known to Serbs simply as Sloba and Mira, they have governed the strange citadel of Serbian politics like a medieval court for over a decade.

It was an autumn morning in Budvar, an elegant seaside town in Montenegro.

The happy couple in 1964

Djordjevic was vice-president of Mira Markovic's party until he was accused of embezzling $10 million from the fund that pays the state health insurance. He served a brief prison sentence and is now enjoying the relative sanctuary of Montenegro, the smaller Republic in Yugoslavia that is no longer under Milosevic's control.

Djordjevic pleaded innocence regarding his own case. He then went on to spend two hours describing different scams and moneymaking schemes employed by Milosevic's ministers and supporters. On my notepad, he piled zeros onto figures for funds illegally pocketed by prominent Serbian officials.

"The only way to understand Milosevic and Mira" he said, "is to understand the Mafia".

Never a nationalist

In the West, Milosevic is considered a nationalist. In fact, Milosevic has never been concerned with Serb nationalism. He exploited the plight of the Serb minority in Kosovo to gain power but ever since has used Kosovo as a vote bank to deliver seats for his party in the Serbian Parliament.

One of the key reasons why Milosevic did not accept a compromise over Kosovo was the consequence that would have for his power base in Belgrade.

Mrs Markovic waves after her speech to the Yugoslav Left Union in 1996

Any deal would have brought an Albanian political grouping to Belgrade that would weaken Milosevic's control. The loss of Kosovo and the ruthless killing that accompanied it has meant that compromise with the Albanians is now impossible. Milosevic prefers to lose territory rather than lose his absolute power.

"Milosevic is not a nationalist. He has given away Serbian lands for years," says Alexsandar Tijanic, a burly man with a square jaw and short hair, cropped in military-style.

At one time Milosevic's Minister for Information, he wrote an open letter last year calling for Milosevic to resign. The text chronicled the damage Milosevic had done to Serbia during his rule. It also said that corruption had entered the heart of Government.

Exploiting isolation

The Serbian economy was cut off from the outside world after the United Nations imposed sanctions in 1992, during the war in Bosnia. Since then, Milosevic and Mira have exploited the economic isolation to create their alternative world.

Tijanic described how the couple had instigated "a social revolution" in Serbia that made Milosevic into a Godfather.

"They chose about 10,000 people who were loyal to the regime. These people were allowed in a very short time to accumulate great wealth. An extremely rich new economic class emerged, made up of people worth tens of millions of pounds".

The money came from smuggling opportunities and business monopolies granted by Sloba and Mira. The couple treated state industry and government concessions as a source of largesse for their followers. The distinction between the legal and the illegal blurred.

A more recent picture of the couple

"He allowed everyone to smuggle," says the Belgrade economist Mladjan Dinkic. "He organised everything so as to corrupt everyone in society from the top to the bottom, so that everyone is involved in corruption of some sort."

Nebojsa Covic was the former Mayor of Belgrade and one of the few men to have broken with Milosevic on a matter of principle. "The central aim of Milosevic's policies is to sully everything that surrounds him. He buys, places you in a role, and once he has done that it is very difficult to go back and free yourself from those claws" said Covic.

Most of the wealthy in Serbia have made money illegally and Sloba and Mira use this knowledge to deter those who might consider disloyalty. The couple have compiled files on both friends and foe - files that contain evidence that could be used in a court of law.

Dusan Mitevic was a friend of Sloba and Mira for three decades. "They use everything" he told me, "whatever contributes to them achieving their political interests. Blackmail, bribery, patronage. Everything is used, everything is allowed in the game."

Nenad Djordjevic - who I later found out owns the hotel where I was sipping coffee - was a secret policeman in the old Communist regime.

He reminded me that Milosevic retains absolute control of today's secret police. "While Serbia remains isolated," he said, "Sloba and Mira can do what they want and will remain in power for years".