By Fatos Bytyci

RAHOVEC, Kosovo, Nov 3 (Reuters Life!) - Giddy over the joy of freedom, the owners of the Stone Castle winery raised toasts to independence from Serbia last year, putting out of mind the fact that they had just lost one of their key clients.

Winemaking in the rolling hills of Kosovo is one area that has been badly hit after Kosovo declared independence from Serbia in February 2008.

Stone Castle in Rahovec is the only one of four state-owned wineries dating back to the Yugoslav era to have been sold successfully. Two Albanian brothers living in the United States bought it in 2006, and it now produces 90 percent of all Kosovo's wine.

In the 1980s before the wars that broke up Yugoslavia, the winemaker produced 60 million litres of wine a year, of which 40 million litres was shipped by train to Germany.

Angry at Kosovo's declaration of independence, Serbia banned Kosovo-marked products and barred trans shipments to other Western European countries, zapping customers and increasing Stone Castle's transport costs by 25 percent in one blow.

In 2008, Stone Castle produced only 10 million litres (2.2 million Imp gallons) and exported 95 percent, mainly to the European Union and Serbia, its former ruler, before it banned Kosovo goods.

"We sell zero in Serbia," said Shani Mullabazi, the manager of Stone Castle vineyards and winery. "Serbia was a very important market for us."

Now he says Stone Castle is looking at the international market as the only way to survive and make a profit by buying grapes in to supplement its production and selling abroad.

Wine-making's roots run deep in this region where 2nd century A.D. wine amphorae have been found by archaeologists and it has always suffered from the vagaries of history. When the Muslim Ottoman Empire conquered the region in the 15th century, they prohibited winemaking.

Rather than losing the taste for alcohol, the inhabitants of Kosovo turned to brandy from grapes and plums. The preferences of yesterday now force today's Kosovo winemakers to depend on Europe for survival.

The continental climate, fields located at a height of 300-400 metres (yards) above sea level and more than 200 sunny days a year make Kosovo a good place for wine production.

In wooden barrels made 30 years ago, Stone Castle stores Chardonnay, Cabernet Sauvignon, Rhine Riesling, Merlot and Pinot Noir wines made from its own grapes and other vineyards.

Stone Castle's main export to Germany, Amselfelder, is a full-bodied red with a tinge of sweetness.

"Our main investments will go to improve the quality and reach the position that we had in 1980s when it was a golden time for Kosovo wine," Mullabazi said.

More than 50 percent of Kosovo's vineyards were destroyed during the 1990s Balkan wars. In nearby Prizren, once an area of active wine production, no one works anymore in the state-owned vineyards, and a fire over the summer destroyed large swatches of grape plants.

Farther away, squatters occupy the vineyards, are building houses and even daring to offer to sell land owned by the state.

Since Serbia's boycott, Kosovo's total wine exports have fallen by half.

"In the first half of 2008, Kosovo exported 5.2 million litres and during the same period this year only 2.2 million litres," said Nesim Morina, chief of the Agriculture Ministry's winery department.

"One day we will understand what we did to our vineyards by destroying them," says Fadil Gashi, the owner of a small vineyard selling grapes on the street. "But it will be late."

(Editing by Benet Koleka and Paul Casciato)

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