LUXEMBOURG, Oct 9: EU foreign ministers today lifted key sanctions against Serbia but retained those which directly target ousted president Slobodan Milosevic, reports AFP.

The EU has decided to lift all sanctions targeting the Federal Republic of Yugoslavia since 1998, with the exception of those aimed at Milosevic and people associated with him." the ministers said in a statement.

Being lifted are an embargo on oil shipments to Serbia and a ban on commercial airline flights that has already been relaxed.

Still in place is a travel ban on Milosevic, his family and close associates, as well as a freeze on assets they have In the European Union.

The lifting of sanctions follows the popular revolt in Belgrade last week that forced Milosevic to recognise Vojislav Kostunica as Yugoslavia's newly elected president.

In Belgrade. Yugoslav Prime Minister Momlr Bulatovlc handed in his resignation today, paving the way for President Vojislav Kostunica to appoint a new federal government, the state news agency Tanjug reported.

Kostunica was expected to present to parliament his choice for prime minister and candidates to other cabinet posts within days.

Bulatovlc. a key ally of ousted president Slobodan Milosevic, announced he was quitting following a meeting with Kostunica, who was officially sworn in Saturday following a week of protests that forced Milosevic to hand over power.

Milosevic late Friday admitted defeat in the September 24 presi-dential elections, ending a 13-year reign marked by wars, economic decline and corruption.

But neither Kostunica's 18-party Democratic Opposition of Serbia (DOS) nor Milosevic's leftist coalition won enough seats to control the two-chamber Yugo-

slav assembly, suggesting that the new president will have to engage In political horse-trading to form the new cabinet.

Attention focused on Bulatovic's Socialist People's Party (SNP) which has been close to the former president but also

was one of the first pro-Mllosevic parties to congratulate Kostunica on his victory.

Kostunica has indicated he could offer the prime minister's post to the SNP although Bulatovlc himself was not seen as a likely candidate.