Under one version of the deal, Croatia would accept certain Serbian gains in the Bosnian war in return for Serbian recognition of Croatia as a sovereign state within its internationally defined borders.
Serbian and Croatian officials confirmed that talks had taken place, but gave differing accounts of the proposals under consideration. Josip Manolic, the head of Croatia's committee for normalising relations with Serbia, said the main topic was Serbian recognition of Croatia in exchange for autonomy for Croatia's Serbian minority. The Serbs of Croatia, backed by Belgrade, rebelled in June 1991 and set up a mini-state called the Republic of Serbian Krajina. The Croats want the Krajina Serbs to abandon their pretensions to independence and permit the restoration of Croatia's integrity.
Serbian sources said the talks had covered not just Croatia but territorial and political arrangements for Bosnia-Herzegovina. They said the Croats were adamant that Croatia must regain its occupied land but were ready in return to contemplate a deal in Bosnia favourable to the Bosnian Serbs.
The deal centres on the status of an area of northern Bosnia, around the town of Brcko, where the Bosnian Serbs need control to maintain effective links with Serbia. Battles raged near Brcko on Thursday and yesterday between the Bosnian Serbs and Bosnian government forces.
The plan devised by Lord Owen and Cyrus Vance, the European Community and United Nations mediators, promises the Bosnian Serbs access to Serbia through northern Bosnia, but assigns the Brcko area to the Croats. The Serbs believe they could secure Croatian concessions in that area if Croatia is given back the land it lost in 1991. The Serbs would also trade recognition of Serbian conquests in northern and eastern Bosnia for Croatian control of central and south-western Bosnia.
In central Bosnia, British Tornado fighters forced down a Croatian helicopter on Thursday that had violated the no-fly zone and delivered arms to Bosnian Croat forces.
The deal would leave Bosnia's Muslims with patches of vulnerable, landlocked territory and raise doubts over the survival of even a decentralised Bosnian state.
It would also, in effect, brush aside the Vance-Owen plan by reorganising the internal Bosnian provinces on which that initiative is based. Since both the Croats and Serbian leaders in Belgrade say they accept the plan, they refuse to acknowledge in public that they may have other goals. But one Croatian official said privately: 'It is well-known that Vance-Owen is unrealistic and finished.'
Western governments are officially committed to the Vance-Owen plan, but diplomats say it could prove hard to reconcile its proposals with military realities on the ground, particularly if Serbia and Croatia are considering a separate deal.
Though nominally allied to the Croats, the Bosnian Muslims have long suspected that the real Croatian and Serbian war aim is to carve up the republic at their expense. The first step in that direction was taken last May, when the Bosnian Serb leader, Radovan Karadzic, and the Bosnian Croat leader, Mate Boban, met in the Austrian city of Graz and agreed on the republic's de facto partition.
The Serbian minorities in Bosnia and Croatia could still torpedo the Serb-Croat deal. Both implacably oppose living in independent Bosnian and Croatian states, even with autonomy.
Joined by the nationalist Serbian Radical Party, they foiled an attempt yesterday by Serbia's President, Slobodan Milosevic, to put on a show
of pan-Serb unity at a conference in Belgrade.
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