In an attempt to salvage the UN's reputation for neutrality, officials in Sarajevo announced a top-level inquiry into the 48 boxes of machine gun and sniper ammunition found by Bosnian Serbs on a lorry going from Sarajevo to the Muslim-held village of Butmir.
There is open concern that the fall-out could sink the UN humanitarian operation in Bosnia, already faltering under the weight of Serbian obstruction. There are also fears that Serbs will seize the opportunity to redouble a brutal offensive against the eastern Bosnian town of Srebrenica, on top off stopping aid convoys to other towns, including Sarajevo.
The UN force's commander, General Phillipe Morillon, went to Belgrade last night to win Serbia's approval for a plan to station UN peace-keepers in Srebrenica, a desperate move given Serbia's unconcealed backing for the Bosnian Serbs besieging Srebrenica.
In Belgrade, the Bosnian Serb commander, General Ratko Mladic, delivered the plan a mortal blow, saying peace-keepers would enter Srebrenica 'over my dead body - or the bodies of my family'.
On Thursday, General Morillon's attempt to save Srebrenica by leading 150 Canadian troops into the town fizzled out in farce when his small advance convoy was turned back by a mob of irate Serb women and children.
Later on Thursday, Serbian attacks on Srebrenica intensified. UN observers said tanks and artillery battered the south and west approaches to the town, where 60,000 Muslims are holed up in appalling conditions. The attack cut the water supply. 'It is a major catastrophe,' said a UN refugee spokesman.
The UN postponed attempts to get another convoy through to Srebrenica until today to give aid officials in Tuzla time to process more than 2,000 people who jammed lorries to flee the enclave on Thursday.
Those reaching the relative safety of Tuzla had been stoned by Serbs as they passed through Zvornik in the open lorries. One woman was hit in the eye and several others on the head.
In Sarajevo, a UN spokesman said officials from Zagreb or New York would be brought in to investigate the arms-smuggling affair. A tough response is expected from the Serbs, who have generated maximum media publicity over the discovery. A convoy destined for the town of Gorazde was halted yesterday by Serbs. General Mladic said yesterday that if necessary 'we will open each box big enough to hold a bullet'.
The furore over the discovery adds to the woes of the UN operation in Bosnia, already torn by accusations of corruption. A more general charge is that the UN has been ineffective in halting the Bosnian carnage, now in its thirteenth month.
Russia said yesterday that proposed UN sanctions, to be debated on Monday, against the rump Yugoslavia represented 'an untimely and harmful step'.
Vitaly Churkin, President Boris Yeltsin's special envoy, was quoted as saying in Belgrade: 'In this connection I am very concerned about the planned vote on a new UN Security Council resolution to impose new sanctions on Yugoslavia.'
The EC peace envoy, Lord Owen, warned yesterday that governments might be forced to bring 'specific and carefully judged military action' to bear in the former Yugoslavia.
'We have been charged with primarily a diplomatic mission and the facts of the matter are that governments are not prepared to put troops on the ground, not prepared to fight their way into Srebrenica,' Lord Owen told BBC radio.
BELGRADE - The Yugoslav government devalued the dinar by 98.4 per cent yesterday, Reuter reports. The official exchange rate from midnight was 48,000 dinars to the US dollar, compared with 750 dinars yesterday morning.
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