Risen from the ashes of war: Winning the peace in the Balkans

As war in the Balkans ended, peace talks in Dayton, Ohio, were locked over the fate of Brcko. Ten years on, Peter Popham looks at the town which has become a model for ethnic harmony

Remembering the day when the district council gave him the materials to rebuild his house, Denic Sulejman's eyes fill with tears. "I was born here, this is where I spent my childhood, I am a citizen of Brcko. And now I'm home again. Yes, I'm happy. When I heard I had been granted the material to build, I cried. If it doesn't snow in the next fortnight, we'll get the roof on."

Welcome to Bosnia-Herzegovina 10 years on, and a story of success. At the nerve-shattering peace talks in Dayton, Ohio, in 1995 where Richard Holbrooke and his team hammered out a deal to make the Serbs, Croats and Bosniaks (Muslims) of Bosnia lay down their arms, the future status of the town of Brcko proved impossible to solve. It was, Mr Holbrooke wrote, "the toughest of all issues at Dayton".

Brcko is a town of fewer than 100,000 people that looks much like anywhere else in the country; a town centre which is a tatty tangle of communist cement and peasant brick, with the odd relic of Habsburgian pomp; beyond the centre, miles of plain, sturdy houses with pitched roofs and chimneys amid the damp green fields and the ginkgo trees.

But today Brcko is an example to the rest of Bosnia. Its mayor earns more than the nation's Prime Minister; its police, teachers and waiters are twice as well paid as those in the rest of the country. Workers and would-be welfare claimants are clamouring to move to the place.

It is home to Arizona Market, once a vast, anarchic outdoor black market where you could buy anything from a sex slave to a landmine. Today it is even more vast but tamed, a shopping draw for folks from Ljubljana to Belgrade. It is also home to a growing throng of privatised companies which are making good profits, taking on new workers and paying taxes.

At least as important as its affluence is the town's new-found ethnic harmony. Brcko's schools are the only ones in Bosnia where children from the different communities study in the same classes. It is home to the country's only integrated police force, integrated justice system and district council. Brcko is the multi-ethnic Bosnian ideal made flesh, and prospering.

What makes Brcko different is its location. At the north-east corner of the country, on the River Sava, it joins and separates everything. Croatia and Serbia are just over the river, and the crossing and the river itself have been Bosnia's lifelines to the outside world for centuries. In 1995, when the war was brought to an abrupt halt, Brcko was the "hinge" that connected the western part of Republika Srpska, the fanatically nationalist Serbian entity within Bosnia, with its eastern part and with Serbia itself.

A majority Muslim town in 1992, Brcko had fallen to the Serbs in one of the most ferocious onslaughts of the war. Hardly a house here was not smashed by artillery; Serbian paramilitaries, led by the notorious hitman-turned-ice-cream parlour owner Arkan, had scoured the centre. More than 30,000 Bosniaks and Croats were driven from their homes, and many were tortured, raped or killed in the 20 prison camps set up around the town.

At Dayton, one vital issue after another was agreed under intense American pressure, but on Brcko no one was prepared to yield; it was vital to everybody. The Muslims wanted the town restored to their side, and suggested (ludicrously) solving the problem of east-west Serb access with an underpass below a railway bridge. Up to the penultimate day of the talks, Slobodan Milosevic, for the Serbs, was demanding that the "Posavina Corridor", in which Brcko sits, be expanded from three miles to 10.

Then, on the final morning, with all sides resigned to failure, Mr Milosevic suddenly told Mr Holbrooke he would "walk the final mile for peace" and submit Brcko to arbitration "one year from now". Dayton succeeded because Brcko, and only Brcko, was set aside to be decided later.

As a result, the town became America's little corner of Bosnia, Bosnia's little corner of America. Thousands of troops, committed by President Bill Clinton with great misgivings, were stationed here, in Fort McGovern, so they could flee across the river and into Hungary if things turned nasty. An American legal expert, Roberts Owen, was given the job of ruling on the town's final status. Until then, it would be ruled by a "Supervisor" appointed by the US State Department.

Brcko illustrates - much like Japan in the early years of the post-war Allied occupation - the creative charms of a benign, alien dictatorship. Notionally, this Brcko Shogunate was subservient to the European Raj in Sarajevo, the "Office of the High Representative", and remains so today. But, in fact, it went its own sweet way from day one.

While the rest of Bosnia was thrust into elections right after the war, with memories of the fury and agony of the fighting still fresh, no elections were held in Brcko until last year. Instead, successive US Supervisors plucked well-intentioned moderates from the non-fanatical political parties to create an assembly, and presented them with the basic building blocks of brotherhood and unity, the rules of the game which a just, multi-ethnic state ought to play. And it worked. When finally the Americans grasped the nettle and called elections, the winners were the moderates.

The bitterness of the war has not evaporated here, but it has been dealt with. Denic Sulejman, 63, a retired butcher, is rebuilding his home and will live in it with his wife and daughters because the Serbs who occupied it in 1992 have gone away. And the reason they left was not a sudden attack of pity and remorse, but the hard-headed realisation on the part of the Brcko authorities that you do not solve one refugee problem by creating another one elsewhere. However outrageous the ethnic cleansing of Brcko - 20,000 Serbs were brought in during the war - a Serb family had been in Mr Sulejman's house for a decade. So new homes were built for the Serbs in other places in the town.

Mr Sulejman says: "When I first came back to look at my house in 2000, large crowds of Serbs would quickly gather to protest. This lasted until they were offered alternative accommodation." But there were no forgiving handshakes at the threshold.

"The Serb asked if I was willing to pay for the improvements he had made to my house. I said I wasn't. So he removed everything, the electrical wiring, the bathroom, the roof. All I found was my wedding photographs and a pullover."

With the roof removed, the house was heavily damaged by rain. But Brcko, in the only system of its kind in Bosnia, provides building materials worth up to €10,000 (£6,800) for people to repair their war-damaged homes. That amount goes a long way here.

Mr Sulejman is confident he will be back home next year. Everywhere you look in Brcko you see scaffolding and cement mixers. In the town centre, a shopping centre is being built and the old Hotel Jelena has undergone a flashy makeover; the Arizona market is still expanding; and rebuilding has even reached the leafy suburbs, the old no-man's-land where the Serb forces dug themselves into trenches and seeded the fields with mines.

Ferid Bjelic is a construction engineer from Brcko with his own company and when the war broke out he was working in Germany and Italy. He stayed out of the country throughout the war. "I had two houses on Brcko's front line," he said over beer and steak in a smoky little pub. "Both were destroyed. I came back in 1997, one of the first Muslims to return. That's when my problems started, because this was now a Serb-controlled area.

"So I registered my company in [Muslim-run] Tuzla and I started up again with 10 workers, doing jobs for the Serbs."

He says things changed dramatically for the better in 2000, when the American arbitrator made his final award, giving Brcko its definitive, multi-ethnic form. "Now I have 110 workers from all three communities, doing jobs all over the district. I came back because of my love of the country and the people, but I also think this area is going to prosper. But I fear the good situation may not last for long, so I want to get as much work as possible now."

The prime arable land for miles around Mr Bjelic's headquarters is still mined, a source of continuing bitterness and anguish. But the work contracts are pouring in: he has just taken delivery of a large crane to increase his capability.

In a cramped, cosy kitchen, his sisters cook 110 lunches every day to feed the workforce, using the chickens and turkeys that scurry around the yard. Next to the kitchen is the copper still from which Ferid makes 150 bottles of prime slivovitz (plum brandy) every year. He hands the bottles round like business cards. At his home, next to a newly rebuilt mosque, he has a coffee bar where his workforce pile in every morning for a free breakfast before work. Under the benign gaze of the Americans, a new type of socialistic capitalism is being roughly hewn into shape.

The problem for Brcko is that it is now so far ahead of the rest of the country economically and socially that it is terrified of being dragged back into the chauvinistic mire after the Supervisor and aides pack their bags and go, which must happen some time.

Two hundred kilometres away in Sarajevo, Paddy Ashdown and his team have achieved great things at the level of high politics: creating a single prosecution service, reforming taxes and customs and intelligence gathering, and getting just enough concessions on an integrated police force to allow talks on EU membership for Bosnia to get under way. But at the level of low politics, ethno-nationalism and corruption remain rampant.

Beyond Brcko, Bosnia's three communities live apart, go to school apart, work apart, and have as little to do with the other two as possible. The Office of the High Representative has striven to change that but, after the war, the chauvinists won the elections and got in on the ground floor of the new nation. They have proven stubbornly difficult to dislodge. In ordinary people's lives, the war-created fact of ethnic division has now been cemented into place.

But the international community has not given up hope of transforming Bosnia. Lord Ashdown has been a uniquely dynamic and ambitious High Representative and when he goes, probably in January, nothing like as much effort is expected from his replacement, whoever that might be.

But by then, the argument goes, a high-handed High Rep will no longer be required, because talks on Bosnia joining the EU will have started, and "the push of Dayton will be replaced by the pull of Brussels", as they say here. Bosnia will have to change in fundamental ways, it is claimed, or it will not get in.

So perhaps the rest of the country will be obliged to go the way of the anomalous town on the River Sava. But at the moment it is even money whether brave little Brcko will become the model for Bosnia's future, or a tragically irrelevant memory from the past.