Diplomatic activity reached a pitch yesterday at the United Nations, where Islamic nations supported a draft Security Council resolution that would demand Nato arrest Mr Karadzic and the Bosnian Serb military commander, General Ratko Mladic.
The draft UN resolution, obtained by the Independent, which will be circulated to Security Council members by Egypt, "requests the Implementation Force [I-For] to arrest Radovan Karadzic and Ratko Mladic and surrender them to the International Tribunal in the Hague and authorises I-For to use force, if necessary, to execute this mission".
The issue of what to do about Mr Karadzic has become urgent because of the planned opening this Friday of the election campaign in Bosnia. Pressure is growing for a Nato-managed military snatch of Mr Karadzic from his base in Pale, a former winter resort near Sarajevo.
Mr Karadzic has been charged with war crimes by the International Tribunal and is the subject of an arrest warrant. The American official in charge of monitoring the elections in Bosnia, Robert Frowick, of the Organisation for Security and Co-operation in Europe, has vowed to bar the Serbian Democratic Party (SDS) from the campaign while Mr Karadzic, who is its chairman, remains on Bosnian soil. However, most observers believe an election without the SDS would be meaningless.
Ambassadors of the Contact Group of countries most closely involved in the peace process - Britain, the United States, France, Germany and Russia - were due to meet late yesterday to iron out differences over the way forward.
Germany and the US have been most outspoken in threatening tough measures to force out Mr Karadzic, including the reimposition of sanctions.
Even Britain, which until recently advised against inflaming Balkan tensions, has, according to senior sources, accepted that one of three options will now have to be considered: a gradual reintroduction of economic sanctions against the Bosnian Serbs and possibly also against Yugoslavia; a full- fledged reintroduction of sanctions by the Security Council; and, at the extreme end of the spectrum, a military kidnapping of Mr Karadzic and General Mladic.
Britain and other states have asked Carl Bildt, the senior international civilian representative in Bosnia, to come to the UN in New York to consider the next steps forward.
If Mr Bildt or the commander of I-For, Admiral Leighton Smith, formally notify the UN that the parties to Dayton are in violation of its provisions, all former sanctions applied to Yugoslavia would automati- cally be reimposed.
Hopes that the crisis may still be defused rest with President Bill Clinton's personal envoy, Richard Holbrooke, who arrived yesterday in Belgrade for talks with the Serbian President, Slobodan Milosevic. Mr Holbrooke was expected to threaten the reimposition of sanctions unless Mr Karadzic is persuaded to leave Bosnian territory.
While the US is on the side of the hawks in wishing to threaten and, if necessary, implement sanctions, it is divided over the plan to arrest Mr Karadzic. While the State Department is believed to favour that option, the Pentagon has voiced opposition.
Nato leaders still oppose giving I-For forces stronger powers to hunt down and arrest Bosnian war criminals, Nato officials said yesterday. Although the alliance has not ruled out adopting a tougher line, the 16 member countries still hold out the hope that diplomatic pressure will persuade Mr Milosevic to round up the Bosnian Serb war criminals himself.
Despite tougher words from some I-For commanders, there have been no attempts within the North Atlantic Council to change their policy, said Nato sources, and no discussions on the matter are planned.
"The council has not seen fit to change policy. It is continuing to stick with it. There is consensus on this from all the allies," one Nato official said.
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