International arrest warrants for the pair are expected to be ordered in court at The Hague tomorrow.
The commander, Admiral Leighton Smith, said that until he receives specific orders from Nato's North Atlantic Council, his troops are under orders to arrest war criminals only if they chance upon them.
He also said he hoped there would be more pressure on Serbian President Slobodan Milosevic to hand over indicted war criminals, as he had agreed to do when he signed the Dayton Accord.
Admiral Leighton Smith, who has led the 52,000-strong peace implementation force since it entered Bosnia in December, and who leaves Bosnia at the end of the month, said,"Mladic is in complete control of his army ... We do not deal with him.
"I have received several letters from Mladic. I do not answer those letters. I have received an invitation to lunch with Karadzic, which I did not answer. Karadzic is still in Pale. He still exercises considerable influence."
He has increased peace patrols in Pale, but said: "That does not mean I've established a permanent presence there."
He said that if Mr Karadzic or Mr Mladic turned up when he was negotiating with the Bosnian Serbs on their own territory, he would have to walk out, as his personal protection squad would probably not be strong enough to overpower their men. He also said that President Milosevic bore some responsibility for not handing Mladic and Karadzic over, when it was obvious that he could have exerted pressure on the Bosnian Serbs. He added that he hoped political and economic pressure would be brought to bear on the matter.
"I know there's a hell of a lot of heat being applied to get the parties to do what they have signed up to," he said. "Milosevic signed; he hasn't implemented."
He said that the other indicted war criminals - there are currently 72 - deserved as much attention as the two Bosnian Serb leaders.
The Admiral, who will retire when he leaves Bosnia, said he was "absolutely delighted" with what had happened in his six months as commander of the peace force.
"Truthfully not many, including myself, thought we would be this far along in the peace process without a great many more problems than we have had," he said.
The Admiral was optimistic that Bosnia would not remain split into two entities, though many observers disagree.
He said that 30,000 vehicles had crossed the "inter-entity boundary line" between the Serb and Muslim-Croat segments in the last few months, and that he had recently seen 75 cars crossing the line to attend a market on the other side.
"Is it a multi-ethnic state now?" he asked, rhetorically. "No. Can we expect one by December? Probably not."
He said the elections, due in December, would be "a huge event" but would mark only the beginning of a return to normality in the country.
He said that establishing the authority of elected officials would be difficult in itself, and he therefore doubted whether the climate would be stable enough to withdraw all military forces after 20 December.Reuse content