''It's clear that we have failed to deter an attack on the safe area,'' Colum Murphy, a senior civilian official, said in Sarajevo yesterday. ''What we do about it now is the important question. We're going to press on in the next few hours to see if something beneficial comes out of it.''
As the Bosnian government forces confront their Serb enemies across the front line a couple of miles inside the Bihac ''safe area'', the UN is scrambling to broker a peace deal that might save civilians in the pocket. If it fails - and the omens are bad - Bihac might become the last resting-place of the UN mission in Bosnia.
If Bihac falls, the Serbs will gain a significant communications link - the railway from Serbia, via Bihac, to Serb-held Croatia - and eradicate a troublesome Muslim pocket, thus enabling the effective creation of ''Greater Serbia''. Residents of Bihac will have to be escorted out of the area, or funnelled into a ''reservation'' surrounded by hostile forces.
The Bosnian government wants a ceasefire in Bihac, and has offered in return a temporary, nationwide truce; the Bosnian Serb leadership in Pale, Mr Murphy said, was ''linking a Bihac ceasefire to a more comprehensive settlement. Their position was that they had won the war.''
The Serbs have demanded a Bosnian surrender in Bihac, and the freezing of front lines (possibly excluding recent government gains elsewhere in Bosnia). In Bihac, this could bring a demilitarisation of the pocket, or the interposition of UN forces between the warring factions. It is not a solution likely to attract the Sarajevo government;it is furious that the Serbs have yet to suffer for their rejection of the Contact Group peace plan, and confident its army can press on in central Bosnia. ''They're not likely to trade Bosnia for Bihac,'' one observer said.
The UN is in a horrible position in Bihac, where the Serbs have trampled all over the organisation's principal mandates: the delivery of humanitarian aid and protection of civilians in ''safe areas''.
The problem is that the UN, which is entitled to use force in support of its mission, has devalued the only weapon it wants to deploy - words - by issuing threatening statements and failing to act upon them. Spokesmen warned last week that attacks on peace-keepers or the ''safe area'' would inevitably result in air attacks; hours later, Serb forces crossed into the ''safe area''. The UN announced that it could not force them out by calling air strikes, because the troops were too close to civilian areas.
''The Serbs are inside the 'safe area' - now what?'' asked one UN official. ''It's become much more difficult. We don't just have to stop them, we have to roll them back or accept a blatant violation of one of the most sacred parts of our mandate.''
Until now, air strikes - limited in scope and relatively painless to the Serbs - have been used to send political signals to Pale. They do not appear to have worked. This week had been ''little short of disastrous,'' another official said.
The UN is loath to attack strategic targets elsewhere in ''Republica Srpska'', the self-declared Bosnian Serb statelet, for fear of reprisals. ''That may be an option, but how would the Serbs react?'' asked Kofi Annan, the UN official in charge of peace-keeping. ''Would they indeed withdraw? Would they take some of the [UN] troops hostage? Would they go for our soft targets - unarmed military observers, aid workers and so forth?''
(As it happens, the Serbs have already taken around 300 UN personnel hostage - although spokesmen in Sarajevo preferred yesterday to describe their unfortunate comrades as ''guests'', who were ''under observation'' by their captors.)
Mr Annan rightly referred to ''our poor commanders on the ground'', who are ''required on an almost hourly basis to manage this fluid and unpredictable situation''. Their situation can be ascribed to the failure of political leaders to decide exactly how far they are willing to go in Bosnia.
This also meant, one UN official said yesterday, that ''the American approach and the European approach are polarising by the minute''.
The Bosnian government - supported yesterday by Sir John Nott, the former British defence secretary - has repeatedly demanded action to save Bihac, which, like the ''safe area'' of Gorazde last April, is in serious danger of being overrun. Ejup Ganic, the Vice-President, said he had spoken to Boutros Boutros-Ghali, the UN Secretary-General, and warned him it was ''not a time for indecision. We saw that movie in Gorazde,'' Mr Ganic said. ''If they knock down the tanks and artillery coming to Bihac, the Serbs will withdraw.''
The UN claims to be confident the Serbs will not press their offensive further. ''Our assessment at the moment is that the Bosnian Serb army will not in fact enter the town,'' Mr Murphy said. ''I think their objective is Fifth Corps'' - the government forces that are based in the town.
The Serbs have expressed it otherwise: ''The Bihac 'safe area' will be safe once our army has entered it and disarmed the Muslim forces,'' Radovan Karadzic, the Bosnian Serb leader, said a few days ago.
Even a UN report casts doubt on that. ''The Bosnian Serb army have demonstrated their policy of burning villages and towns in their wake, which must question their published aims.'' If the town does fall, the UN will be as big a loser as the Bosnian government.