Karadzic admits Serbs are losing the war

The Bosnian Serb leader, Radovan Karadzic, yesterday admitted "heavy losses" in western Bosnia, where government forces have seized more than 4,000sq km of territory in the past week and are dangerously close to the rebel stronghold of Banja Luka.

"As a result of that offensive, we have sustained heavy losses and lost several towns and land that has belonged to the Serbs for centuries," he said in an interview with the Russian news agency Itar-Tass. "We are now trying to form a new line of defence and we are basically achieving this."

The modesty of Mr Karadzic's claim bodes ill for Serbs living in the area; he normally boasts of imminent victory, whether against the Bosnian government or Nato. A UN source suggested a Serb military "implosion" in the area, saying the decision-making system was so rigid that a combination of events, including Nato strikes against supply and communications links, had brought the Serb army close to collapse in the north-west.

Bosnian radio claimed the capture of yet another Serb-held town west of Banja Luka: "Sanski Most has been liberated," the announcer said, but gave no details. The Sarajevo daily Oslobodjenje hailed the offensive with a banner headline: "Bosnian Mistral", adding: "Army takes Kljuc, advancing towards Sanski Most, Prijedor and Banja Luka. Fifth and Seventh Corps will finally liberate the country."

The two units have a high proportion of refugee soldiers from the area. Prijedor was the site of perhaps the worst Serb atrocities of 1992, when rebel Serbs imprisoned thousands of men, raped their women and expelled the rest. More than half a million Muslims and Croats have been "cleansed" from the Banja Luka region, the most recent victims expelled just last week.

As many as 70,000 Serbs are said to have fled to Banja Luka, where roads are jammed by trucks, trailers, cars and horse-drawn carts. "The traffic jams, the road problems, are so big that the local refugee authorities are using horses to distribute aid. They have not been able to move around with cars," Mans Nyberg, a spokesman for the UN High Commissioner for Refugees (UNHCR), said.

"I think there is a feeling that everything is falling apart in Banja Luka," he added.

Another aid official described "a surreal calm in the city", where people are waiting for their fate to be revealed. "All movements of the civilian population out of Banja Luka have been banned by the local war presidency," Mr Nyberg said.

Bizarrely, local officials told UNHCR they were moving refugees towards Sanski Most and Prijedor, where they describe the situation as "stable".

A UN military source disagreed: "The Serb forces have lost cohesion, they have lost the ability to command, control and communicate and what happens invariably is there is a total collapse," he said. "I think they are near to that in northern and western Bosnia."

But the fate of Banja Luka, he felt, would be decided by diplomacy. "Political pressure will stave off an attack on Banja Luka," he said - pressure on the heavily armed Croatian army rather than the Bosnian forces, which are ill-equipped to take Banja Luka.

The stunning reversal of fortunes on the battlefields was gleefully depicted by a cartoonist in Oslobodjenje. He drew a Muslim refugee in Banja Luka handing his bundled belongings to a Bosnian Serb soldier with the words: "Here, you need this."