Thousands flee as advancing Croats take two towns

BOSNIA CRISIS: OFFENSIVE; War escalates as Zagreb army makes big gains and Karadzic proclaims martial law 8 Zepa refugees taken off bus by Serbs

The Croatian army inflicted a major defeat on the secessionist Serb forces of Bosnia and Croatia yesterday, driving a wedge along the border between the allied Serb armies and seizing two key towns south of the Bosnian enclave of Bihac. The United Nations warned of the dangers of a wider war as peace-keepers braced for a second offensive within Croatia.

Thousands of Bosnian Serb refugees driving tractors and trailers loaded with clothes, washing-machines and other goods fled north as their Croatian Serb allies admitted the fall of Grahovo, which sits on a main road from Bosnia to Knin, "capital" of the self-declared "Krajina Serb republic" in Croatia.

The victorious forces, made up of regular Croatian army aided by the Bosnian Croat militia, were also said by Serb sources to have taken the town of Glamoc, south-west of Grahovo, near the Livno valley. Radovan Karadzic, the Bosnian Serb leader, reacted by declaring martial law throughout his self-declared "republic"

The fall of Grahovo leaves Knin dependent on one smaller road and is likely to relieve some of the pressure on Bihac, where the Bosnian Fifth Corps is under attack on all fronts from around 20,000 troops.

The mood in Knin was tense yesterday, according to Colonel Andrew Leslie, a UN commander in the area. "It was very grim this morning, the streets were mostly bare," he said. "All the males are in uniform, and the local employees are worried." Although the town has not come under attack, "every few hours you can hear shell fire", he said, from Croatian attacks on border villages. The loss of Grahovo "leaves one major re-supply route for the Serbs ", Colonel Leslie said.

"The Croats are now ideally positioned to put increasing pressure on Knin to negotiate." Zagreb has massed up to 10,000 troops in the Livno valley, south of Grahovo, and at least two professional brigades (around 4,000 men) along the confrontation line with the Krajina Serbs, the UN said.

"At the same time, on the other side of the line, the Krajina Serbs have been professionalising and mobilising their army. This adds up to a volatile cocktail," Chris Gunness, a UN spokesman in Zagreb, said. "The situation is very grave, and I believe that there may be military action [in Croatia], possibly within days."

The Croatian government had promised military help to its allies in Sarajevo. But the relief of Bihac, which is under attack from the Serbs in Bosnia and Croatia and renegade Muslims loyal to a local businessman, Fikret Abdic, is also a pretext for Croatia to attack its secessionist Serbs. UN officials expect the authorities in Knin, which have mobilised all able-bodied men, to pull some of their troops out of the Bihac offensive to prevent a Croatian attack.

The situation in Bihac is dire, according to the UN commander there, who plans to distribute military food stocks to some of the 4,000 refugees who have fled the Serb advance.

"I have a fairly good amount of compo rations, on which Unprofor forces can live for 28 to 30 days, and then I have fresh, frozen and dried food," Colonel Jesper Helsoe said by telephone from the town of Coralici. "Those are the stocks I am going to use for the most vulnerable people."

Colonel Helsoe said the Bosnian Fifth Corps had withstood fierce artillery attacks yesterday, and had held its ground. However, he said the Krajina Serb forces were only 4.5km from Coralici, which is outside the tiny UN- declared "safe area" and is home to a large UN base.

n Bosnian Serb forces shelled a humanitarian convoy yesterday as it moved slowly through Bosnian government territory to bring assistance to Serbs living in Sarajevo.

The convoy was hit by mortar fire as it crossed a bridge linking the Sarajevo suburb of Butmir with Hrasnica, south of the city's airport, to pick up supplies.

The convoy belonged to the local Serb aid agency, Dobrotvor, which tries to relieve the effect of the Bosnian Serb siege on about 30,000 Serbs who live in Sarajevo and are loyal to the Bosnian government. The Serbs besieging the city say that those Serbs are traitors.

The UN has moved heavily armed Western European troops onto nearby Mount Igman to protect UN convoys entering Sarajevo but their shield does not extend to covering local relief efforts.