NEWS ANALYSIS : A ‘New Yugoslavia,’ but Old Problems Remain : Balkans: Western countries want to shun ‘Greater Serbia,’ but they are fearful of losing their influence with what they consider an outlaw state.

In a display of the calculation and cunning that have effectively won him the Yugoslav war, Serbian President Slobodan Milosevic has trapped Western countries in a diplomatic deadlock that compels them to deal with what they consider an outlaw state.

Not a single foreign country has established ties with the new Yugoslavia proclaimed last month by Milosevic allies to replace the shattered federation that was the West’s rare Communist friend during the Cold War.

The new union of Serbia and Montenegro has been shunned internationally because of systematic aggression that has allowed Serbian forces to capture one-third of Croatia and to consume nearly all of Bosnia-Herzegovina in ethnic war.

But neither has any state broken off relations with the old Yugoslavia, the six-republic Balkan federation that nearly a year ago ceased to exist.

Foreign governments are fearful of closing down their embassies and losing what little influence they have with defiant Serbia. As one U.S. State Department official put it, the West needs the old Yugoslavia as a fig leaf for its relationship with the new.

That has allowed Milosevic’s hard-line nationalist regime to inherit the old federation’s assets and authority, from the massive armed forces still rampaging through Croatia and Bosnia-Herzegovina to the international memberships that make formal acceptance of the new state irrelevant.

“We’re facing a paradoxical situation. New states have been established, but what used to be Yugoslavia is what is recognized internationally. It has an international personality,” said Zoran Miskovic, chief of staff for the Yugoslav leadership now firmly under Milosevic’s control.

He expressed no worry over the lack of foreign support for the new two-republic federation, confidently predicting that “any new country being established will be recognized sooner or later.”

The new Serb-run Yugoslavia actually enjoys a higher international profile than any of the four republics that have seceded--three of which have been widely recognized and incorporated into some international bodies.

“Yugoslavia,” the name used by Milosevic for his Greater Serbia, is the only state from the former federation with a seat in the United Nations. It also retains membership in important financial organizations such as the World Bank and the International Monetary Fund.

A U.S.-led drive to expel the new Yugoslavia from the 52-nation Conference on Security and Cooperation in Europe last week failed.

The U.S. ambassador to the conference, John Kornblum, told member states meeting in Helsinki, Finland, that Serbian-run Yugoslavia should be excluded for failure to uphold human rights.

But Russian delegates refused to support the U.S. proposal or any other calls for sanctions against the new federation.

The nation created in 1918 to unite fractious Balkan peoples has disappeared, and “the state which now lays claim to its name and to its seat in the CSCE can in no way be described as meeting CSCE standards or commitments,” Kornblum said. “Until it does, we do not believe that even the provisional participation agreed on May 1 is any longer justified.”

On May 1, conference members agreed to allow Yugoslavia to retain its membership in the conference until European Community mediators worked out a peace accord to settle inheritance and territorial disputes among the six former Yugoslav republics.

But the EC talks have stalled since the 12-nation forum recognized Croatia in January and since the United Nations sent 14,000 peacekeeping troops to Croatia.

The EC conference has done more to open new rifts among its own member states than to close them among the warring Balkan republics. EC member Greece remains allied with Serbia in an effort to economically and politically isolate Macedonia because of a dispute over the latter’s right to use that name, which is shared by a northern Greek province. Germany forced EC recognition of Croatia, a move some in Western Europe consider to have been premature.

Until recently, U.S. policy regarding Yugoslavia had put it at odds with allies in Europe, and Washington continues to vacillate between punishing Serbia and trying not to take sides.

Serbia, in the name of Yugoslavia, has also succeeded in getting the slow-moving United Nations to work to its advantage. By the time U.N. peacekeepers arrived to take over in occupied Croatia, security and access to the area had been deeded over to resettled Serbs and guerrilla bands had moved on to fight against the secession of neighboring Bosnia-Herzegovina.

Officials in the Bosnian capital of Sarajevo have called for U.N. troops to protect the poorly armed Muslim community. But U.N. Undersecretary General Marrack Goulding, during a visit to the strife-torn republic last week, ruled out such a deployment as long as fighting continues.

Western diplomats who have watched Milosevic’s carefully orchestrated campaign to build his long-sought Greater Serbia express both awe and revulsion at his skillful and bloody end game.

“In point of fact, he has gotten everything he wanted from Croatia and is well on his way to capturing most, if not all, of Bosnia,” one Belgrade envoy said. “As long as he wants to continue the war, I don’t see any international force that can stop him.”

In a classic case of being damned if they deal with Milosevic or if they don’t, foreign mediators are finding themselves unable either to influence the Serbian strongman or to ignore him.

Goulding, who met with Milosevic and other Serbian leaders last week, expressed some exasperation in dealing with “a situation like this where nobody will admit responsibility for the things you want stopped.”

Diplomats from Portugal, which holds the EC’s rotating presidency, tried to put pressure on Serbia to stop its aggression against Bosnia-Herzegovina by suspending negotiations aimed at restructuring the republic into Muslim, Serbian and Croatian cantons--a difficult division being pursued at Serbian insistence.

But the pro-Serbian army responded to the EC retreat by detaining Bosnia’s Muslim president, Alija Izetbegovic. A Belgian monitor was also shot to death shortly after the talks were suspended in what the EC has claimed was an act of deliberate murder.

The U.N. deployment, which began two months ago, has done little, if anything, to halt Serbian forces in their march to gain more territory for Milosevic’s new state.

Yugoslav federal army troops were supposed to have pulled out as U.N. forces moved in, but there remains no deadline for their withdrawal, and their presence is aiding a massive resettlement of Serbian refugees into the homes of other ethnic groups who have fled or been expelled.

Even when the federal army formally withdraws, it will be leaving behind a well-armed proxy force of Serbian locals and recently arrived settlers.

“We’re caught in the middle. There’s no way we can win,” complained one disillusioned U.N. official at the peacekeepers’ eastern Croatia headquarters in Erdut. “Both sides are using us as a weapon against the other.”