G-7 Leaders Threaten to Use Force in Sarajevo : Summit: Group debates military role to protect aid. Economic issues at Munich meeting remain muddled.

President Bush and the leaders of the other major economic powers agreed Monday to issue a new and stronger warning to Serbia that they may use force to protect relief shipments to beleaguered Sarajevo.

Raising the possibility of expanded military operations in the intractable Yugoslav conflict, the Group of Seven (G-7) also discussed opening a land route to relieve Sarajevo and extending humanitarian assistance to cities and towns beyond the Bosnian capital.

Because of the limited capacity of the airlift to Sarajevo, “sooner or later it would have to be supplemented by ground convoy,” probably protected by U.S. warplanes, said Bush’s national security adviser, Brent Scowcroft.

The seven big powers, meeting at their annual economic summit, also debated launching air and sea blockades to enforce United Nations sanctions against Serbia--another measure that would escalate their military role.

At a dinner of the seven leaders Monday evening, French President Francois Mitterrand proposed replacing the U.N. force in Bosnia with more aggressive national detachments--”troops that can shoot back,” a British official recounted.

But even as they appeared to near a resolution on a general approach to protecting Sarajevo’s fragile supply line, diplomats worked frantically behind the scenes to paper over a host of differences on a host of economic issues, including sputtering world economic growth and deadlocked international trade negotiations.

The difficulty the United States and its summit partners have had in finding agreement over supplying Sarajevo and other cities and towns of Bosnia-Herzegovina, under siege from Serbian militia units, reflects the limits of post-Cold War unity among the Group of Seven, as well as the frustration over the efforts to halt the fighting.

The United States has pressed its partners--Britain, Canada, France, Germany, Japan and Italy--to put the United Nations at the center of any effort to enforce peace in the Balkans and to deliver humanitarian assistance there, and it has insisted that the discussions here did not include the use of ground combat troops.

As the day wore on, however, U.S. officials became less reticent about the military role in Yugoslavia and more willing to speak on the record. Shortly before midnight, Scowcroft made it clear that the use of other countries’ ground forces was very much a possibility.

The aid will get through, he said, if possible by air, but if not, then “by using other measures if they (are) necessary.”

“If there were road convoys, they would have their own ground protection that went along with them,” Scowcroft said. “I would not anticipate that they would be U.S. forces; there are other countries providing forces on the ground. The U.S. role has been, and probably would continue to be, primarily air.”

Canada, France, Egypt, Russia and Ukraine have already committed peacekeeping troops to Yugoslavia under U.N. command.

Scowcroft’s comments were the most explicit U.S. commitment yet to a gradual expansion of the Western aid effort in Bosnia--whether Serbian forces cooperate or not.

Extending the aid mission to other parts of Bosnia could mean a significant widening of the Western role in the conflict. Until now, the United States and other Western powers have concentrated almost exclusively on getting supplies to Sarajevo.

The leaders are expected to issue a formal statement Wednesday on Yugoslavia, at the end of their conference, which is being held in the Residenz, the lavish 16th-Century home of Bavarian princes in the center of this gleaming city of ornate shops and well-manicured gardens.

A senior U.S. official said the statement “will be a firm, even stern, message about the determination of the G-7 to ensure that the humanitarian relief effort succeeds.”

Proving equally sticky were the international economic issues that were originally the central element of the annual summit conferences when they began in 1975. The difficulty they posed reflects as much the troubled political problems faced this year by most of the participants, including Bush, as it does the inherent problems of stimulating economic growth.

There were signs of potential progress on the old allies’ most bitter economic dispute, the fight over agricultural subsidies that has blocked agreement in the decade-old trade talks known as the Uruguay Round.

“We believe that we’re very close to an agreement,” a senior U.S. official said. “We’re optimistic that with a certain political will, the way could be opened here for an agreement. . . . You need to get a process going.”

A European source said that the European Community’s trade negotiator, Frans Andriessen, made a new compromise offer Monday morning that brought the two sides’ positions closer than ever before. Andriessen said the Europeans are willing to meet a U.S. demand for a 24% cut in agricultural subsidies, as long as the time span for the reduction could be stretched out.

U.S. officials refused to discuss the talks in any detail.

Some Europeans have proposed a formal order from the leaders to their Cabinet ministers to wrap up a deal by late this year.

That way, one explained, a deal could be unveiled soon after the U.S. presidential election in November, “avoiding the problem of becoming a campaign issue.”

Bush’s own political problems--brought upon him to at least some extent by the United States’ long and not yet successful effort to emerge from economic recession--were never far from the surface during the summit’s first day, and his efforts to get Germany and Japan to help stimulate world economic growth could be seen as similar to the pressure he has placed on the Federal Reserve Board to lower interest rates at home to pump more money into the economy.

“There isn’t any question anymore about whether growth is at the top of the agenda; it is. And we dealt with that,” said Treasury Secretary Nicholas F. Brady, drawing a contrast with the reluctance to push the need for growth one year ago at the London economic summit conference.

Still, there was no agreement on specific measures.

German interest rates remain high. The German central bank maintains a tight money policy because the federal government’s budget deficit has risen rapidly in response to the demands placed on spending by the unification with the former East Germany.

And in Japan, interest rates are low, but the United States wants Tokyo to boost domestic spending in the expectation that such steps would stimulate Japanese demands for imports, among them those from the United States.

A meeting last week in Washington between Bush and Japanese Prime Minister Kiichi Miyazawa produced a Japanese agreement on the need for fiscal stimulus, but it did not produce a program specific enough to satisfy the White House.

For their part, the heads of government made no public statements during the day, leaving to their senior aides the difficult chore of putting the best light on their differences while making sure that their own approach was being reported.

But, although the small conference table around which they sat put them in extraordinarily close contact throughout the day, when they posed for a group portrait at midday, their body language said as much as any lengthy official statement: Despite gestures from summit personnel to close ranks, they kept their distance, some remaining at arm’s length from each other for much of the photo session.

Meanwhile on Monday, Munich police arrested more than 450 leftist demonstrators who tried to disrupt arrival ceremonies for the G-7 leaders.

Earlier, dissidents hurled a firebomb through the window of a branch of the Deutsche Bank, inflicting $125,000 in damage. The bank is Germany’s largest and a frequent target for leftist anger over German financial power.

Times staff writers Tyler Marshall and James Risen contributed to this report.