Bosnian Serb Leaders Debate Western-Mediated Peace Plan : Balkans: Many speak derisively of accord. It ‘does not close the door on a union of Serb states in the future,’ official says.

Under threat of Western intervention if they continue to wage war, leaders of Bosnia’s rebel Serbs debated Tuesday whether to accept a negotiated settlement of the conflict or to fight on for their dream of a Greater Serbia.

During an all-night debate, the self-styled “Parliament’s” collection of rebel gunmen and former Communist Party functionaries spoke derisively of a Western-mediated peace plan aiming to restore the territorial integrity of this ravaged republic.

Many interpreted the loose plan crafted in Geneva as offering de facto recognition to the Serbian Republic, which they have proclaimed in the two-thirds of Bosnia they have conquered and occupied.

“The plan does not close the door on a union of Serb states in the future,” Deputy Foreign Minister Todor Dutina said, in defiance of the principles outlined by mediators Cyrus R. Vance of the United Nations and Lord Owen of the 12-nation European Community.

The agreement, already endorsed by Muslim and Croatian leaders, calls for the former Yugoslav republic to be divided into 10 semi-autonomous provinces under a multiethnic leadership in Sarajevo. But it makes clear that Bosnia’s three ethnic communities--Muslim Slavs, Serbs and Croats--must continue to live in a unified country.

“The plan is a little like the Koran; it can be interpreted in many ways,” Dutina said.

But the mediators have said they will accept no equivocation from the Serbs.

Vance and Owen have said that, if the 4-month-old Geneva talks break down as a result of obstinacy by any one party, they will name that side before the U.N. Security Council.

The Security Council could then be expected to consider stronger measures, including complete isolation of Serbia and Montenegro--the only two republics still bound within Yugoslavia--or military intervention to break the Serbian siege of Sarajevo and other cities.

The rump Yugoslavia is already under severe U.N. sanctions for provoking the conflict in Bosnia by arming and inciting the republic’s Serbs to forcibly wrest territory for eventual annexation to Serbia.

Under intense pressure from Vance and Owen, Bosnian Serb leader Radovan Karadzic approved their plan last week on condition that it win the support of his legislature. Also under pressure from his sponsors in Belgrade, Karadzic has thrown his support behind the agreement, threatening to resign if it does not win approval.

Karadzic urged deputies to vote in favor of the proposed restructuring of Bosnia, saying the Geneva conference is taking place “under the shadow of threats not only against Serbs in Bosnia but against the Serbian people.”

While any negotiated settlement would represent a step toward ending the war, Serbs appear to view the proposed accord as offering the same fringe benefit as a troubled U.N. peace plan in Croatia: a means to secure de facto recognition of their territorial gains.

Meanwhile, in a letter to President-elect Bill Clinton shown to journalists here, Karadzic appealed for a change of what he called America’s “misinformed” policy toward Serbs.

“One part of the international community led by Germany . . . forces the Serbs to give up not only the right to self-determination, but also the right of self-defense,” Karadzic told Clinton, who has called for a firmer line against Serbian aggression.

From Pale, just 10 miles southeast of Sarajevo, Serbian artillery can be heard firing indiscriminately on the Bosnian capital.

At the parliamentary session, which adjourned early today without delegates voting, Bosnian Serb officials appeared more interested in bolstering their public image than in the details of the plan. Western journalists, usually condemned for what Serbs consider a pro-Muslim bias, were bused by the rebels from Belgrade to Pale, a former ski resort now serving as the Serbs’ war headquarters.

Eager press assistants urged reporters to visit an exhibit of “Muslim atrocities,” which included pictures of bullet-riddled corpses and severed heads. Neither the origin of the photos nor the Serbian version of the atrocities they purported to show could be verified.

Agreement by all three warring factions on the broad outline of a political settlement would be only the first of three steps to end the Bosnian war, as designed by Vance and Owen. The parties must next agree on boundaries of the 10 provinces. Bosnian Croats have already approved the map; Serbian and Muslim negotiators have indicated they agree with most of it.

But Bosnia’s Muslim president, Alija Izetbegovic, has accused Vance and Owen of going back on their word not to divide the country into ethnic cantons. Karadzic also has indicated that he will demand several revisions to link the areas to be ruled by Serbs.

Once the province borders are agreed to, a cease-fire would be declared and Serbian gunmen would be required to begin pulling out of some of the territory they control.

Special correspondent Silber reported from Pale; Williams, a Times staff writer, reported from Vienna.