Muslims, Croats OK Bosnia Union : Balkans: Christopher says the U.S.-brokered accord ‘shows that peace is possible.’ Officials hope the pact will put pressure on Serbs to reach a settlement.

The Bosnian government and Croatian separatists, two of the parties in a three-sided war, signed a peace agreement Tuesday to form a federated state--a move hailed by U.S. officials as a significant step toward ending two years of bloodshed in Bosnia-Herzegovina.

The agreement “shows that peace is possible,” Secretary of State Warren Christopher declared after witnessing the pact’s signing at a ceremony here.

The accord came after three weeks of intensive negotiations, which culminated in four days of U.S.-mediated talks here among representatives of the predominantly Muslim Bosnian government, Bosnian Croats and Croatia--Bosnia’s neighbor, which has armed and supported Bosnian Croat rebels.

Despite the hopeful language, the agreement is far from an end to the war. Most significantly, it leaves out Serbian separatists who control about 70% of Bosnian territory, including large swaths that the new federation would claim as its own. But American and European officials hope the agreement will add to pressure on the Serbs to reach a settlement that would involve giving up some of the territory they have seized.

The Croats and the Bosnian government also must still work out numerous details of their new federation in talks expected to begin Friday in Vienna.

Finally, although U.S. officials insisted that the men who negotiated the agreement--primarily Bosnian Prime Minister Haris Silajdzic and Croatian Foreign Minister Mate Granic--acted in good faith, they conceded that neither fully controls the forces on his own side. Extreme elements among the Croatian and Muslim populations have torpedoed earlier agreements between the two groups.

Under the settlement, the two groups would form a federation made up of several cantons, some of which would be predominantly Muslim, some predominantly Croatian and others mixed. That new federated state would cover just over half the territory of Bosnia-Herzegovina--leaving the rest in Serbian hands. In theory, Bosnian Serbs could join the new federation as a third party, although neither American officials nor other observers expect that would happen.

Under a second agreement, signed simultaneously, the new federation would form a loose economic union with Croatia.

After two years of war that has involved thousands of atrocities and cost roughly 250,000 missing and dead--mostly Muslim civilians--the federation idea holds some benefits for each side that earlier peace plans did not.

For the Bosnian government, a chief benefit would be territorial. By linking the Bosnian government’s lands with those held by Croats, the new federation would be far more economically and politically viable than the remnant of territory the government seemed likely to control under earlier peace plans, which would have divided Bosnia into three ethnic states. The agreement also commits Croatia to guarantee Bosnian access to the Adriatic Sea--an economically vital point.

“The fact that you have these two units together helps a lot” in making the resulting federation economically viable, said a senior Clinton Administration official who assisted in the negotiations.

By setting up a binational federation, the agreement would maintain--at least in theory--the idea of a Bosnian state not based solely on ethnicity. That idea has been of great importance to some Bosnian government loyalists, who are mostly Muslim but include some Serbs and Croats.

For Croatia, the chief selling point has been a chance to regain the graces of the United States and its European allies. Large chunks of Croatian territory remain under Serbian occupation as a result of earlier warfare. Granic made clear that his country now expects Western help in the “peaceful integration” of those territories back into Croatian control.

Over the last three weeks, “it started to sink in that this was a real opportunity for Croatia to become a real partner with the United States and Europe,” the senior Administration official said.

The North Atlantic Treaty Organization’s action Monday in downing four Bosnian Serb warplanes violating a “no-fly” zone over Bosnia also may have sent a message to Croatian extremists, as well as to the Zagreb government supporting them, that there is a price to be paid for destabilizing and renegade actions. Croatia had been threatened with the same harsh international sanctions levied against Serbia if it persisted in supporting Croatian nationalist rebels in Bosnia.

Meanwhile, for the Administration the agreement caps a decision made last month to inject the United States directly into the Bosnian war for the first time as the sole mediator in negotiations. The result has staked the Administration’s prestige more directly than ever before on a successful outcome. “We have acquired a kind of moral obligation,” former White House National Security Adviser Brent Scowcroft said. “A year ago . . . we were hands off. Now we’re no longer hands off.”

Despite the potential reasons for all sides to make the agreement work, previous accords and cease-fires signed by moderates in the Bosnian war have proven short-lived because radical military commanders have refused to abide by them. American officials conceded the same fate could befall the current agreement.

Emotions run high in central Bosnia, where Muslim-Croatian relations have been poisoned by the past year of violence, provoked by Western capitulation to the concept of ethnic partitioning.

Tensions are particularly sharp in the central Bosnian city of Vitez, where radical Croatian forces, instigated by nationalists from the Herzegovina region, committed atrocities against Muslim civilians; this has drawn in equally violent, unscrupulous Islamic warriors who have come to fight their own holy war in hopes of securing a fundamentalist foothold in Europe.

Silajdzic and Granic represent the moderate factions in their respective republics, but their word and signatures on peace accords hold little sway with radical elements.

But there have been signs in recent weeks that the Croatian leadership in Zagreb is distancing itself from the more extreme elements of the Bosnian Croat community, such as former rebel leader Mate Boban, who has been swept aside by another Zagreb surrogate.

Boban, a small-town businessman through whom Croatian radicals have funneled millions of dollars in weapons with the aim of forcibly expanding the state of Croatia, had instigated much of the fighting in central Bosnia by loosing Croatian radical forces against Muslim civilians in a terror campaign aimed at forcing them to flee.

He was removed from his post as self-proclaimed president of the purported rebel state of Herzeg-Bosna last month and replaced with Kresimir Zubak, a move thought to be aimed at convincing the West that Croatia has abandoned a nationalist course.

Although Croatia has struck an official pose of neutrality in the Bosnian conflict, U.N. military observers have confirmed that at least 5,000 regular Croatian army troops have been fighting in Bosnia, and many more nationalist volunteers are estimated to be backing Bosnian Croat forces. Under Tuesday’s agreement, Croatia will withdraw its troops from Bosnian territory.

Lauter reported from Washington and Williams from Vienna. Times staff writer Doyle McManus in Washington contributed to this report.

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