U.S. Agrees to Plan That Would Hand a Victory to Serbs : Balkans: Acceptance marks a major Administration reversal. European proposal requires Bosnian rebels to give up some land, allows federation with Yugoslavia.

The United States has agreed to a European proposal that would allow Bosnia’s Serbs a major victory if they accept the pending allied peace plan, U.S. and U.N. officials said Monday.

Under the proposal, the Serbian rebels would be permitted to form a federation with neighboring Yugoslavia, enhancing their prospects for achieving a Greater Serbia.

Acceptance of the proposal marks a major reversal by the Clinton Administration, which has resigned itself to a military victory by the rebels and has conceded the futility of threatening additional allied air strikes.

U.S. diplomats endorsed the offer at a meeting of the so-called Contact Group in Paris over the weekend. The proposal is expected to be tendered to the Bosnian Serbs sometime this week. The Contact Group includes the United States, Britain, France, Germany and Russia.

In Washington, President Clinton’s top national security advisers met Monday to review the Administration’s policy but apparently came up with no new proposals for dealing with the worsening situation in Bosnia-Herzegovina.

Leon E. Panetta, the White House chief of staff, told reporters that since Serbian nationalists in Bosnia already have seized so much of the republic’s land, the situation right now “really is . . . in control of” the Serbs. “It’s not an optimistic situation,” he added later.

There was no immediate indication of whether the Bosnian Serbs would accept the latest allied proposal. Although Serbian nationalists have been pressing for a confederation for months, they now hold 70% of the territory in Bosnia and would have to give some up if a deal were to be struck.

The peace plan drawn up by the Contact Group earlier this year would give the Bosnian Serbs only 49% of the total territory, ceding the remaining 51% to a Muslim-Croatian federation.

The fact that the United States has endorsed the new allied offer was expected to reduce prospects that Britain, France, Canada and the Netherlands might seek to pull out their U.N. peacekeeping troops, as had been feared over the weekend.

Some allied officials had hinted at such a troop withdrawal because the fall of Bihac in northwestern Bosnia seemed imminent and diplomatic efforts had become stalemated. While a pullout may yet prove necessary, U.S. officials said Monday that they believed the pressures had waned.

The developments came as Serbian nationalists continued their advance on the strategically important town of Bihac, in what Western intelligence officials said appeared to be an attempt to destroy the Bosnian government army’s 5th Corps.

However, U.S. officials said that the allies still were not certain whether the Serbian nationalist forces intend to capture Bihac or merely expel the Bosnian Muslim soldiers and then continue to surround the city, as they have in the case of other U.N. safe areas.

Officials said that Contact Group foreign ministers meeting in Brussels later this week also plan to offer rump Yugoslavia more relief from the U.N. sanctions imposed on it for arming and instigating the Bosnian Serbs to rebel against the Sarajevo government.

Washington previously opposed any easing of the sanctions until negotiated settlements are achieved to end the war in Bosnia and Croatia.

However, U.S. officials were cautious in describing the “confederation” plan that Washington endorsed, insisting that any confederation would be limited in scope and similar to the alliance now in effect between the Muslim-led Bosnian government and neighboring Croatia.

“Reports that this is a green light for the Serbs to create the so-called Greater Serbia that they have always wanted are incorrect,” one senior official said. He also stressed that the offer would be made contingent on the Serbs’ accepting the Contact Group peace plan.

State Department spokesman Mike McCurry said that the United States is basing its strategy in the Contact Group on “an understanding that the situation is different now than it has been and that it requires a reinvigorated effort to bring the conflict to a negotiated solution.”

Even so, outside analysts said it seems clear that, once the deal is in effect, the Bosnian Serbs would be able to make whatever alliances they chose, including erasing the borders between ethnic Serb populations to create a single country.

Although the Contact Group plan does not attempt to settle the unresolved conflict between Serbs and Croats in Croatia, a confederation between Yugoslavia and the Bosnian Serbs would improve the Croatian Serbs’ prospects of joining as well.

Civil affairs officials with the U.N. mission have responded to the latest Serbian offensive against Bihac by pushing the overwhelmed Bosnian government to accept the Serbian terms for peace, which probably would make a reality of the Serbs’ dream of a Greater Serbia.

Fierce fighting continued throughout the Bihac pocket Monday, U.N. spokesman Michael Williams reported. He said that heavy artillery shells landed in the heart of the purported U.N.-protected safe zone within the pocket, killing at least one civilian.

There appeared to be little change in the Serbs’ territorial holdings, Williams said, but he reiterated the U.N. assessment that the rebels could overrun the safe area any time they chose.

In addition to seeking a thorough “ethnic cleansing” of northwestern Bosnia, the Serbs also are believed to want control of the strategic railroad that runs through the center of Bihac and would create an unimpeded supply corridor between the Serbs in Bosnia and Croatia.

Officials of the Contact Group plan to consult with Serbian leaders in Belgrade this week about the U.S. concession on the issue of Bosnian Serb confederation rights. But some say the diplomats may be pursuing the wrong path.

The Bosnian Serbs stopped insisting on the right to unite with Serbian-led Yugoslavia this fall, after Serbian President Slobodan Milosevic ostensibly cut off supplies to the Bosnian Serb rebels in hopes of getting relief from sanctions.

Since then, Bosnian Serb rebel leader Radovan Karadzic has demanded international recognition of his conquered territory as a state in itself, said Williams, the U.N. mission’s chief spokesman.

Karadzic appeared to still be working out his conditions for a cease-fire in the Bihac region and an overall settlement, as he let pass a 7 p.m. Monday deadline for accepting a U.N. truce that calls for Bosnian government forces to retreat from Bihac.

Williams reported from Zagreb and Pine from Washington. Contributing to this article were Times staff writers Richard Boudreaux in Moscow, Scott Kraft in Paris and Doyle McManus and Stanley Meisler in Washington.