Serb Leader Seen as Willing to Deal With West : Balkans: Analysts believe Milosevic is ready to give up dream of Greater Serbia in exchange for normalization.

Despite his recent refusal to become part of a U.S.-backed strategy to help end the Balkans conflict, Serbian President Slobodan Milosevic may in principle still be eager to cooperate with the West, according to diplomats and political analysts here.

That assessment comes amid suggestions that the Clinton Administration is making new overtures to the Serbian leader, apparently pressing him to support measures to guarantee the territorial integrity of Bosnia-Herzegovina in return for a partial lifting of economic sanctions against Serbia.

And the Serbian president met this week in Belgrade with a Bosnian diplomat, Muhamed Filipovic, in the first known direct contact between the Bosnian government and Milosevic without mediation.

Filipovic told Milosevic that Bosnia’s territorial integrity must be ensured, Bosnian media said. No other details were released.

While Milosevic is seen as pivotal to a settlement of the Balkans crisis, he is also seen by many as the main villain of the tragedy that has befallen the former Yugoslav federation because of his aggressive, cynical manipulation of Serbian nationalism.

His policies and the resulting conflicts have brought stiff U.N. sanctions against Serbia and led to Serbs being treated as international outcasts--despite the fact that they too have become victims of “ethnic cleansing” and other atrocities.

But the Serbian leader was the focus of a flurry of diplomatic activity earlier this year as representatives of five of the world’s most powerful nations--the United States, Russia, France, Britain and Germany--pressed him to formally recognize Croatia and Bosnia, which would help undercut the Serbian nationalist movements he once strongly encouraged in those former Yugoslav republics.

As a reward, the major powers had promised to lift economic sanctions against Serbia, at least temporarily and possibly for good.

While Milosevic rejected the offer, diplomats and political analysts here said he did so more because of the timing and terms of the Western offer than for ideological reasons.

“First lift sanctions, then begin discussions about normalizing relations in the region,” was the comment of Vladislav Jovanovic, foreign minister of Serb-dominated Yugoslavia, now reduced to just Serbia and Montenegro.

While it remains unclear how the Serbian leader will react to the latest overture, many argue that recognition and normalization are now exactly what Milosevic wants.

“He would prefer recognition over continued war and continued sanctions,” said Bratislav Grubacic, who runs a Belgrade political newsletter, VIP. “But he’s in a very delicate position within his own structure. It’s very difficult for him internally.”

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A senior Western diplomat based here went further, saying that Milosevic had already “entered into an unwritten contract” to support international efforts to end the conflict but that he “expected more than the crumbs from the rich man’s table in return.”

The comment was an apparent reference to the Contact Group’s offer to lift sanctions against Serbia only temporarily in return for the recognition.

The fact that Milosevic, the godfather of post-Cold War Serbian nationalism, would even consider formal recognition of Croatia and Bosnia-Herzegovina at a time when the status of Serbian minorities in both places remains unresolved is as much a reflection of the man himself as it is of the difficulties he faces.

In part, it merely confirms what observers here have suspected for much of the past year--that Milosevic has discarded his vision of a Greater Serbia as easily as he discovered it eight years ago.

Then, he seized on discrimination against the Serbian minority in Kosovo province to stoke a more subtle sense among Serbs that history had treated their people badly in the united Yugoslavia.

He successfully rode this nationalist fervor to the peak of power in Serbia. But with Serbian pushes into Croatia and Bosnia in stalemate, his own country suffering under the weight of economic sanctions and the wind gone from Serbian nationalism, he reportedly wanted to start again--this time, apparently, as a social democrat.

“He used to be the great leader helping Serbs emerge from the humiliation of Yugoslavia, but he’s changing the base of his power and setting the stage to end the war,” said Predrag Simic, director of the Institute for International Politics and Economics here. “Milosevic has no long-term vision; he lives week to week.”

Added Milos Vaslic, commentator for the Belgrade weekly, Vreme: “Milosevic never had an ideology. He’s always been a pragmatist.”

Goran Percevic, the youthful vice president of Milosevic’s Socialist Party of Serbia, sat slumped in his chair, his left ear a few inches away from a stereo speaker blaring out the sounds of Billy Idol, and compared his leader to European figures of the moderate left.

“He’s in the mold of men like (Socialist Spanish Prime Minister) Felipe Gonzalez and (youthful British opposition Labor Party leader) Tony Blair,” he said. “We feel close to the Socialist International. We want to become members and expect they will accept us.”

A number of factors appear to lie behind Milosevic’s latest shift.

In Croatia and Bosnia, militant Serbian goals for independence have become liabilities.

In Croatia, where a U.N.-monitored cease-fire line has left 30% of the country under Serbian control, Milosevic has supported a gradual restoration of economic ties and would like to negotiate normalization of relations with Zagreb.

In Bosnia, he has fallen out with his own creation, Bosnian Serb leader Radovan Karadzic. A militant nationalist now inconveniently out of step with Milosevic’s new image, Karadzic has also defied his former mentor by twice refusing to accept internationally proposed settlements that could have ended the conflict.

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Many here believe that Milosevic willingly imposed the blockade against his Bosnian Serb cousins last August in return for an easing of international sanctions on air traffic, sports and cultural events. They also reject charges that the embargo is not enforced.

The sanctions, now nearly 3 years old, have hurt but have not pushed Serbia over the edge. One diplomatic estimate put its gross national product last year at about half the 1990 level. There are shortages of fuel, medical supplies and some specialty goods, but Serbia is self-sufficient in food.

Still, Milosevic needs to have the sanctions lifted to get Serbia moving forward again--and keep himself on his new, moderate path and, above all, firmly in control.

“We never thought he would be around this long,” said Vladeta Jankovic, vice president of the opposition Democratic Party of Serbia. “We failed to realize that the only constant in his life is to stay in power.”