Rebel Serbs in Croatia Agree They’ll Return Last Enclave to Government : Balkans: Pact on Eastern Slavonia defuses explosive situation that threatened to prevent regionwide settlement.

In a major step away from war, rebel Serbs in Croatia agreed Sunday to return their breakaway enclave to Croatian government rule, ending an explosive situation that threatened to undermine Balkan peace talks.

The agreement announced in the Croatian capital, Zagreb, by U.S. and U.N. mediators ends the Serbs’ four-year rebellion and appears to avert, at least for now, a showdown between Serbian separatists and the Croatian army, whose troops have been massing in the area in recent days.

If successful, the pact will clear one of the most nettlesome obstacles to an overall Balkan peace agreement under debate at U.S.-sponsored negotiations in Ohio.

“I think we have experienced the start of the end of the war in ex-Yugoslavia,” U.N. mediator Thorvald Stoltenberg said after Croatian Serb leaders signed the deal.

At issue was the last piece of Serb-held territory in Croatia, Eastern Slavonia, which was seized in a 1991 war that left an estimated 10,000 people dead after Serbs rebelled against Croatia’s declaration of independence from the disintegrating Yugoslav federation.

Croatia’s nationalist president, Franjo Tudjman, had vowed to use force to retake the fertile, oil-rich area if a political settlement was not reached by Nov. 30.

He has made good on similar threats, deploying his army twice in the last six months to take back rebel territory in swift and sometimes brutal military campaigns that have driven 200,000 Serbs from their homes.

With their options thus dwindling and facing Croatia’s show of force, the Serbs of Eastern Slavonia signed Sunday’s deal along with a representative of Tudjman’s government.

The agreement provides for a transition period of up to two years, after which Eastern Slavonia will revert to Croatian government authority. An international entity--either the United Nations or the North Atlantic Treaty Organization--will set up an interim administration, and peacekeepers will police and monitor the area.

Both sides, however, still face the difficult task of building trust among their people. Ordinary Serbs who live in Eastern Slavonia remain, for the most part, fearful of a nationalist Tudjman government, and it is far from clear that Sunday’s agreement will provide the necessary guarantees for the safety of Serbs who want to remain, as well as displaced Croats who want to return.

Croatian refugees driven from the area by the occupying Serbs said they found it hard to believe that a settlement had been reached. Several interviewed on Zagreb television Sunday night said they doubted they will be able to return home soon.

Peter Galbraith, the U.S. ambassador to Croatia, said in Zagreb that the issue of human rights is a fundamental element of the 14-point accord. Rights will be “fully protected,” he said, so that both remaining Serbs and returning Croats can “live in peace.”

Stoltenberg said he hopes the agreement will have a “contagious effect” that will lead to an overall settlement in the Balkans by giving “security and protection to all the people.”

The accord was said to have been worked out at the peace talks under way at Wright-Patterson Air Force Base in Dayton, Ohio, and appears to reflect the hand of Serbian President Slobodan Milosevic, who is on a quest to make his onetime proteges, the Serbian separatists in Bosnia-Herzegovina and Croatia, come to terms.

New fighting in Eastern Slavonia could have ruined the already complicated Ohio talks; instead, an agreement makes possible a normalization of relations between the rump Yugoslavia and Croatia, a development that would dramatically ease tensions in the Balkans.

In Belgrade, the Serbian and Yugoslav capital, Milosevic’s political party welcomed the Eastern Slavonia agreement.

“[It] stopped the war and prevents the further suffering of the Serbian people,” said Ivica Dacic, spokesman for the ruling Socialist Party of Serbia.

Eastern Slavonia, which borders the rump Yugoslavia along the Danube River, has been especially volatile because the conventional wisdom held that the Serbs would fight to keep it. Even if Milosevic kept his regular army out of the conflict, there are abundant paramilitary units that would have waged a bloody battle.

The Croatian army moved its crack Tiger units and heavy artillery toward the region last week, and Yugoslav troops were also reported headed toward it over the weekend.

On Sunday, the Serbs in Eastern Slavonia also dropped their demand for a referendum to determine whether the patch of land should belong to Serbia or Croatia; instead, under the agreement, local elections will be held 30 days before the transition ends, and Serbs will be allowed to have their own municipal council.

Times special correspondent Laura Silber in Belgrade contributed to this report.