Holbrooke Inches Forward Bosnian Peace Process

BANJA LUKA, Bosnia-Herzegovina -- A U.S. envoy wrested agreement on ambassadors and communications from Bosnian officials in an overnight arm-twisting session Friday, and then tackled the Serb side of the divided republic.

Richard Holbrooke kept Moslem, Serb and Croat officials at the bargaining table until the early hours of the morning in Sarajevo.

At a predawn news conference, he announced some movement in the peace agreement he negotiated in late 1995, which has been largely frozen by suspicion, intransigence and corruption.

But agreement on the design of a common currency, crucial to establishing a central bank, eluded Holbrooke. U.S. officials traveling with him also castigated Serbs for turning down international loans for their impoverished republic.

Holbrooke moved Friday morning to Banja Luka, the northwest headquarters of the Bosnian Serb president, Biljana Plavsic, who is locked in a bitter political feud with supporters of war-crimes suspect Radovan Karadzic.

Later Friday, he was to go to the Yugoslav capital, Belgrade, for meetings with Yugoslav President Slobodan Milosevic and his political opponents.

Plavsic accuses Karadzic, his ally Momcilo Krajisnik and their supporters of getting rich through smuggling and corruption, leaving average people poor and without work and weakening the entire Serb republic.

The agreement on dividing up Bosnia's 33 ambassadorships will likely lift a boycott of current envoys that the United States and European Union countries imposed earlier in the week.

The boycott was announced out of frustration with the inability of Bosnian leaders to reach agreement on who would get which ambassadors' posts.

Under the agreement, Serbs would appoint the ambassador to Washington, Moslems would name the ambassador to the United Nations and Croats would appoint the ambassador to Tokyo.

Officials also reached agreement to establish three separate telephone dialing codes for Bosnia -- one for Sarajevo, one for the remainder of the Moslem-Croat Federation, and one for the Serb half of Bosnia.

That clears the way for a $68 million international loan to rebuild the telephone system.

Holbrooke's negotiations fell short in other important areas, though. U.S. Treasury Department official David Lipton said Bosnian officials failed to agree on the design of a common currency.

"There will now be a delay in the beginning of the central bank,'' Lipton said. "The design of the currency was the last of the important steps that was required for approval of a $90 million loan, very important for the creation of the central bank and to the finances of Bosnia-Herzegovina.''

Holbrooke, who now is in private business, was brought back to Bosnia on a special mission by U.S. President Bill Clinton's administration because of its fears that lack of progress will make it difficult to withdraw the NATO-led peace force, including about 8,000 U.S. troops, next year.

The man who is now the U.S. envoy in the region, Robert Gelbard, blasted Bosnian Serbs for turning down $50 million in loans from the World Bank after complaining about unfair treatment by international lenders.