Serbia's

By JAMES L. GRAFF /BELGRADE

The toast was made with orange juice and the greatest reluctance. For weeks, Slobodan Milosevic, president of Yugoslavia's largest republic, Serbia, had resisted the European Community's attempts to engineer a peaceful future for its neighboring republic, Croatia. Since Croatia declared independence from the Yugoslav federation on June 25, a brutal ethnic war has raged in its eastern region. Croatian security forces are pitted against rebel Serbian residents of the republic who want their homes and fields incorporated into an enlarged Serbia.

It has been a rout: with money from Serbia and active support from parts of the Serb-dominated federal Yugoslav People's Army, the rebels have steadily gained control of the roughly one-quarter of Croatian territory where they have a strong ethnic presence. Under those conditions, why should Milosevic, whose power at home is girded by what most Serbs see as a righteous war for Serbian self-determination next door, accept a peace forged by foreigners?

To persuade him to do so, E.C. officials began brandishing threats of Serbia's total isolation, complete with economic sanctions. Last week Milosevic finally followed Croatian President Franjo Tudjman's lead and signed on to an E.C. plan to monitor a cease-fire and moderate an all-party peace conference for war-torn Yugoslavia. Cornered into a toast, Milosevic said, "You always have to protect victims, and Serbs are victims in this case." Dutch Foreign Minister Hans van den Broek, who brokered the agreement on behalf of the Community, added an amendment to Milosevic's grudging salute: "All those who are being killed are victims; they are all human beings. So let's drink to them."

Within hours, the clinking glasses had made way for thudding mortars and stuttering machine guns. Every promised cease-fire in Yugoslavia unleashes new fury on the battlefields, and last week's was no exception. Serb rebels managed to block the main road connecting the Croatian capital of Zagreb to the besieged region of Slavonia along the Danube River to the east, virtually cutting the republic in two. The Yugoslav federal air force subjected Osijek, Slavonia's major city, to indiscriminate bombing of civilian targets. Said a senior British diplomat in London: "This is naked grabbing of all the ground Milosevic can get." Against that backdrop, Yugoslav leaders gathered at the weekend in the Dutch capital for an E.C.-sponsored conference at which they are likely to prove as bellicose as their compatriots now fighting on the ground.

There is ample blame to go around in the wearying spiral of Yugoslavia's bloody demise, but most Western observers believe that Milosevic, 49, deserves the lion's share. Of the former communists still in power in Eastern Europe, Milosevic is the least reconstructed, presiding over a government and a party still largely unpurged, both in terms of ideology and personnel, from the bad old days when it enjoyed a power monopoly. His regime is a nest of paradoxes. While wielding more personal power within his republic than any other Yugoslav leader, he faces a stronger opposition press than the leaders of Slovenia and Croatia. He foments an aggressive nationalism by playing to the Serbs' age-old conviction that they are beset by aggressive enemies on all sides.

In his rare talks to the press, Milosevic recalls how the Nazi vassal Independent State of Croatia slaughtered hundreds of thousands of Serbs during World War II, and insists that Serbs are facing a similar threat today. Those memories are particularly painful in the Serb-dominated regions of Croatia where today's fighting goes on. But sometimes they are harnessed to chimeras. Says Serbian Vice President Budimir Kosutic, appointed by Milosevic just last month: "The Croatians and the Germans behind them want to make a new state in the old borders of Austria-Hungary."

The persistence of such fears even in the highest echelons of the Serbian government hardly bodes well for peace talks. Croatian President Tudjman, as strident a nationalist as Milosevic, has done little to allay them. Had Tudjman made even perfunctory mention of his republic's 600,000 Serbs -- some 12% of the population -- in the Croatian constitution adopted last December, perhaps the conflict would not have grown as violent as it has.

For his part, Milosevic claims merely to be toiling to preserve what he can of the old Yugoslavia. He can accept the departure of Slovenia, whose declaration of independence engendered a shorter military conflict early this summer; even Croatia can leave, yet only within reduced borders now being carved out by the Serb rebels. But on a continent with other untested borders, changing existing ones by force cannot be sanctioned. That is the nasty * precedent that the European Community, to the extent that it can control anything in a conflict fueled by apparently boundless ethnic hatred, is determined to prevent.

With reporting by William Mader/London