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"I PROCLAIM THE FEDERAL REpublic of Yugoslavia," intoned Bogdana Levakov, leader of the parliament in Belgrade, as a new flag was hoisted minus the red star of the old communist Yugoslavia. The star was not all that was gone: this Yugoslavia consists of just two republics, Serbia and Montenegro, with less than half the territory and less than half the 23.9 million people that constituted the nation of six republics a year ago. Only a handful of other countries sent representatives to honor the launch of the self-proclaimed new Yugoslavia.

Even as the old Yugoslavia is cut apart, blood continues to flow. For 10 months now, this has been no tranquil subdivision but a vicious battle among ethnic and religious groups in which principles of self-determination conflict with respect for territorial integrity. And as the relentless loss of lives and the destruction of old and lovely cities continue, the U.S. and its European allies wonder who is to blame and what it will take to stop the killing.

The ill-attended ceremony in Belgrade symbolized the diplomatic isolation that the U.S. and other powers are trying to impose on Serbia. Their intent is to force the fiercely nationalistic leader, Slobodan Milosevic, to stop what looks to most of the world like aggression against the breakaway republics of the old federation. But moral suasion, coupled with the explicit threat of economic sanctions, has as yet achieved nothing. Instead, the warfare among Serbs, Croats, Slovenes and Slavic Muslims has given the world a lesson in the true -- and terrible -- meaning of the often loosely used term Balkanization. If the proprietors of the new world order regard this as a test case of their ability to defuse ethnic warfare anywhere, they have so far resoundingly failed.

Any hopes that the proclamation of a shrunken Yugoslavia might prove a key to peace died within days. In the name of protecting the Serb minority in Bosnia, predominantly Serb army troops and local militia poured artillery shells into towns and fought pitched battles with Croats and Slavic Muslims in the capital, Sarajevo. The recent fighting in Bosnia has added at least 300 deaths to the 10,000 killed -- the bulk of them in Croatia -- since Croatia and Slovenia declared their independence last spring. The federal army has withdrawn from Slovenia, and in Croatia the presence of a U.N. peacekeeping force has helped reinforce the sense of a shaky peace. But fighting still flares occasionally, and political talks have failed to produce even a glimmer of a lasting peace. Throughout the former republics, the warfare has driven a million refugees from their homes, including 400,000 Bosnians who have fled in the past month.

Most Western observers put primary blame for the desperate situation on Milosevic and his Serb followers. By this reading, their incessant attempts to dominate the other ethnic groups in Yugoslavia caused every erstwhile republic but tiny Montenegro to secede. Then Milosevic sought to salvage a kind of Greater Serbia from the wreckage by encouraging Serb-populated regions of the breakaway republics to resist secession -- and providing the crude military means to do so. Around U.N. headquarters in New York City, some diplomats are reminded of the way Hitler used the supposed need to protect German minorities in Czechoslovakia as an excuse to subjugate those countries.

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