By Daniel Williams and Thomas W. Lippman
Washington Post Staff Writers
Wednesday, March 2, 1994; Page A01

Bosnian Muslim and Croat negotiators agreed yesterday to link their war-torn territories under a single flag in Bosnia, a step aimed at isolating Bosnia's Serb faction at peace talks and bringing the brutal war in the former Yugoslavia to an end.

Muslim and Croat representatives signed a detailed political and military document that would set up a two-house legislature, merge the warring armies of both Bosnian groups and provide for the presidency to rotate annually from one group to the other. Refugees within the new joint entity will be allowed to return home and reclaim property seized through "ethnic cleansing," the accord specifies.

The Croats and Muslims envision their new federation as a "lasting, viable, durable state, or rather entity," a U.S. official said, with guaranteed access to the Adriatic Sea and to Western Europe. However, the two federation members control only about a third of the territory of Bosnia. Bosnia's Serbs are to be asked in upcoming negotiations to yield enough territory to bring the federation's share to 51 percent, a U.S. official said.

Serb refusal to give up land would mean the war between the Serbs and Muslims, at least, would continue. Some of the accord can be implemented, including Muslim access to the sea, without the Serbs surrendering territory, since the agreement is essentially a peace agreement between Bosnia and Croatia, a U.S. official said.

The accord was finalized in four days of talks at the State Department and wound up with frenetic phone calls from Croatian Foreign Minister Mate Granic to President Franco Tudjman in Zagreb and "much floor pacing," a department official said.

In effect, by joining Muslim and Croat sectors in a "bi-communal entity," the agreement raises the possibility that a solution in Bosnia will divide the country into two parts -- one Muslim and Croat, the other Serb -- rather than three envisioned in earlier, stalemated negotiations.

The document was signed by Granic, Kresimir Zubak, representative of the Bosnian Croats, and Haris Silajdzic, Bosnia's prime minister. No further signatures or ratifications are required to put it into effect, a U.S. official said, although final constitutional arrangements need approval by a constituent assembly in existence since 1990. A "high-level committee" is to meet in Vienna beginning on Friday to draft a constitution, according to the text of the agreement.

In a related promising development, Bosnian Serb leader Radovan Karadzic, under Russian pressure, announced in Moscow an agreement to open the airfield at Tuzla in Bosnia and allow humanitarian aid flights.

The Muslims and Croats have engaged in heavy fighting in recent months, although both regard the more powerful Serbs as the main enemy. U.S. officials have told the Muslims they need to negotiate and not dream of recovering territory by force. Croatia, in turn, has been warned by European leaders that it faces sanctions if it continues to support the Bosnian Croats militarily.

U.S. special envoy Charles Redman oversaw the talks here, which culminated three weeks of diplomacy that broke an apparently intractable stalemate. Secretary of State Warren Christopher hosted a celebratory signing last night, in the presence of European ambassadors and the Russian charge d'affaires.

"The agreement shows how much can be accomplished even after bitter years of violence, when two sides sit down to reach an understanding," Christopher said.

As an incentive to join forces, U.S. officials held out the lure of integration with the West: representatives on both sides were told that a new Croatia-Bosnia federation might eventually obtain limited membership in the European Union and would be invited to take part in NATO's new Partnership for Peace program, which offers military cooperation.

The accord fulfills a longtime American goal of simplifying the Bosnian quandary by isolating the Serbs as the main villain and holdout. If the European Union and Russia support the arrangement, the Bosnian Serbs and their patron Serbia would be left as odd players out.

Last spring, U.S. and European negotiators obtained Croat and Muslim signatures on a peace agreement, but the effort crashed as the Serbs refused to sign and continued to pile up conquests.

Peace negotiations among all three Bosnian factions are scheduled to resume this month. The agreement between Muslims and Croats specifies that the status of territory controlled by the Bosnian Serbs is to be the subject of those negotiations. Hardly anyone expects the Serbs to join the federation, but in any case they will be under pressure to make some territorial concessions, U.S. officials said.

Any territory conquered by the Serbs in the war and not surrendered still would officially be regarded as part of the Republic of Bosnia. The objective of American and Bosnian negotiators is to preclude Serbia's annexation of Serb-held parts of Bosnia, in the hope that someday the Bosnian Serbs, seeking to escape a pariah status, will join the Muslims and Croats under the Bosnian flag.

In addition to uniting Bosnia's Muslims and Croats, the deal reached yesterday commits the rump republic of Bosnia to join in a confederation with neighboring Croatia. The states would remain independent but cooperate militarily and economically. Croatian officials expect the United Nations to lift the embargo on arms sales to the new entity, but such a move would be unlikely if the war with the Serbs continued, U.S. officials said.

The confederation agreement is regarded as a kind of glue for the bi-communal deal because, under the accord, Croatia essentially gives up claims to territory in Bosnia.

Officials of the Muslim-led Bosnian government regarded the union as a necessary first step and palliative for losing territory to the Serbs.

"This is positive in the context of the overall situation," said Muhamed Sacirbey, Bosnia's ambassador to the United Nations. "Bosnia has viewed itself as being betrayed by the West. This arrangement at least brings some stability to a potential solution."

The new Bosnia would be ruled by a two-house parliament. One chamber would be elected on the basis of one-citizen, one-vote. Seats in the other would be divided among ethnic groups. The president, chosen by the upper house of the legislature, would choose the prime minister, who would have to come from the other ethnic group.

Administratively, the country would be split into cantons based on ethnic makeup, economic potential and other factors. Some of the cantons would be ethnically mixed.

The status of Sarajevo, which is now divided militarily between the Muslims and Serbs, is still at issue and must be worked out in later negotiations, Sacirbey said.

Earlier yesterday, before the agreement was announced, President Clinton expressed optimism about both the negotiations and the continued quiet on the Sarajevo front. He also went out of his way to praise Russia for its role in trying to bring peace to Bosnia.

The president, who was joined at a news conference by visiting British Prime Minister John Major, said Washington and London were encouraged by the Muslim-Croat talks and Russia's willingness "to work with us and others trying to bring the Serbs into a final peace agreement."

"I think we have a terrific opportunity to try to build on what happened in the situation involving Sarajevo, to try to keep the Russians involved in a very constructive way," said Clinton.

Clinton and Major also announced that they had agreed to send a U.S.-British civil planning mission to Sarajevo to help get the utilities system working. The breakthrough in the Muslim-Croat talks following American mediation stands in sharp contrast with months of immobile negotiations held under United Nations and European direction. The Clinton administration agreed to take an active hand once the Europeans, led by France, agreed last month to join in a NATO ultimatum to silence Serb artillery around Sarajevo.