By Bradley Graham
Washington Post Staff Writer
Friday, March 13, 1998; Page A17

An American arbitrator trying to settle a potentially explosive territorial dispute in Bosnia plans to postpone again a final decision about the future of the town of Brcko when a deadline expires Sunday, U.S. officials said yesterday.

The move by Roberts Owen follows a series of delays dating from the 1995 Dayton peace accords that has left unresolved whether control of Brcko should remain in Bosnian Serb hands or go to the Muslim-Croat federation.

The Serbs have said retention of Brcko is vital to them because the city, with a population of about 45,000, sits astride a neck of Serb-controlled territory that connects the eastern and western halves of Bosnia's Serb Republic. The town, once inhabited predominately by Muslims and Croats, was seized by Serb forces in 1992 and left provisionally in Serb hands by the Dayton agreements that ended 3 1/2 years of war.

But the Muslims have insisted that they should govern the area because Muslims were the largest single ethnic group there before the war and they need untrammeled access to the Sava River for foreign trade. They also insist that the manner of the city's conquest alone ought to negate Serb claims to continued jurisdiction.

After the Dayton accords, Owen, a U.S. lawyer, was named to head an arbitration panel to determine Brcko's future status. Owen postponed his initial December 1996 deadline by two months, then announced in February 1997 that he would wait another 13 months before issuing a final judgment.

In the meantime, he allowed Brcko to stay under the de facto control of the Bosnian Serbs but established an international supervisor with the power to overrule decisions of local authorities on both sides of Bosnia's inter-ethnic dividing line. The supervisor's job went to a career U.S. diplomat, Robert W. Farrand.

In the past year, the Brcko area has seen some progress toward the return of Muslim refugees to homes they occupied before the war. But this and other encouraging developments have occurred under the heavy presence of American troops. U.S. and other Western authorities regard the progress as less than sufficient to warrant awarding permanent control of Brcko to the Bosnian Serbs.

At the same time, Western officials are reluctant to take jurisdiction over Brcko away from the Bosnian Serbs because such a move might undermine a newly elected moderate government in Serb territory. Bosnian Serb Prime Minister Milorad Dodik, who took power in January after winning election by a single vote, has pledged to implement the Dayton accords fully, including allowing Muslim and Croat refugees expelled from Brcko to move back.

Further, some of the pressure to settle the Brcko dispute this month was eased by the recent decision to extend the presence of NATO-led peacekeeping forces in Bosnia indefinitely beyond what had been a June withdrawal deadline.

"The extension makes us more willing to punt the decision on Brcko," a senior U.S. official said. "The fact that we're still going to have a significant military presence in Bosnia means we'll still have the kind of stable environment to make more progress on refugee returns, local police training and other matters before having to resolve the Brcko issue."