While Kosovo is making headlines, diplomats in the Balkans say the real threat to peace could lie in another troubled corner of the former Yugoslavia – Bosnia.

Twelve years after the US-brokered peace ended a bloody civil war, people in Sarajevo are even talking about the risk of violence erupting again in the next few months.

Nerma Jelacic, director of the Balkan Investigative Reporting Network, says mounting nationalist rhetoric is frightening residents: “There is fear among the people on the same level as it was in 1991. You can see it in the streets and supermarkets, people are buying flour and sugar. Household goods prices have risen as a result.”

The European Union’s long-term plan of extending membership to Bosnia, and to all the ex-Yugoslav states, cannot be implemented without resolving these immediate difficulties. Janez Jansa, the Slovenian prime minister, told the FT: “Bosnia is the most difficult case in this region – much more difficult than Kosovo.”

The country of about 4m people is split into two opposing “entities”. In the Serb-dominated republic, citizens see neighbouring Serbia as their mother country and feel no loyalty to the weak multi-ethnic state where Bosniak Muslims form the largest group. Belgrade backs its ethnic kin. Within the other entity, the Croat-Bosniak federation, Croats rely on cumbersome administrative safeguards to prevent Bosniak domination.

Miroslav Lajcak, the international high representative, has this autumn sparked a political crisis by trying to complete the implementation of the 1995 Dayton settlement by attempting minor procedural adjustments.

Milorad Dodik, prime minister of the Serb entity and Mr Lajcak’s primary opponent in the crisis, dismissed any possibility of armed confrontation. He said he remained open to settling the stand-off peacefully and denied reports he was printing ballot papers for an independence referendum.

Western officials said there was no risk of an all-out war. Rear Admiral Hans-Jochen Witthauer, commander of the EU-led force says the main risk is “localised ethnic clashes”, although even then that risk is low. But he commands just 2,500 troops compared with the 60,000 Nato soldiers in the late 1990s.

Mr Jansa said the EU will have to put more effort into Bosnia. “All these polities, federal cantons, this is not a working state. We have to recognise this, and after solving the problem of Kosovo, the European Union will have to concentrate heavily on Bosnia’s case.”

Meanwhile, dangers lurk elsewhere in the former Yugoslavia.

In Serbia, non-governmental paramilitaries have again reared their heads threatening to intervene in Kosovo, although their numbers appear small for now. More serious-looking formations have appeared in Kosovo in recent months, promising to protect parts of the province that Nato is allegedly neglecting. This could set the stage for clashes if the Serbs concentrated in the north of Kosovo secede in reaction to an ethnic Albanian declaration of independence.

Serbia’s more pro-western parties continue to threaten the EU that hardline nationalists, the largest parliamentary bloc, would come to power if Kosovo declares independence.

Kosovo’s tensions have spilled over into Macedonia, with its own restive ethnic Albanian minority. Last week police clashed with black-clad gunmen from an organised crime group and reported finding a weapons cache sufficient to equip a 650-man battalion, complete with portable anti-aircraft weapons.

Even Montenegro, the smallest ex-Yugoslav republic, has worries. After ending its union with Serbia with a peaceful referendum last year, it contends with residual loyalties to Belgrade among more than a quarter of the population. As elsewhere, political conflicts are complicated by ties and tensions among armed criminal groups.

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