BRUSSELS, July 7 (Reuters) - NATO is looking at ways to allay a growing sense of isolation in Serbia, possibly with an offer of closer ties short of a full partnership, alliance diplomats said on Friday.
The alliance has denied Serbia and its neighbour Bosnia entry to its Partnership for Peace programme, the first rung on the ladder to possible membership, until fugitive Bosnian Serb war crimes suspects General Ratko Mladic and wartime leader Radovan Karadzic are brought to international justice.
But now Montenegro has ended its union with Serbia and Kosovo is set to go its own way, NATO fears its tough line will play into the hands of an anti-Western camp in Serbia.
That concern is compounded by the fact that the European Union also suspended pre-membership talks in May after Belgrade failed to meet a deadline to arrest Mladic.
"There is a deep sense of frustration in Belgrade and a risk of radicalisation of the political landscape," said one senior NATO diplomat who requested anonymity.
"The question is: how can we give Belgrade encouragement without giving up on the policy of conditionality," he said of the longstanding condition that Serbia must deliver Mladic to the U.N. war crimes tribunal before it can join the partnership.
Possible steps will be outlined when Serbian Prime Minister Vojislav Kostunica meets U.S. Secretary of State Condoleezza Rice in Washington on July 11.
U.S. envoy to Serbia Michael Polt said this week the visit would be devoted to "improving the situation in Serbia and bilateral relations which are not based only on the political status of Kosovo or whether Mladic is in the Hague or not".
One idea is that Serbia could receive unprecedented observer status in the Euro-Atlantic Partnership Council (EAPC), the 46-country forum in which NATO allies discuss security and political issues with 20 mainly east European partners.
NATO, which conducted an 11-week bombing campaign against Belgrade in 1999 to drive Serb forces out of Kosovo, is also due to appoint a liaison officer soon to work at the Serbian Defence Ministry on military cooperation.
"The idea is to split the difference between where we are now and full Partnership for Peace," a second senior alliance diplomat said, adding that any agreed formula would have to be applied to Bosnia too.
No concrete proposal has yet been put forward. The United States is among those pushing for early steps to reach out to Belgrade, while others such as Britain are in less of a hurry.
"It could be part of a Kosovo end-game package," said the second diplomat of U.N.-backed talks which the West hopes will by year-end confirm Kosovo's future as an independent state.
Supporters of the NATO outreach move say it must come before elections which raise the risk of Serbia being turned over to ultranationalist, anti-Western parties.
There is constant media speculation there will be early elections by the end of the year, but diplomatic sources say Kostunica wants to hold on until early 2007.
The EU is also looking at ways to reach out to Serbia despite the war crimes obstacle.
EU foreign ministers agreed last month on the need to support Serbia's "European perspective" and make it easier for young Serbians to get visas to travel to EU countries. Enlargement Commissioner Olli Rehn visited Belgrade this week to discuss a way forward.