UN envoy closes in on Kosovo endgame

VIENNA, Sept 15 (Reuters) - U.N. envoy Martti Ahtisaari plans to tell the major powers next week that talks between Serbs and ethnic Albanians on the fate of Kosovo are nearing the end of the line.

"He will tell them: 'Maybe we have reached the stage when both sides have almost exhausted their options and we are at a very difficult period in the negotiations, if not the dead-end yet,'" a senior Western official said on Friday.

Diplomats say that if the two sides fail to agree, major powers will impose a solution, most likely advocating independence for Kosovo.

Ahtisaari leaves on Saturday for New York, where he will brief the U.N. Security Council and the foreign ministers of the major powers on the state of play in talks on Serbia's breakaway province, where 2 million ethnic Albanians demand independence.

"He will brief them on the progress, or the lack of it," the official, who asked not to be named, told Reuters. "He will say: 'This is the situation, what are you going to do about it?'"

Ahtisaari meets the Contact Group -- the United States, Britain, France, Germany, Italy and Russia -- on Sept. 20.

If Moscow agrees, they could give Ahtisaari the green light to propose a solution. Diplomats say this will almost certainly advocate independence, setting up a showdown with Serbia.

Legally part of Serbia, Kosovo has been run by the United Nations since 1999, when NATO bombs drove out Serb forces accused of ethnic cleansing.

Direct talks on the province's future began in February, with little sign of compromise. The focus has been on the rights and security of the 100,000 remaining Serbs, but U.N. mediators say Belgrade has been particularly stubborn.

Talks resumed on Friday in Vienna, but few people involved hold out any hope of the two sides striking a deal.

"INSEPARABLE"

The Contact Group has said a decision should be made this year, mindful of growing Albanian impatience and the risk of fresh violence. As if to underscore the point, a blast overnight destroyed the Kosovo interior minister's car.

A spokeswoman for Ahtisaari said the former Finnish president would brief the Security Council on "the way forward."

"We have to bear in mind the timeframe given to us by the Contact Group. That's the end of the year," she said.

But separately, Russia has cautioned against any "artificial deadlines", backing Belgrade's demand for more time.

Rich in Orthodox heritage, Kosovo holds almost mythic status for Serbs. After an impassioned speech on Tuesday by Prime Minister Vojislav Kostunica, parliament agreed to enshrine Kosovo in a new constitution as forever Serbian.

"The entire world must know that as long as the Serbian state exists, Kosovo must be its inseparable province," he said.

Around 10,000 Albanians died and 800,000 were expelled in Serbia's 1998-99 war against Albanian rebels. Eleven weeks of NATO bombing forced Belgrade to pull its troops out, but half the Serb population too fled a wave of revenge attacks.

Analysts say Belgrade knows Kosovo is lost, but could back a breakaway bid by the Serb north. The West argues this might reignite Albanian insurgencies in southern Serbia and Macedonia.

As 2006 starts to close, the European Union is preparing to take over from the U.N. with a smaller police and monitoring operation. NATO will keep at least some of its current 16,000 troops there.