The indictment of President Slobodan Milosevic on alleged war crimes severely complicates the search for a peaceful end to the Yugoslav conflict.

Although Western governments have periodically threatened various Balkan leaders with criminal responsibility throughout the 1990s - and in more specific terms at the start of the Kosovo war - they have been careful not to single out Mr Milosevic.

From the start of the air offensive in March, Nato leaders knew they might have to negotiate with Mr Milosevic. Indeed, Nato's official position is still that, if the Yugoslav president withdraws from Kosovo and allows the introduction of an international force, he can continue ruling his country.

The military command was also doubtful because fingering Mr Milosevic as the ultimate culprit changes the entire nature of its campaign. Instead of being an essentially humanitarian operation (to reverse ethnic cleansing and return the refugees), it becomes a moral crusade, which may entail the occupation of Yugoslav territory and the imposition of a new regime in Belgrade - hardly aims the military leaders wish to pursue.

Independent tribunal

Yet Nato has no control over the international tribunal in The Hague. Having toyed with the tribunal in the recent past by supplying its prosecutors with intelligence information about the massacres inside Kosovo, Western governments should not be surprised that the tribunal has acted. One cannot claim to uphold international law but still hope to bend it to suit particular military objectives.

In theory, the alliance can overcome this new and unexpected obstacle. Since the war began, Nato leaders have never tried to deal with Mr Milosevic directly, partly because the Yugoslav leader was already beyond the pale with Western public opinion, and partly because no Western leader would risk the humiliation attached to a meeting with the Yugoslav leader that ended in failure.

In order to avoid these dangers, Nato has relied on the services of Viktor Chernomyrdin, a former Russian prime minister and now Moscow's roving Balkans ambassador, and has also enlisted the mediation efforts of the Finnish President.

These two negotiators could put together a peace deal which the UN Security Council would be asked to approve and which, in turn, could be applied regardless of Mr Milosevic's personal fate.

Concessions to Belgrade

In order to improve the chances of such a deal, Nato leaders have put forward a set of concessions to the Belgrade regime which, although not publicised, remain significant.

• Originally, Nato demanded the total withdrawal of Yugoslav troops. This demand still stands, but the alliance has accepted the principle that some Yugoslav "representatives" could remain in Kosovo.

• The alliance demanded the right to introduce a peacekeeping force into the province. This has been watered down to a demand for an international force, in which Nato will have a "substantial contribution".

• Nato wanted to command this force. It has now accepted that the force will be constituted under the United Nations, and the command structure is open to negotiations, although Washington still demands direct control over its troops.

• There was a direct hint that the alliance would not attempt to remove Mr Milosevic from power.

• Nato vowed to continue the air strikes until its demands had been met in full. In practice, Mr Milosevic has a guarantee that the bombardment will stop once "substantial" numbers of Yugoslav troops are withdrawn, and that troops withdrawing will not be targeted.

Mr Milosevic is not in a particularly good position. The sporadic defections of soldiers, coupled with anti-war demonstrations in various Yugoslav towns (especially in Krusevac, a Milosevic stronghold) indicate that there is a limit to how much pain the Yugoslav population is prepared to suffer.

Most of the country's economic infrastructure has been destroyed and, good weather permitting, Nato's air offensive is intensifying by the hour.

Approaching deadline

Ground troops into Kosovo ?

Finally, the alliance's decision to increase its ground forces in the region to 50,000 troops gives Mr Milosevic a clear deadline: a month from now he will face a real threat of a ground offensive, if Nato leaders decide that this is a feasible course.

These calculations, coupled with the concessions, could have resulted in a deal. But the indictment puts back the entire search for a settlement a considerable extent.

Quite apart from the fact that Mr Milosevic's personal survival is now at stake, there are other calculations which will loom large both in Belgrade and in Moscow.

The Yugoslav authorities have been hoping that, if they accept a peace deal, they might benefit from some of the reconstruction aid which will be offered to the region. It is difficult to see how this can be offered as long as Mr Milosevic remains in power.

Furthermore, as far as the Yugoslav military is concerned, the issue is no longer confined to the president: generals in Belgrade are now worried that, if their head of state can be indicted, they are likely to follow. The commanders of the Yugoslav troops in Kosovo are already on the international tribunal's "want" list.

The immediate effect of the indictment may therefore be to close the ranks of the Yugoslav leadership even further.

Finally, the West will find it hard to follow through with the compromises Nato has privately suggested. It is difficult to argue that any peace deal can be concluded with an indicted war criminal, and even harder to appear to be making compromises with him.

The peace negotiations are going to continue, partly because the West has an interest in keeping the Russians involved, and partly because the continuation of these negotiations is Nato's way of maintaining the internal cohesion of the alliance.

But every detail of these negotiations will be scrutinised by public opinion. The biggest obstacle to a peace deal until now has been Nato's determination to appear as the only real winner in the Balkans war - and Mr Milosevic's determination not to be portrayed as a loser.

The prosecutors in The Hague have made sure that the threshold has been raised much higher. The reputations of both Nato and Mr Milosevic are at stake.

The confrontation over Kosovo is now a fight to the finish between Nato and the Yugoslav leader - something that neither Mr Milosevic nor the alliance ever predicted.