On the surface, the Balkan region is now stable. Nato has triumphed against Yugoslavia.

The biggest humanitarian disaster in Europe since the Second World War is now being reversed as the Albanian refugees return home, and Western governments are busy devising economic reconstruction schemes for the entire region.

To a certain extent, optimism about the Balkans' future prospects is justified. But many tasks still need to be accomplished, and the most difficult strategic questions are yet to be tackled.

At least in one respect, Nato has failed in the Balkans: Yugoslavia's President Slobodan Milosevic is unlikely to be brought before an international tribunal to answer for his crimes.

Not only is Milosevic a signatory of the Kosovo deal, but he remains a master of Orwellian deceit at home.

Sitting amidst the rubble of Belgrade, and with his tattered army executing a hasty retreat from Kosovo, Milosevic nevertheless proclaimed victory against Nato.

The situation is reminiscent of the Gulf War earlier this decade, when another dictator, Iraq's Saddam Hussein, also proclaimed the "Mother of All Victories" on the corpses of hundreds of thousands of his own people.

But the similarities can be extended much further. Just as in the Gulf, a coalition of Western forces defeated a dictatorship, but did not remove a dictator.

Copying Saddam Hussein's technique, Milosevic remains defiant, a seemingly perpetual cancer in the Balkans.

Russia and the West may yet squabble over the future of Kosovo, potentially allowing the local ruler to escape from his international isolation, exactly as they have allowed Saddam Hussein to survive.

And, to make the current situation even more complicated, at least in the Gulf War earlier this decade Kuwait was a recognised country whose independence was restored; Kosovo is a province whose ultimate legal status remains in abeyance.

Sense of grievance

So, is Milosevic likely to become Europe's Saddam Hussein, a ruler who still manages to snatch victory from defeat while escaping justice? Fortunately, the answer is almost certainly negative.

Mr Milosevic does not have Saddam Hussein's stamina

More importantly, while neither the inducements nor the threats deployed against Iraq throughout this decade were potent enough to remove Saddam Hussein, the carrots and the sticks now operating in the Balkans are substantial.

The Security Council resolution which authorised the Kosovo force was taken under Chapter VII of the UN Charter, which allows Western governments to use force at any time in the future if Milosevic goes back over his promises.

Theoretically at least, Nato will not need to repeat the anguished debates with Russia or China, which often paralysed action in the Gulf.

There are no complicated monitoring procedures and deadlines to be observed either: Nato has an open-ended mandate to do more or less as it pleases, for as long as it wishes.

At the same time, the West will shortly be offering substantial economic assistance to the other Balkan countries; the people of Yugoslavia will not benefit from these as long as they have Milosevic as their helm.

Saddam Hussein can play on his country's independence; the Yugoslavs know only too well that, ultimately, their status as a pariah state in a continent which is increasingly integrated is not a long-term proposition.

And, finally, while in the case of Iraq one of the main reasons for Western inaction was the fear that the country may disintegrate, thereby destabilising the entire Middle East, no such fears are present in the Balkans.

Indeed, quite a few European governments are prepared to recognise an independent Montenegro if that sole non-Serb republic decides to leave Yugoslavia.

In short, Milosevic does not have either the staying power nor the strategic opportunities to repeat Saddam Hussein's survival techniques.

Mischief in Maceonia

This does not mean, of course, that he is devoid of options. Milosevic can, for instance, create mischief in neighbouring Macedonia. Despite Macedonia's official support for Nato, the country is terrified of an independent Kosovo.

Ethnic tensions remain high

A large ethnic Albanian population resides in Macedonia and its "liberation" was traditionally one of the avowed aims of the KLA, the Albanians' guerrilla organisation.

Nato is currently engaged in an effort to "demilitarise" the KLA, but every Western military commander knows that this is easier said than done; at best, Nato will be able to keep KLA actions to the minimum, while hampering its ability to smuggle in weapons and fresh recruits.

The possibility of an ethnic flare-up in Macedonia therefore continues to exist, and any such clash will serve Milosevic well. But, yet again, the chances of Yugoslav mischief in Macedonia are more theoretical than real.

As long as large contingents of Nato forces continue to be positioned throughout the Balkans there is little Milosevic can do and, since most of the logistical supply lines for the Kosovo force now cross Macedonia, Nato will make sure than nothing will happen in that republic.

Resilient and resourceful

Bereft of all these options, Milosevic will have to resort to internal repression in order to maintain his rule. But even here, his options are rather limited.

Throughout this decade he has relied on smuggling and illicit sales of his country's economic assets through shadowy trade organisations in order to finance the war and pay the salaries of his people.

Most of these scams are no longer feasible, and much of what could have been sold has been destroyed.

The people of Yugoslavia are resilient and resourceful: the country's electricity grid, for instance, was restored within hours after each Nato bombing.

Yet there is a limit to this ingenuity. The country has lost all its oil refining capacity, most of its industrial stock, all its critically important bridges over the Danube river and the overwhelming part of its arms producing capacity.

Mass unemployment

Millions of people are already technically unemployed, if only because they have no factories to go back to; millions more will be rendered unemployable when the after-shocks of the war start affecting what is left of the Yugoslav economy.

Milosevic will gain a few months by the time-honoured fashion of just printing money in order to pretend that he is still paying salaries. By early autumn this year, however, the ruination of the entire country will be impossible to hide.

Another Ceaucescu?

The Belgrade ruler can, of course, continue to deploy force against any opposition which may arise, as he has often done in the past.

However, the military are notoriously bad at firing on their own people; as the experience of communist regimes throughout Europe indicates, when an order is given, the military either refuses to shoot, or disintegrates.

Mr Milosevic may not be able to rely on the military

Milosevic may yet meet the fate of Nicolae Ceausescu, the communist dictator in neighbouring Romania, who also destroyed his country and then used troops against his people, only to be deposed and executed by a mixture of a popular uprising and a military coup. This now looks as the most likely scenario in Yugoslavia as well.

The West is right not to make Milosevic's removal from power its key policy objective, partly because nobody can control developments inside Yugoslavia, but also because this is not actually necessary.

Although very late and after many errors, Nato has finally stumbled upon a regional Balkan policy which keeps Milosevic boxed in.

Lessons learnt from Bosnia

The challenge for the West in the coming years is, therefore, less how to make sure that Milosevic stands trial for his crimes. Instead, the major task for all Europe will be how to assist the destroyed country which he will leave behind. Milosevic's punishment will come from his own people.

Investigators are uncovering new mass graves

In Kosovo, meanwhile, the situation appears stable. The initial deployment of Nato forces was a huge military success. Alliance troops accomplished the biggest active European manoeuvre since World War II with fewer accidents than would normally be expected during a regular Nato peacetime exercise.

Some of the mistakes committed in Bosnia have been avoided this time. There is no cut-off period for the presence of Western troops; indeed, all Western countries accept that they will be present in the region for many years to come.

Nor is there a commitment to immediate elections, like there was in Bosnia in early 1996. This will provide the Alliance with some useful bargaining chips.

Election dilemma

Any elections held at this moment could only result in a victory for the KLA: this guerrilla organisation can plausibly claim to have been successful in achieving Kosovo's liberation, and in best representing the interests of ordinary Albanians.

Furthermore, the KLA is also in control of many Kosovar villages, and is therefore able to extend its political influence even further.

With no state structures in place, hasty elections may actually become part of the problem in the province, rather than a method for their solution.

Nato commanders hope to postpone elections for a local assembly until late this year, when most of the refugees have returned, the traditional political parties which existed in Kosovo are established and the Organisation for Security and Co-operation in Europe, which is tasked with handling the process, sets up its own election monitoring mechanism.

Political moderation

If stability can be maintained in the province until December this year, it is quite possible that the elections will produce a more evenly balanced Kosovo assembly, one in which Ibrahim Rugova, the Albanians' moderate leaders, still holds sway.

Mr Rugova: An effective performer

Rugova has been tarnished by his inability to extract concessions from Milosevic over the last 10 years, and his dealings with the Yugoslav dictator during the first stages of the war.

Nevertheless, his historic appeal to ordinary Albanians is still legendary, and he is an effective political performer. Kosovo has never experienced a tradition of political moderation, and this cannot be accomplished overnight.

But Nato hopes that, if there is a time lag before the elections, a more balanced political leadership may emerge. And the Alliance will also have to tackle the tricky question of whether the ethnic Serbs in the province, whose numbers are still dwindling despite all the assurances which Nato has given for their protection, should have a representation in Kosovo's elected assembly.

Flag-waving

For the moment, the West is right to assume that ambiguity about the territory's internal arrangements is the best policy which can be pursued.

In other areas, however, this ambiguity will quickly become a hindrance. Despite all the lessons of Bosnia, Western governments did not resist the temptation of becoming involved in a flag-waving tussle about who should be appointed as Kosovo's civilian administrator.

Instead of looking for the best possible candidate, a man with a high international profile but a flexible touch on the ground, governments have been more concerned with the nationality of the individual.

Arrangements for the creation of a local police force - necessary in order to extricate the Alliance from too many roles on the ground - are in their infancy, and have been further muddled by an incoherent demilitarisation agreement with the KLA.

The KLA claims that it has been promised the opportunity of forming the backbone of Kosovo's police; Nato is still insisting that the police will be recruited from various elements, and trained under Western supervision.

Reconstruction pledges

And, meanwhile, many of the financial arrangements for administering and reconstructing Kosovo are lagging behind schedule. A meeting of potential donors, the so-called "Friends of Kosovo", held at foreign minister level this week, produced various pledges but little in concrete terms.

The promise of cash for the war-torn province is there and will be respected; in what way and how far still remains to be seen.

The experience of Bosnia's reconstruction is hardly reassuring: billions of dollars were poured in for the last five years, but the republic is still utterly dependent on Western aid and administration for its survival.

Nato has clearly scored a victory on the battlefield. And the Alliance has managed to reverse the immediate consequences of ethnic cleansing. But it is premature to say that peace has returned to the Balkans.