Beth Kampschror in Sarajevo -

After two years of fruitless Serb-ethnic Albanian talks in Western capitals, it wasn't much of a shocker last week when the so-called Troika - the EU, the US and Russia - announced that the latest and last-ditch talks over the future of the Serbian province of Kosovo had come up with nothing new. Independence, and its ripple effects on the region, are now the focus of all the speculation - not what will happen when Kosovo has to face an economy run on remittances from the diaspora and budget coffers filled only by customs revenue.

In yet more meetings, this time at the posh Austrian spa town of Baden, Serbia offered autonomy for the mostly ethnic-Albanian province (backed by its ally Russia) and the Kosovo Albanian leadership offered nothing less than independence (backed by its allies the US and much of the EU). All eyes are now on the date of December 10 when the Troika is to report to the UN - but most here in the region think December 10 will be yet another Kosovo deal deadline that will come and go. Meanwhile, in Kosovo the nearly 2m majority of ethnic Albanians are facing their eighth winter of living in the muddy province dominated by stray dogs and litter outside, and electricity cuts and water cuts inside. And their patience is coming to an end.

New elections in November made the former guerrilla leader Hashim Thaci prime minister apparent, and he has promised to declare independence unilaterally if the Troika can't come up with a plan by December 10. The only question seems now to be the declaration's timing. It's not entirely clear what Thaci, a man who was referred to as "The Snake" by his own men in the Kosovo Liberation Army for his success in evading Serb police, will do once he becomes prime minister.

If the conjecture that Thaci and his government will declare independence in January or February is true, the first government to recognise an independent Kosovo would most likely be the US. The senior State Department diplomat Nicholas Burns, who is the US' point man on the Balkans, reaffirmed in Congress in November that if there was no agreement by December 10, the US would support Kosovo's supervised independence, as envisioned in a plan unveiled in February by UN envoy Martti Ahtisaari. The EU, meanwhile, is as usual sending mixed signals. While the newswires reported in November the EU was unified on Kosovo, with only Greece and Cyprus advocating more negotiations, its foreign policy chief Javier Solana was announcing that if there's no agreement by December 10, the UN secretary-general would decide on how the process would continue.

If the Kosovar Albanians do declare independence, and the US and other EU nations recognise the new country, the reactions of the Kosovo Serb minority that's concentrated on Kosovo's northern border with Serbia, the Bosnian Serbs, Serbia itself and Serbia's ally Russia remain open to question.

Kosovo Serbs

Kosovo's Serb minority dominates the north of the province and is connected in every possible way to Serbia proper - Belgrade pays official salaries, the north uses Serbia's telephone system, water and other infrastructure is connected to Serbia rather than to the provisional government in Pristina. Kosovo Serbs have consistently boycotted elections and the Pristina government. And the dividing line between the Serb north and the rest of Albanian-dominated Kosovo runs through the unhappy town of Mitrovica, where Nato troops and UN police keep a close watch on the bridge over the Ibar River that divides the town. Neither the Kosovar Albanian leaders, the UN nor Nato have taken the threats of partition seriously enough to elaborate what they would do if the Serbs in the north set up an international border crossing on the bridge.

Serbia

Billboards appearing this autumn in the grey concrete jungle that is Belgrade show a handful of defiant Serbs of all ages and walks of life standing together, saying in Cyrillic, "We're not shutting our eyes - Kosovo is Serbia!" Shrill radio talk shows discuss nothing else, and play to the Serb sense of being persecuted by a Western-led international conspiracy. After November's failed talks, Serbian President Boris Tadic threatened a trade and travel border blockade if Kosovo declares independence.

Officials in Serbia are also shrewdly playing to EU fears that Kosovo will spark a new war by announcing that the defence ministry has made action plans in case of a "presumed threat" and has sent out recruitment orders to more than 700 soldiers to report for duty in southern Serbia. Publicly, however, Defence Minister Dragan Sutanovac said on November 29 that Serbia would not intervene military. Which should seem a no-brainer: Nato has some 16,000 troops in Kosovo that will be boosted by Germany's recent announcement to send a further 600. But the multi-national force has a less-than-stellar record; during several days of rioting in Kosovo that left 19 people dead in 2004, one US military source in the region noted that "they ran away." It's unclear what Nato will do about the self-styled Albanian National Army, a shadowy paramilitary group that's been roaming parts of Kosovo for the past few months.

Serbia has also threatened to turn away from the EU and towards Russia. Though the EU has thrown Serbia several bones this year - re-starting pre-accession talks with Serbia, and allowing them to initial a pre-accession agreement though Serbia hasn't met the EU's condition of turning over a wanted Serbian general to the UN war crimes tribunal - Serbia's nationalist prime minister, Vojislav Kostunica, has said that Belgrade "will know how to thank" Moscow for its support over Kosovo. Russia's Lukoil and Aeroflot are reportedly already favourites to win tenders for next year's planned privatisations of the NIS oil monopoly and the JAT national airline.

Russia

Russia has long threatened to veto any proposal that reaches the UN Security Council without Serbia's approval. Why Vladimir Putin's resurgent Russia is doing this has been the subject of cafe gossip throughout the region all year. Western sources speculate it's because Russia wants a deal with the West over the Russia-backed enclaves in the Caucasus. The word in Serbia is that Russia is grooming the country to be its client state in Europe, and will be buying up all of Serbia's major assets in the next year. That theory, however, was dealt a blow in November after a Vienna-based company, rather than Russian metals tycoon Oleg Deripaska's company Basic Element, placed the highest bid for Serbia's Bor copper mining and smelting complex. Russia also currently ranks only 18th among foreign investors in Serbia.

Bosnian Serbs

The EU is set to offer Bosnia Herzegovina its own Stabilisation and Association Agreement, in exchange for the country's politicians passing a set of internationally-backed parliamentary reforms at the end of November - though Bosnia has not made any of the EU-mandated reforms to its ethnically divided police. Some analysts in Sarajevo have noted the EU is throwing dangling a carrot in front of politicians in hopes that its restive Bosnian Serb Republic (a Serb-dominated mini-state that makes up half of post-war Bosnia, along with the Muslim-Croat Federation) won't hold a referendum on its own future if Kosovo becomes independent. Bosnian Serb Prime Minister Milorad Dodik has never explicitly said he would do so, but his hints to that effect in the past year have been jangling the nerves of diplomats who would like to call Bosnia their "success story."

The morning after

Even if Kosovo's likely independence declaration brings no upheavals, the province is in deep trouble economically after eight years of limbo under the UN Mission to Kosovo (UNMIK). On the cracked sidewalks of Kosovo's towns, toothless locals make up most of Kosovo's cash economy by hawking phone cards, cigarettes and pirated CDs. Unemployment hovers at around 40%. The infrastructure is so decrepit here that even after more than €500m spent on the local electric utility, power outages are as much part of the Kosovo experience as stray dogs and rubbish. "UNMIKistan is no place to live," noted opposition politician Veton Surroi earlier this year, echoing all other Albanian politicians in their drive to independence.

Critics of the political elite say that Kosovo's final status has been a smokescreen for the politicians' inaction. "You mention any problems and they say, 'No, wait until status.' People are like sheep following after status," says Sarah Maliqi of the Youth Initiative for Human Rights.

Petrit Selimi, the owner of Pristina's most popular cafe, agrees: "Sooner or later everyone will ask what's wrong with Kosovo, and people will need something more than status."

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