Andrew MacDowall in Sarajevo -

A decade and a half after its bloody civil war came to a close, Bosnia-Herzegovina prepares to go to the polls peacefully, but with fading hopes that any serious political progress can be made in its current form. As the international community's urgings over reform lose their volume and effectiveness, two unpalatable scenarios have emerged: stasis or separation.

Arguably, post-war Bosnia has never been more in need of its ethnic factions pulling together - but rarely have they seemed so far apart. Last year, the country's economy shrank by 3.4%, according to the International Monetary Fund (IMF), which extended a €1.2bn package to Bosnia in 2009 to help it weather the impact of the global economic crisis. Yet while the country sorely needs a reinvigoration in its political and economic direction, the campaigns for the parliamentary and presidential elections on October 3 have been dominated by nationalist rhetoric and the country appears ever more starkly divided along ethnic lines.

The Dayton Agreement that brought the Bosnian war to an end set up two entities: the Bosnian Federation, mainly inhabited by Bosniaks (Bosnian Muslims) and Bosnian Croats, and the Bosnian Serb Republic, which is predominantly ethnic Serb. Both zones have a great deal of autonomy, running their own police and judicial systems beneath the federal structure, and each has its own government.

Since Dayton, many diplomats and international observers had hoped that the entities would come closer together as the wounds of the war healed and the benefits of unity in a small and relatively poor (by European standards) country became clear. However, most would now agree the opposite has happened.

Divided house

The Bosnian Serb Republic has gone as far as to set up diplomatic representative offices overseas, while its government has proved recalcitrant in dealings with the centre.

Most analysts agree that one of the more certain outcomes of the election will be the strengthening of the hand of Milorad Dodik, the prime minister of the Bosnian Serb Republic. Previously supported by the West due to his opposition to the regime of Slobodan Milosevic in Belgrade, he is increasingly seen as a nationalist strongman close to Russia, which is keen to advance its strategic interests in the Balkans - potentially against those of the EU and Nato. Dodik's stance on secession is increasingly stark. On September 13, he told Belgrade daily Politika that, "our position is clear - a peaceful dissociation is best for Bosnia," adding that "if the pressure on the Bosnian Serb Republic becomes too great, we will calmly and slowly build our position to one day decide our fate on our own."

Meanwhile, Bosnian Croats have been agitating for their own entity as tensions between the Croat and Bosniak leaderships within the Federation have grown. Croats, as 10% of the country's population and less than a third of that of the Bosnian Federation, are the smallest of the three big ethnic groups (Bosniaks constituting around half the population and Serbs around third) and many feel they are deprived the equal recognition afforded to them under the constitution. Pressure for a separate Croat zone is particularly acute in the country's south, where Croats and Muslims fought against one another during the war. Reports in 2009 even suggested that leading Bosnian Croats and representatives of the Bosnian Serb Republic were putting aside differences to build a "Christian coalition" for greater autonomy.

Internal support for integration comes largely from the Bosniaks, who fear that moves towards further autonomy for the Serbs and Croats could leave them with a rump of a country and set back the post-war dream of nation-building. They have been supported by the West, which sees a united, viable Bosnia as supporting its interests. The EU and Nato have been using the prospect of eventual membership in their organisations to encourage the entities to move closer together, and the EU, with other international organisations, has provided diplomatic and financial support for federal institutions.

However, in January, the US think-tank Stratfor reported that Bosnia plans to dramatically reduce the number of experienced officers in its army, considered one of its few fully-functioning federal institutions, as a cost-cutting measure. Stratfor suggested that the two entities were looking to bolster their police units instead.

With Serbs generally at best sceptical towards Nato (already arguably a declining force) and the US tapering down its involvement in the Balkans, the EU remains the most influential international actor in Bosnia. It has benefited from a strong consensus in favour of EU accession across ethnic and party lines in Bosnia - perhaps the only major policy area in which there is almost total agreement. However, the EU incentive, perhaps as it is a long-term prospect, has not prevented the deepening of divisions in Bosnia. Indeed, the current federal government failed to secure visa-free travel for Bosnian visitors to EU nations in July last year due to a squabble over the appointment of a state anti-corruption chief. EU pressure for a revised constitution that would strengthen federal institutions at the expense of entity bodies - seen as a precondition for membership - ran up against Serb insistence that a clause be inserted that would allow the Bosnian Serb Republic to secede (and, some suspect, unite with Serbia).

Matthew Parish, the former chief legal adviser to the international supervisor of Brcko (an internationally-administered enclave in Bosnia), told the think-tank TransConflict that Bosnian Serb Republic secession is already all but a reality, and de jure independence could come within years unless a deal can be struck with moderate Bosniak politicians to increase autonomy in exchange for dropping calls for a break-up. But partly as a consequence of Dodik's strength, nationalist parties representing the other ethnic groups are strengthening their hands in the elections.

Bosnia's economy is expected to eke out growth of just 0.5% in 2010, and the IMF has urged the country to push ahead with structural reforms, calling for "strong leadership by all authorities." Yet while the final break-up of Bosnia is unlikely in the immediate future, at a time when its economy badly needs a fillip and the EU accession process has stalled, it can hardly help that the country's internal divisions look set to become even further entrenched.