EU again delays Serbia trade decision (UPDATED)

European Union Enlargement Commissioner Olli Rehn urged the bloc last week to allow Serbia improved trading conditions following the arrest of the wartime Bosnian Serb leader.

But diplomats said ambassadors from the 27 EU states agreed to wait for Karadzic's transfer to the Hague tribunal and for U.N. war crimes prosecutor Serge Brammertz to report on whether Serbia was fully cooperating with the tribunal -- the condition for unblocking Belgrade's EU path.

An EU diplomat said envoys had agreed on these conditions last week and there had been no new element by the time of their meeting on Tuesday.

"Both are still lacking," he said after the ambassadors' last meeting before a month-long summer break.

Asked whether this meant the decision was postponed until September at the earliest, the diplomat said: "You could put it like that. It's postponed until we have those two elements."

He said he was not aware of any target date for Brammertz to report to the EU on Serbia's compliance with The Hague.

Karadzic's lawyer, Svetozar Vujacic, said he expected Serbian authorities to try to send his client to The Hague before a mass protest planned for Tuesday against his extradition and trial.

EU foreign ministers last week called the arrest a milestone on Serbia's road to joining the EU, but several stressed that Karadzic's wartime military commander, Ratko Mladic, also wanted for genocide, was still at large and said Belgrade must go further to reap full benefits.

Any decision to reward Serbia must be unanimous. The Netherlands and Belgium have taken the toughest line among the 27 EU states in insisting that conditions be fully met.

Dutch Foreign Ministry spokesman Rob Dekker said the Netherlands was very happy with the arrest of Karadzic and appreciated the cooperation of the Serbian government.

"But we are still waiting for Radovan Karadzic's transfer to the Hague, the arrest of Mladic and Serbia still has to set up a witness protection program," he said.

"We are also waiting for Mr. Brammertz's position on Serbia's cooperation."

Karadzic and Mladic were indicted for genocide over the July 1995 Srebrenica massacre, in which some 8,000 unarmed Bosnian Muslim males were murdered and bulldozed into mass graves.

The EU signed a long-delayed Stabilization and Association (SAA) pact with Serbia in April but vowed not to ratify it or unlock its trade benefits until all member states agreed that Belgrade was complying fully with the Hague tribunal.