SARAJEVO, June 6 (Reuter) - Greece renewed efforts on Tuesday to win the release of U.N. hostages held by Bosnian Serbs, pinning hopes on Serbian President Slobodan Milosevic to exert influence over his former proteges.

Diplomats said Greek Foreign Minister Karolos Papoulias and Defence Minister Gerasimos Arsenis were due to meet Milosevic in Belgrade after holding talks on Monday night with Bosnian Serb leaders in Pale, outside Sarajevo.

"We will continue the discussions tomorrow in Belgrade and at the end of our discussions...with Mr Milosevic we will make an announcement," Arsenis told reporters on Monday before leaving Pale.

The Greek ministers left Pale after six hours of discussions with Bosnian Serb leader Radovan Karadzic.

Milosevic's state security chief, Jovica Stanisic, remained in Pale and was reported to have held talks into the early morning with the Bosnian Serbs.

Speculation that more U.N. peacekeepers might be released grew after Milosevic sent Stanisic to Pale to join the talks on the hostage crisis. He was accompanied by police vehicles similar to those used to transport a group of freed peacekeepers last week.

Stanisic was the man who oversaw the escort of 121 peacekeepers released by the Bosnian Serbs last Friday.

The Bosnian Serbs are still holding 257 U.N. personnel to ward off further NATO air strikes and are demanding the United Nations guarantee there will be no more allied bombing raids.

"We hope to hear from the international community that there will be no more air strikes but anyway we are going to discuss it with Mr Milosevic," Karadzic said after meeting the Greek envoys. He said he would not be attending the talks in Belgrade.

The West has rejected the Serb demands but has backed off talk of more NATO air strikes.

Western countries were appealing to Milosevic, who has broken with the Bosnian Serbs over their rejection of an international peace plan, to use his influence to win the freedom of the detained U.N. peacekeepers.

Milosevic appeared however to be using his leverage in the hostage crisis not only to crack the whip over Karadzic but to secure further concessions from the West before agreeing to recognise Bosnia's borders, diplomats said.

U.S. envoy Robert Frasure, representing the major powers' Contact Group, has been trying to clinch a deal that would ease sanctions on rump Yugoslavia in return for Belgrade recognising Bosnia.

Diplomats said that although Frasure remained in Belgrade, talks with Milosevic were on hold. Washington has also been lobbying Milosevic to obtain information from the Bosnian Serbs on the fate of a U.S. F-16 pilot shot down in Bosnia last week.

Bosnian Serb retaliation for NATO air strikes last month has effectively paralysed the U.N. mission, cutting off aid deliveries to Sarajevo and other government-held enclaves surrounded by Serb forces.

Western countries have called for reinforcing the U.N. mission in Bosnia since the hostage crisis began. But Russia has voiced its opposition to a 10,000-strong European rapid reacton force designed to protect vulnerable peacekeepers.