"We are nearing an important point in the negotiations...we might have a breakthrough in the coming weeks...We expect a partial easing of the embargo," Zagreb-based Turot told Reuters during a two-day visit in Sofia.

He said Bulgaria's losses from the United Nations embargo on neighbouring ex-Yugoslavia totalled about $1.5 billion, adding that Sofia would be compensated indirectly by EU aid programmes.

"I am sure there are some violations but we have to keep them at a minimal level. An embargo cannot be 100 percent effective," said Turot, commenting on petty sanctions busting along Bulgaria's border with Serbia.

International mediators are currently trying to negotiate a formula that would persuade Serbia president Slobodan Milosevic to recognise Bosnia in return for a partial lifting of sanctions.

A possible package would lift the embargo on key commodities but still limit fuel supplies and access to international financial credits, diplomats said.

Rump Yugoslavia's losses from the embargo, imposed in May 1992 for Belgrade's backing of warring Serbs in Croatia and Bosnia, amount to billions of dollars, officials say.

"One of the best pieces of evidence of the effectiveness of sanctions is that Yugoslavia is asking for this embargo to be lifted...If it had no effect they would not be so eager to have it lifted," said Turot.