IF nothing else, two months of fighting in Yugoslavia has provided a useful lesson for the Soviet Union on how not to deal with explosive ethnic tensions."Yugoslavia is a nightmare the Soviet Union is trying to avoid," says George Zarycky, an East European specialist at Freedom House in New York. "The Soviets are definitely looking at Yugoslavia and saying, 'We don't want this. Scenes of bloody conflict between Serbs and Croats in Yugoslavia undoubtedly influenced a decision by 10 Soviet republics, announced Sept. 2, to reshape the Soviet Union into a loose confederation. A move to forestall political collapse, the plan has momentarily defused the threat of conflict over disputed borders and the status of ethnic minorities. Even as the Soviet republics sidestep divisive issues, Yugoslavia itself is taking a tentative step back from the brink of full-scale civil war. Leaders of the Yugoslav republics of Serbia and Croatia agreed on Sept. 2 to accept a European Community-sponsored cease-fire that could open the door to an international peace conference and eventually to binding arbitration. If the agreement holds, it could end a costly civil conflict that was triggered when the northern republics of Croatia and Slovenia declared their independence from the six-nation Yugoslav federation on June 25. According to news reports from Croatia Sept. 2, fighting has already shattered the day-old truce, leaving many diplomatic observers pessimistic about the chances for a long-term solution. In a patchwork federation that includes numerous acrimonious ethnic minorities, relations between Serbs and Croats have been among the most bitter, culminating in the slaughter of thousands on each side during World War II. Beyond historical memories, peace efforts will be taxed by the irreconcilable objectives of leaders of the two republics, who face far stronger pressures from local nationalists than from would-be international peacemakers. Croatia is seeking recognition as an independent state and in sists that its 600,000-strong Serbian minority be part of it. Serbia says it would be willing to accept disunion but only if Serbs from Croatia and the other Yugoslav republics are incorporated into a "greater Serbia." The economic costs of the conflict between Serbia and Croatia have been enormous. Fighting has brought business, trade, and tourism to a standstill and sent unemployment soaring. War has also generated a huge refugee population as 75,000 Croatian Serbs have streamed into Serbia and Hungary to escape the fighting. Under the agreement signed Sept. 2, representatives of Serbia, Croatia, and the Serbian-dominated federal army will monitor the cease-fire, along with 300 civilian observers. The immediate crisis began when efforts by Croatia and Slovenia to secede from the federation shattered the facade of Yugoslav unity, which was preserved through most of the postwar era by communist leader Josip Broz Tito. After skirmishes that bloodied Yugoslav regulars, Slovenia gained a kind of de facto autonomy. The main battleground has been Croatia, where a well-armed Serbian minority, backed by the Serbian-dominated federal army, has fought to seize control of more than a quarter of Croatian lands. Although more successful on the battlefield, where Yugoslav tanks, artillery, and planes have predominated over a poorly-equipped Croatian militia, Serbia has fared badly in the arena of diplomacy. Croatia's leaders have skillfully played on growing international opposition to the force of Serbian arms to gain sympathy, leaving Serbia increasingly isolated. Analysts say the collapse of current peace efforts would intensify pressure to dispatch an international military force to stop Serbia from gobbling up all the Serbian enclaves in Yugoslavia. "Unless you draw a line in the sand, threats will be hollow," says the Heritage Foundation's Douglas Seay. "Without this, Serbia will take what it wants militarily, present the world with a fait accompli, and the world will grumble and accept it." Although dismayed by the violence in Yugoslavia, the international community has been slow to intervene. The US has played a largely passive role in the crisis, while UN peacekeeping has been thwarted by Moscow's opposition to the principle of using outside force to settle the very kind of internal ethnic disputes now rampant in the disintegrating Soviet Union. Until recently, the European Community (EC) has been immobilized by its own divisions. Germany, Austria, and Italy have been eager to recognize the breakaway republics. But France and Spain, in particular, have worried that recognition could energize terror-prone independence movements in French Corsica and Spain's Basque province. But, angered by the partisan role played by federal troops in Croatia, the EC last week closed ranks, coupling its peace plan with threats to impose economic sanctions. The failure of peace efforts could produce a consensus to recognize Croatia and Slovenia and sanction the collapse of the federation, sources close to the EC speculate.