THE sense of shock is palpable. From the president down to homemakers, stunned Serbs are struggling to rationalize their worst military defeat since World War II and come to grips with a disturbing new feeling -- vulnerability.
''This has been a great lesson for us,'' says Milan Martic, president of the self-declared ''Republic of Serbian Krajina'' in his first interview with Western journalists since the Croatian Army easily seized a 16-mile-wide Serb enclave two weeks ago. ''We have learned that we can rely only on our own forces.''
The Croats' stunning 72-hour blitzkrieg-like victory in Croatia's Western Slavonia, in which they captured more than 1,700 Serb troops, may signify a greater strategic shift in the Balkan war.
After the former Yugoslavia exploded in 1991, powerful Serbia was the mentor of ethnic Serbs in Croatia and Bosnia. And rebel Serb leaders in those regions have long assumed that military support from their ''homeland'' would come -- if they are severely threatened by the Croatian or Bosnian governments.
No more 'big brother'?
But Serbia failed to come to the military rescue of Croatian Serbs during their recent rout and offered only lukewarm political support. This makes it unclear whether Serbian President Slobodan Milosevic, eager to have punishing UN sanctions lifted, is willing to abandon rebel Serb regimes.
Serbia's response to the rebel Serbs in Croatia ''was very well-noted here,'' says a Western observer. ''They discovered that big brother is not the friend they thought he was.''
Fears of an all-out war in Croatia -- along with the steadily deteriorating situation in Bosnia -- led United Nations Secretary-General Boutros-Boutros Ghali to order a ''fundamental review'' of the UN mission here on Friday. A pullout, assisted by as many as 20,000 United States troops, is possible, according to UN officials.
Western observers say how the Krajina Serbs respond to the Croat victory may show whether a UN pullout is coming to Europe's worst conflict in 50 years. If the Croatian Serbs fail to now launch a counteroffensive, it may indicate that the military balance is shifting against the apparently isolated rebel Serbs in Bosnia and Croatia.
''Morale is at rock bottom. It couldn't be any worse. You don't have to be a genius to figure out that a military victory will help them,'' says a Western official in Knin, the rebel Serbs' self-declared capital in Croatia.
''It makes sense politically, but do they have the resources? Do they have the political support? Do they have the will?'' the official asks.
The failure of Serbia, whose forces helped rebel Serbs seize control of nearly one-third of Croatia in 1991, to militarily or politically respond to the Croat attack has been particularly unsettling for Serbs here, observers say.
Mr. Milosevic condemned Krajina Serb rocket attacks on the Croatian capital of Zagreb that were made in response to the Croat offensive.
And the Serbian media, which is tightly controlled by Milosevic, blamed Krajina Serbs for the ''politically, militarily, and nationally scandalous'' defeat and predicted Croatia would continue taking bits of Serb territory.
Another disturbing development for Serbs here was the failure of a much-publicized new military alliance between rebel Serbs in Bosnia and Croatia.
''The Krajina Serb Army [and] Bosnian Serb Army military alliance was not functioning properly at the time of the attack,'' ''Krajina'' President Martic says. ''There is a simple reason.... The Muslims have attacked on the other side.''
Martic was referring to what could be a death knell of heavily armed Serb forces here -- a severe manpower shortage. With front lines that extend for over 1,500 miles in Bosnia and Croatia, rebel Serbs may not be able to muster enough men to hold their ground, let alone mount a counter-offensive, against re-armed Croatian and Bosnian government forces that generally outnumber them two to one.
But optimism among euphoric Croats that the recent victory will lead Serbs to accept a negotiated reintegration into Croatia appears premature.
Martic, seated in a musty office filled with worn furniture and paintings of Serbian nationalist leaders, seemed confident. Serbs in Knin were clearly disturbed by the loss of Western Slavonia, but no sense of panic has set in here.
Outdoor cafes, surrounded by graffiti-covered walls praising ''Serbian power'' and punk-rock music, are full. One even offers a ''banana knin'' -- the local equivalent of a banana split. Local grocery stores appear to be better stocked with food than they were a few months ago, including some with food smuggled from neighboring Croatia.
Most important, militarily crucial fuel does not appear to be in short supply in Knin. Western observers recently in Banja Luka -- the largest Serb-held city in neighboring Bosnia -- also report no fuel shortages there and no sense of panic following recent Bosnian government victories.
UN military officials also warn that the area taken so easily by Croatian forces -- Western Slavonia -- is the most vulnerable of four Serb enclaves.
''Don't underestimate the fighting power of the Krajina, says a UN military official. ''There would be a lot of dead people if the Croats were to launch an [all-out] assault.''
Martic vows that no negotiations will be held with the Croatian government until its forces have withdrawn from the recently seized territory. He also says that no international observers, as required by a new US-backed mandate for UN peacekeepers here, will be allowed to deploy along the border between rebel Serb-held parts of Bosnia and Croatia.
Martic, a former policeman who quickly rose to power as an ultranationalist, lashed out at the West and the UN for tacitly accepting the Croatian use of force. He blasted US Ambassador to Croatia Peter Galbraith, who until now has played a crucial role in brokering Croat-Serb negotiations, for condemning the Serb rocket attacks and praising the Croatian forces for showing restraint.
''He has now become the adviser and the new spokesman for [Croatian President Franjo] Tudjman,'' Martic says. ''He will never be able to come to Knin again ... [unless] he publicly apologizes to the Serbian people.''
Murky Serb politics
Martic refused to discuss a reportedly widening rift between himself and Borislav Mikelic, the rebel Krajina Serb state's ''prime minister'' and an ally of Serbian President Milosevic, who is believed to favor a negotiated reintegration with Croatia.
Western officials hope the defeat would weaken Martic, but the murky world of politics in Knin appears to be getting even less clear. Krajina ''foreign minister,'' Milan Babic, also believed to be a moderate, has called for a no-confidence vote in the Krajina Serb parliament against moderate Prime Minister Mikelic.
''You've got a worst case scenario theory where this has hardened their position and they're planning a counterattack, and then you've got the theory that this is going to lead them to cut a deal while they can,'' says one UN official. ''I have no idea what's going to happen.''