American and Russian delegations were last night labouring, in two palaces on opposite sides of Europe, to cobble together a Kosovo peace deal in time to beat tomorrow's NATO air-strike deadline.

While US Secretary of State Madeleine Albright met ethnic Albanians at France's Rambouillet chateau, Russian military officers were in Yugoslavia's presidential palace, Beli Dvor, with President Slobodan Milosevic.

The details of the Russian meetings are secret, but diplomats say they could hold the key to peace, by "customising" a form of peacekeeping force for the war-torn province that is acceptable to the Yugoslav leader.

"It was always envisaged there would be Russians," said one Western diplomat. "One option, if he [Mr Milosevic] wants to take it, is to persuade him to take it under another name. It would still be NATO - in all but name."

Sending Russian forces into Kosovo alongside those of NATO would be more acceptable to Mr Milosevic, who could present it as a guarantee by fellow Slavs that Kosovo's Serb minority would be protected.

Kosovo's peace talks are stalled because of this single issue: Mr Milosevic refuses to consider a NATO force to police an agreement. NATO says that without such a force, there are no guarantees that Yugoslavia will stick to any deal.

"The Albanians are working very hard, I think moving towards a yes," said Ms Albright last night. "The Serbs, on the other hand, are refusing to engage on a basic part of the agreement, which is the military aspect of it."

Ms Albright said pressure cannot be brought to bear to get Yugoslavia to sign a deal unless the ethnic Albanians had already done so. But the ethnic Albanians, an alliance of the rebel Kosovo Liberation Army and civilian leaders, are delaying agreement to the proposed peace deal because it would give them only autonomy, rather than the full independence they desire. Talks were eased by the subsidence of fighting that flared in the province on Saturday, causing hundreds of ethnic Albanians to flee the village of Studencani after Serb forces opened fire on it. However reports yesterday said three ethnic Albanians had been shot dead in the village of Orohovac.

While the Kosovo problem is a simple one - the deployment of peacekeepers - the solution has attained a mind-bending complexity. NATO is unwilling to commit itself to air strikes against the Serbs, despite hawkish talk from the Americans, until it sees whether all the diplomatic options have been exhausted. Yugoslavia, sensing NATO's indecision, is meanwhile unwilling to give a definite reply on what kind of peace deal will be acceptable.

Complicating things still further, the Russians say that any air strikes will mean an end to their co-operation on defence with NATO.

"What I think people need to understand is that this is a very complicated and very serious process, " said Ms Albright. "Some really earth-shaking decisions are being made: these are really decisions between war and peace."

Not surprisingly, confusion dominates the thoughts of ordinary Serbs and Albanians.

In Belgrade, Serbs remain stoic. They worried about NATO bombing back in October, only to see a diplomatic deal on Kosovo forestall it. There has been no sign of the stocking-up of foodstuffs and candles that took place then.

"What do you think, will they bomb us?" asks a waiter at the Hyatt hotel, home to the Russian military delegation. "We don 't care really, we have had 10 years of wars here."

Kosovo's Albanians are anxious. Without air strikes, they fear Yugoslavia will never accept NATO peacekeepers, leaving them free to go back on any peace deal as they did last October. But air strikes would bring their own problems, with fears that Serb police and paramilitary groups would wreak revenge on the ethnic Albanian population.

"Albanians are really afraid of air strikes. A lot of people are frightened to go out," said Bartha, a 20-year-old student in Kosovo's capital, Pristina. "Those armed groups are really dangerous."

Recently the army and police forces have been augmented by civilian militias, now patrolling the streets of many towns which echo at night to the sounds of machine guns fired in the air.

Belgrade's state-controlled media were yesterday triumphant, presenting the extension of Saturday 's deadline for three more days as a victory for Mr Milosevic.

Newspapers gleefully reported the indecision in the West's camp. "We must not have NATO, even if it means bombing," said one Belgrade man interviewed on television.

IF there is still no agreement by the new deadline of 3 p.m. Paris time tomorrow, NATO is unlikely to unleash its bombers. Rather, there is likely to be a final flurry of diplomatic activity as the United States demands the alliance follow the American lead, or see the alliance split.

NATO generals are meanwhile wresting with the parameters of launching air strikes in an operation dominated as much by opinion polls as military success.

The air strikes need to be massive, simply to ensure that Yugoslavia's air defence system is destroyed in its entirety and to prevent casualties to NATO pilots.

The strikes, led by a wave of Cruise missiles fired from US navy ships and huge B-52 bombers that began arriving in Europe yesterday, would hit eight key communication sites, together with 50 to 60 antiaircraft missile batteries, plus fighter airfields and radar sites.

Another option being explored is to unfreeze the current block on loans to Yugoslavia from the IMF. The country is now on the brink of bankruptcy. Next month it must pay China and Russia $130 million for oil and gas used through the winter - a sum equivalent to its entire known foreign reserves. A loan to Mr Milosevic might be a powerful incentive to sign a Kosovo deal. Diplomats say no formal talks on this issue have started.

The only thing that seems clear from the weekend confusion is the failure of Europe to solve Kosovo on its own. Rambouillet was convened to kick-start what its co-hosts, Britain and France, hoped would be a common European foreign and security policy.

But after two weeks of fruitless haggling, the silky mandarins of Britain's Foreign and Commonwealth Office and France's Quai d'Orsay have made way for the blunter, but perhaps more effective, officials from the United States and Russia.