A decision last night by Belgrade to suspend an order to expel Mr William Walker, the head of the Organisation for Security and Co-operation in Europe's mission in Kosovo, was a "tactical" move - a "necessary but insufficient step" towards resolving the current crisis in Kosovo, the US State Department said.
An official statement said in Belgrade that the Yugoslav government had "frozen" the expulsion of Mr Walker.
It said the decision to expel Mr Walker "remains valid but will be frozen for as long as the consequences of his behaviour have not totally become clear," the statement published by Tanjug news agency said.
Mr Walker had been ordered to leave the country last evening in retaliation for his allegations that Serbian police had massacred 45 ethnic Albanians in Racak village, southern Kosovo, on January 15th.
The statement said the government decision followed talks between the Yugoslav Foreign Minister, Mr Zivadin Jovanovic, and the current chairman of the OSCE, the Norwegian Foreign Minister, Mr Knut Vollebaek.
It added that Belgrade had taken into account the views of President Boris Yeltsin and the Russian Prime Minister, Mr Yevgeny Primakov, contained in a message to President Slobodan Milosevic.
The government had also considered an appeal from the United Nations Secretary General, Mr Kofi Annan, who had spoken to Mr Jovanovic yesterday, the statement said.
In Washington, a White House official said Mr Vollebaek had informed the United States that Mr Walker would be able to stay and carry on with his duties. But the same source said the US would reject any attempt by Belgrade to attach conditions to its decision.
Earlier official statements issued said Yugoslavia and the OSCE had agreed to improve their cooperation after "extended and substantial talks" between Mr Vollebaek and Mr Milosevic which "focused on issues concerning the work of the OSCE mission in Kosovo".
President Clinton's special representative for Kosovo implementation, said yesterday after four hours of talks with Mr Milosevic that the President made no concessions on on main demands to avoid threatened NATO military action. "He remains inflexible on all key compliance issues," Mr James Pardew said.
In Washington, the White House spokesman, Mr Joe Lockhart, said during the day: "It is important for the stability of the region that the international community insist on Serb compliance, through the use of force if necessary." The British Prime Minister, Mr Blair, and President Clinton discussed the growing crisis and agreed that more had to be done to find a political solution, officials said in London.
NATO aircraft and an aircraft carrier are in the region in case of air strikes being considered against Yugoslavia because of breaches of its October ceasefire agreement.
Mr Walker, head of an 800-strong group of verifiers, has refused to back down on his statement that Yugoslav forces were responsible for Racak, where the victims were found strewn across a hillside, most having been shot dead at close range.
Meanwhile, fighting continued in the southern Yugoslav province for a sixth straight day with Yugoslav forces storming a house that contained guerrillas from the ethnic Albanian Kosovo Liberation Army in Mitrovica. Two rebels died in the battle but the Serb-led Yugoslav army said another 15 escaped and were being hunted.
The KLA yesterday admitted that its men shot and wounded two of Mr Walker's verifiers last Friday, telling the OSCE that it was a "misunderstanding".
But the OSCE in a statement said "attacking an internationally protected person is a serious crime. The KVM expects to be informed of the names of those responsible."