Even by the strange standards of Balkan politics, the events of the last week in Yugoslavia must be ranked as truly surreal. Both President Slobodan Milosevic and the chief opposition candidate, Mr Vojislav Kostunica, claimed victory immediately after the ballot boxes closed. The European Union and individual Western governments also acted as though they were in full possession of the results. Indeed, Britain's Foreign Minister, Mr Robin Cook, the first Western leader to speak, within hours of the polls closing in Yugoslavia, said confidently that Mr Kostunica had won "57 per cent of the vote".

There was one little snag, however: nobody inside Yugoslavia was in any real hurry to actually count the votes. And for a simple reason: as always in that country, power changes hands by force, rather than through the ballot box. And, as so often in the past, it does not matter how people vote - it matters who does the counting.

The conflicting predictions of victory have little to do with the elections as such; they are part of a wider battle for power which is now being decided on the streets of Belgrade.

Yet, despite all the confusion, a few facts are already clear. President Milosevic is Yugoslavia's biggest loser; he may continue to cling to power, but his options are increasingly circumscribed. The West may be winning the long-term battle for democracy in the region. But even these glimmers of hope only reveal further dilemmas.

In calling for early presidential elections, Mr Milosevic characteristically pursued three aims at the same time. First, he wanted to gain a new legitimacy inside Yugoslavia, a year after his military defeat in Kosovo. Second, he wanted to tell the West that, regardless of the economic sanctions and NATO's military presence around his country's borders, he is likely to remain in power for ever. Finally, he planned to use his re-election as a justification for moving to crush the growing independence movement in Montenegro, still a component but restless part of Yugoslavia.

Almost regardless of what final results Mr Milosevic manufactures in the second round of these farcical elections - now scheduled for the coming weekend - it is obvious that he has failed on all three counts. Nobody in Yugoslavia will believe his electoral figures and millions of his citizens now regard him as little more than a fraud and a liar. For over a decade, he was an elected dictator; now he is simply a dictator.

Nor are Western governments impressed by his tricks. Up to last week Mr Milosevic was treated as an accused war criminal who was nevertheless president of a country. Now he can be regarded as just an international criminal who is not even entitled to be treated with the courtesies usually accorded to a head of state.

And Montenegro can afford to ignore the entire election process. This small republic can now plausibly demand further support from the West, and can refuse to negotiate with the federal government of Mr Milosevic in Belgrade. Faced with demonstrations nearer home, Mr Milosevic is hardly in a position to open up a new dispute with Montenegro.

The West has invested a great deal in trying to achieve through the ballot box what NATO's bombing campaign failed to accomplish last year. The US alone allocated over $10 million to this effort in 1999, a figure which jumped to $25 million this year and will rise again to over $40 million in 2001. The EU has spent an equal amount in similar activities. Most of the money has gone to equipping opposition movements inside Yugoslavia with the resources to fight the electoral campaign.

Behind the scenes, Western governments have been instrumental in trying to forge unity between otherwise disparate and fractious opposition movements. Theoretically, the exercise has succeeded: the people of Yugoslavia have proved that they remain part of Europe and that a civil society can be re-created even in that country, regardless of a decade of war, economic misery and dictatorship.

But it is clearly too early to proclaim victory. Having presided over 10 years of warfare and murder, Mr Milosevic knows that he cannot retire to a villa in the countryside to write his memoirs. He will do everything possible to cling to power, and earn protection for himself, his family and his close economic mafia.

Originally, he planned to proclaim victory immediately after the first round of the elections. The strong performance of the opposition candidate made this impossible, and his strategy now is to force another round of voting on October 8th, using the intervening period to divide the opposition. He will then proclaim victory, perhaps by a small majority, in order to make his claim of a "democratic" election more plausible.

Mr Milosevic's problem is that the opposition refuses to play this game. One of the main reasons why the Yugoslav government delayed the release of the election "results" was that it was not sure how big the lie about the final results should be. It depended on whether the opposition could be persuaded to accept a second round of voting.

The main reason why Western leaders rushed to congratulate the opposition on its victory even before the results were made public was precisely in order to avoid any such possibility.

It can be argued that the opposition should accept the challenge and go for a second round of elections. In the absence of an opposition candidate, the Yugoslav leader could be declared a winner by default, or could cancel the entire electoral process. In practice, however, the opposition has no choice but to boycott the second round of the elections.

ONCE Western governments proclaimed that Mr Milosevic had been defeated on the first ballot, the opposition could not afford to discredit its main international supporters by accepting a second electoral test. Furthermore, it is now clear that Mr Milosevic will stop at nothing in his quest to declare himself re-elected. Falsifying electoral results will be easier in the second round, when the gap in the number of votes between the candidates is always smaller.

Having embarked on a policy of denying Mr Milosevic's legitimacy, the opposition has no other recourse but confrontation.

In reality, both opposition and government know that the matter will be settled by demonstrations on the street. What neither side knows is how the military and the security services, the real mainstays of the Milosevic regime, will react.

There is little doubt that the real battle now taking place is over the loyalty of these services. If Mr Milosevic can be assured of their support, he will ignore the opposition and crush the demonstrations. If, however, Mr Kostunica can gain the support of the security services and the military, perhaps by promising them immunity from international criminal tribunals, then Mr Milosevic will be finished.

The opposition has managed to organise some huge rallies in Belgrade. It will need to apply this pressure for many more days, and the demonstrations will have to spread to other cities in Yugoslavia, before Mr Milosevic is under real threat. This week will be decisive.

The general strike which the opposition has called must effectively shut down the entire country. If it is sporadic and intermittent, the regime will be able to survive, at least long enough to proclaim Mr Milosevic leader for another term.

But, even if he survives, Mr Milosevic will be a broken man. Members of his own party are deserting him; the all-important Orthodox Church now supports the opposition, and even the clique of mafia bosses which surrounds him is showing signs of cracking. One way or another, it is hard to escape the conclusion that change will come, but that it will involve violence. And it will probably resemble events in neighbouring Romania in December 1989: a mixture of popular uprising and military coup wrapped into one.

Once this happens, the West will discover that many of those in power in Belgrade may be less awful than Mr Milosevic, but hardly the democrats they expect. And Mr Milosevic, together with his wife, may well experience the fate meted out to the Ceausescus in Romania a decade ago.

It would be a fitting end for the man who dashed the hopes of an entire generation in the Balkans.

Jonathan Eyal is Director of Studies at the Royal United Services Institute in London