Condoleezza Rice, the US secretary of state and Boris Tadic, the Bosnian president, signed the Status of Forces Agreement on Thrusday.

This will allow the US military to train Serbian forces and conduct exchange programs.

US officials played down the pact, suggesting initial cooperation was likely to focus on training programs that addressed issues like civilian relations with the military.

"It's not talking about combat techniques or that sort of thing, it's really civil-military relations, how does that work in a democracy," Sean McCormack, the US state department spokesman, told reporters on Thursday.

He and other US officials said they saw the agreement as a first step towards putting Serbia on the road towards joining the Nato.

Tadic said he hoped the pact would lead to closer economic ties with the US, which in June suspended $7 million in aid to Serbia because of its failure to arrest and extradite Bosnian Serb war crimes fugitive Ratko Mladic.

"Without cooperation in the defence sector, we are not going to have cooperation in the economy," Tadic said as he and Rice signed the agreement at the State Department.

The aid cutoff was more a political gesture of Washington's annoyance at Belgrade than a financial penalty because the United States continues to provide substantial financial assistance to Serbia.

Mladic is charged alongside former Bosnian Serb leader Radovan Karadzic with genocide for their alleged role in the 1995 Srebrenica massacre of 8,000 Muslim men and boys and the 1992-1995 siege of Sarajevo, which killed about 10,000 civilians.

UN chief prosecutor Carla del Ponte says Mladic is hiding in Serbia with the help of army and intelligence hard-liners.