AMERICAN negotiators have offered the family and bodyguards of General Ratko Mladic up to $5m (£3m) in “compensation” if the Bosnian Serb commander turns himself in after 10 years on the run.

He would be taken to the Hague and tried by the International Criminal Tribunal for the Former Yugoslavia for allegedly ordering the murder of 8,000 men and boys at Srebrenica in 1995.

Serb military intelligence sources said Mladic spent at least a day in Belgrade last week in secret negotiations with go-betweens representing the Serbian and US governments, but the talks broke down when he demanded “tens of millions of euros”.

Mladic was said to be in an “exceptionally difficult psychological state”.

News of the negotiations was greeted with outrage in Bosnia, where survivors of Mladic’s reign of terror claimed the portly general was effectively being rewarded for his crimes.

The Serbian government denied persistent reports last week that he had already been arrested. But the sources are confident that Mladic will be handed over “soon”.

About 10,000 supporters rallied in the centre of Belgrade on Friday protesting against any attempt to extradite Mladic. But the Serbian government is under pressure to co-operate with the international community and assist in bringing Mladic to justice in return for increased aid.

Vojislav Kostunica, the prime minister, has been told that his country’s “wiggle room” in talks on the future of Kosovo will be enhanced once the general is delivered.

America considers Serbia’s stability crucial for the region’s future and is anxious that its accession talks with the European Union move forwards over the coming months. It also wants the Hague tribunal, which costs more than £70m a year, to wrap up its outstanding cases as soon as possible.

American negotiators are wary of a possible backlash if they are seen to be buying Mladic’s arrest.

The intelligence sources said Mladic appeared to be holed up again this weekend in a hideout in the Serbian countryside, possibly on Cer mountain, 75 miles west of the capital, where the army has a missile base and a network of underground bunkers. Other sources claimed he was effectively under house arrest in a villa on the outskirts of Belgrade.

The sources said talks had broken down in part because Mladic tried to lay down conditions for his handover, insisting he should not be seen publicly in handcuffs and should be flown directly from Serbia to the Netherlands. Kostunica is said to be adamant that Mladic must be transferred from Bosnia.

Mladic faces charges of genocide for his role as commander of the Bosnian Serb army during the Srebrenica massacre, the worst mass killing in Europe since the second world war.

Remzija Hasanovic, one of the “mothers of Srebrenica” who lost their loved ones, said: “It is all coming too late for me — my life is over. Nothing can compensate for my loss.”

Like others, she was furious at the idea of Mladic’s family gaining financially from his arrest. “How dare they contemplate such a thing?” she said.

Hasanovic had returned to Srebrenica from Lausanne, Switzerland, where she now lives, to mourn her two sons. The youngest, Remzudin, 13, disappeared in July 1995 when he fled with his grandfather after Bosnian Serb forces overran the town, which had been declared a safe haven by the UN.

The grandfather’s body was later found in a mass grave. He had been shot. Remzudin simply disappeared.

Then, on February 13, Hasanovic received a letter from the International Commission for Missing Persons in Tuzla, north of Srebrenica, where thousands of bodybags and sacks of personal remains gathered from grave sites across Bosnia are stacked from floor to ceiling for identification.

DNA analysis of a bone had identified it as belonging to Remzudin. “We always expected it, but when the news came it was devastating,” Hasanovic said.

Later the same day her older son, Nesib, 27, who had escaped from Srebrenica through the woods with her husband, went quietly to his room and hanged himself.

On the other side of Bosnia, Serbs in the little snowbound village of Bozinovici, where Mladic was born in March, 1943, regard him as a hero. “He was just a good soldier doing his duty,” said Mladic’s cousin, Duskol.

“He was always correct with the Muslim civilians.

“He was an honest man, too. Even I drive a car better than his was.”

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