A row over car number plates in Kosovo is threatening to erupt into open unrest and one of the most serious regional crises in years as tensions between Serbia and its breakaway former province continue to mount.

The EU, US and Nato have expressed alarm after more than eight hours of emergency talks in Brussels on Monday failed to resolve the dispute over Kosovo’s plans to fine ethnic Serb residents who refuse to surrender their Belgrade-issued plates.

Hours before a 7am deadline when police were to start issuing the €150 (£130) fines, the Kosovan prime minister, Albin Kurti, agreed early on Tuesday to hold off for another 48 hours, saying he was “happy to work with the US and EU” to find a solution.

The EU’s foreign policy chief, Josep Borrell, said both sides had shown a “complete lack of respect for their international obligations” and would bear “full responsibility for any escalation of violence that might occur on the ground in the following days”.

The US state department spokesperson, Ned Price, expressed Washington’s concern, calling on both sides to make “concessions to ensure that we do not jeopardise decades of hard-won peace in an already fragile region”.

Jens Stoltenberg, the secretary general of Nato – which has 3,700 peacekeeping troops still deployed in Kosovo – said he was “disappointed it was not possible to solve the licence plate dispute” and urged “pragmatic solutions” to avoid any escalation.

Tensions between Belgrade and Pristina have flared in recent weeks as the number plate issue has become the focus of a long-running sovereignty dispute that dates back to Kosovo’s formal declaration of independence in 2008.

While about 100 countries have recognised Kosovo, whose 1.8 million inhabitants are majority Albanian, and it has been granted membership of several international institutions, Serbia and its key allies, Russia and China, refuse to do so.

Serbia’s constitution defines Kosovo as part of its national territory and many of the estimated 50,000 Serbs in the north of the former province remain fiercely loyal to Belgrade, which provides them with significant financial and political support.

Locals in a dozen or so Serb enclaves reject Pristina’s authority, fly the Serbian flag, use its currency – and an estimated 10,000 are steadfastly refusing to swap pre-independence Serbian number plates for new Kosovo Republic plates.

Pristina began implementing its multi-step exchange plan – involving warnings, fines and finally road bans – on 1 November, sparking heated resistance and the mass resignation of Serb police officers, judges, prosecutors and other officials in Kosovo.

Serbia’s president, Aleksandar Vučić, whom Kosovo accuses of deliberately fomenting the tensions, has warned of “hell on the ground” if Kosovo police try to enforce fines or bans and warned the two sides are “on the verge of conflict”.

Borrell said the EU, which also has a 130-member mission on the ground in Kosovo, had proposed a compromise that might have avoided escalation, but while Vučić accepted it, Kurti, who wants broader negotiations on normalising relations, did not.

The EU’s foreign policy chief said the situation sent “a very negative political signal” given that both sides have made it an objective to the EU.

He urged Pristina to suspend all further steps related to re-registering vehicles in northern Kosovo, and Serbia to stop issuing new number plates. Both sides needed “space and time to look for a sustainable solution”, he said.

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