Admiral Smith complimented all three parties to the peace agreement for their full cooperation so far.
They have been indicted on war crimes charges, and Admiral Smith said he was ordered not to deal with them.
Admiral Smith, whose tour is up this summer, has been slow to respond in Bosnia.
"Our intention was to try to limit collateral damage," Admiral Smith said.
Admiral Smith added that the allies would have destroyed the Serbs' gasoline and oil supplies.
"He believes that's the best way to send the signals," Admiral Smith said.
But colleagues say Admiral Smith is well prepared for his post.
"But I'm not going to suggest those other two enclaves are free of risk," Admiral Smith said.
"What we can't stop are the fires," Admiral Smith said.
Admiral Smith works hard to project the image of an arbitrator who is tough but fair.