(Adds Macedonian govt reaction, detail)

By Alexandra Hudson

THE HAGUE, July 10 (Reuters) - The U.N. war crimes tribunal on Thursday cleared former Macedonian Interior Minister Ljube Boskovski of responsibility for the murder of seven ethnic Albanians during a rebel insurgency in the country in 2001.

However, the court convicted his co-accused, police officer Johan Tarculovski, of murder and destruction for leading a police unit that struck an Albanian village in an apparent revenge attack, and sentenced him to 12 years in prison.

Both men had pleaded not guilty to all charges.

News of Boskovski's release was met with loud applause from the public gallery, while Tarculovski, 33, showed no emotion as the verdict was read out.

Boskovski, 47, was cleared of responsibility for murder, wanton destruction and cruel treatment relating to a police attack on civilians in the village of Ljuboten north of the capital Skopje.

The aim of the attack seemed little more than a retaliation against ethnic Albanians for the actions of rebels believed to have killed Macedonian soldiers, the court ruled.

Prosecutors tried to argue Boskovski controlled the police and was responsible for failing to punish their actions.

But Judge Kevin Parker said: "It has not been established that Ljube Boskovski failed to take the necessary and reasonable measures for the punishment of the police".

Boskovski was one of the toughest members of the nationalist government of Orthodox Christian Macedonia during the six-month insurgency by guerrillas from its Muslim Albanian minority.

The Macedonian government in a statement welcomed the decision to acquit Boskovski but added: "At the same time we honestly regret the Johan Tarculovski verdict."

"We hope that in the appeals process Tarculovski will have the chance to state his case and present the facts."

BURNED HOUSES

According to the indictment during the attack on Ljuboten, police set fire to houses with hand grenades, subjected Albanian villagers to brutal beatings with rifle butts or pieces of burning wood, and carved a large cross on the back of one man.

"Tarculovski personally led the police operation and was with the police as they moved through the village," Judge Parker said, finding him guilty of the murders of three men and cruel treatment of others.

Although Tarculovski himself was acting under orders from above, the evidence does not allow the person who gave the orders to be identified, the judge added.

Boskovski surrendered to the court in March 2005, while Tarculovski was handed over by Macedonia.

The case is the only one at The Hague tribunal concerning Macedonia, which voted for independence from Yugoslavia in 1991. It broke away peacefully but erupted in ethnic violence in 2001.

During the conflict ethnic Albanian rebels seized control of villages in the north of the country, igniting a conflict that took Macedonia to the brink of civil war.

Mediation by NATO and the European Union eventually stopped the fighting, leading to the 2001 Ohrid peace accord which gave greater local autonomy to the 25 percent Albanian minority. (additional reporting by Kole Casule in Skopje; Editing by Catherine Hornby and Keith Weir)

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