Tensions simmer in Timor capital

DILI - Australian troops fanned out across sprawling neighbourhoods of East Timor's capital today but the city was largely peaceful.

Associated Press reported rebels as saying they were ready for peace talks with to President Xanana Gusmao to ease the violence.

Major Agosto De Araujo, a leader of the faction of dismissed soldiers said his forces based in hills near the city had no intention of assaulting the capital.

"We are ready to be called back to the negotiating table at any time," he told AP.

The government of the world's newest independent state, which last week appealed for foreign troops to quell a rebellion by almost half of its army, was due to meet for crisis talks amid constant rumours of major differences between the president and prime minister Mari Alkatiri.

But with almost the entire 2,500-strong contingent of peacekeepers from Australia, Malaysia, New Zealand and Portugal now on the ground, residents were simply hoping for a sense of security so that they can return to their homes.

NZ Prime Minister Helen Clark today said the scale of recent violence in Dili meant New Zealand and Australian troops would probably have to stay on until next year at least, when fresh elections are scheduled to be held.

The past three days have seen Dili's ramshackle suburbs turn into a battleground for gangs of youths loosely allied to factions of the police or army.

Lieutenant Commander Barbara Cassin told Newstalk ZB today not much has changed since the weekend, with tensions still at boiling point.

She said there were still groups milling around on the streets, but the youth gangs do not seem to be out in force as they have been.

Lieutenant Commander Cassin said the New Zealand embassy had been secured, and the ambassador and other personnel are being looked after.

The Red Cross says more than 40,000 have been displaced by the fighting, and food and fuel supplies are running out.

Some petrol stations opened for business for the first time in nearly a week on today, but prices went up and long queues swiftly formed.

"As long as the Australians are patrolling, we'll open," said Asveido Alamar, a pump attendant.

Australian Prime Minister John Howard today described the violence as worse than that which followed East Timor's 1999 vote for independence from Indonesia.

"In a way, it is more dangerous than it was in 1999, because in 1999 you had in effect an ordered retreat, not the disparate disorganised number of gangs you are dealing with," Howard told Australian radio.

Timorese Prime Minister Mari Alkatiri sacked around 600 of the 1,400-strong army in April after public protests over what they said was discrimination against soldiers from the east.

Seven police were killed when they tried to disarm the rebel soldiers last week. Later both the army and police virtually disintegrated, with factions reluctant to engage each other and abandoning their uniforms and positions.

Some observers in Dili say the country is on the verge of a civil war, with the country divided into the same pro- and anti-independence camps that fought so bloodily in the run-up to the 1999 referendum.

But Timorese voted overwhelmingly for independence in that ballot and there is little sign on the ground of anyone yearning for a return to rule by Jakarta.

East Timor is one of the world's poorest nations and suffers from massive unemployment. Dozens of gangs have emerged and routinely fight turf wars regardless of the political situation.

A Portuguese colony for centuries, East Timor was annexed by Indonesia in 1976 in a move the United Nations condemned and much of the population resisted.

Australia led a UN-backed intervention force to East Timor in 1999 to quell violence by pro-Indonesian militias after the vote for independence. This was finally achieved in 2002 after almost three years of UN administration.

Apart from some coffee production, East Timor has virtually no economy but has signed lucrative oil and gas exploration deals for resources in the Timor Sea.

Analysts say the government has been too slow to identify development projects and put the money - and millions of dollars in foreign aid - to good use.

- REUTERS, NZPA, NEWSTALK ZB