Troops searched for Tamil Tiger rebels and claymore mines in military-held areas in Sri Lanka’s north and east yesterday as the toll from a deadly ambush that raised fears of a return to civil war rose to 12. Tuesday’s attack in the island’s far north, which killed 10 soldiers on the spot and claimed the lives overnight of two others, was one of the deadliest incidents since a 2002 ceasefire and the second such attack in less than a week. “We are conducting search operations in the north and the east,” said military spokesman Prasad Samarasinghe. “We are searching for claymores and for terrorists who throw grenades at us.”

In a separate incident overnight in the eastern district of Trincomalee, a soldier was shot dead in his home by suspected rebels. Tuesday’s attack was the latest in a string of guerrilla ambushes on the military and the assassination of a pro-rebel member of parliament at a Christmas mass that are straining a 2002 truce to breaking point. Those in turn came after 13 sailors were killed in an ambush by suspected Tigers using claymore mines and rocket-propelled grenades in the island’s northwest.

Sri Lanka’s stock market was down over 6 percent at 0535 GMT yesterday after falling nearly 7 percent on Tuesday as news of the attacks prompted small investors to sell their shares and kept bigger investors on the sidelines, waiting to see if the $ 20 billion economy was heading back to war. “It is war in all but name,” said Paikiasothy Saravanamuttu of the Center for Policy Alternatives. “They cling on to the ceasefire agreement as some kind of totem pole, but in effect on the ground it doesn’t hold with these kind of casualty figures,” he added. “To say that there is a ceasefire in the country is somewhat farcical.”

<B>Government seeks sanctions</B>

The government has appealed to the island’s main donors – Japan, the United States, Norway and the European Union – to make good on a warning to the Liberation Tigers of Tamil Eelam (LTTE) that continued attacks would bring serious consequences. “The LTTE has shown complete contempt to the diplomatic efforts made by the co-chair countries,” the government said in a statement issued overnight. “We believe that such actions (by the donors) could take the strain off the ceasefire by preventing the escalation of violence.”

The government and the Tigers are poles apart over the rebels’ demands for wide political powers in the north and east and a homeland for ethnic Tamils. The two sides cannot even agree on a venue for emergency peace talks, and analysts say the Tigers have been using the truce to rearm and regroup. Norwegian peace envoy Erik Solheim warned overnight crunch peace talks were vital to avoid further escalation.

“The high level of violence and the tragic loss of life are putting the ceasefire agreement at risk and will make it very difficult to secure further progress in the peace process,” Solheim said in a statement. The northern Jaffna peninsula, which is held by the military and which the Tigers want to control, remained tense. Ceasefire monitors have stopped patrols in the northern Jaffna peninsula because of deteriorating security, and have voiced deep concern about the future of a ceasefire that halted a two-decade civil war that killed over 64,000 people.

The Tigers threatened in November to resume their armed struggle to carve out a homeland for ethnic Tamils in the north and east unless they were given wide political powers in about 15 percent of the country where they run a de facto state.

New President Mahinda Rajapakse, who is allied to hardline Marxists and Buddhists who refuse any concessions for the rebels, has ruled out the idea of a Tamil homeland. Rajapakse is in India on his first state visit since winning the presidency in November to seek greater Indian involvement in the stalled peace process, but officials and analysts in India say he is unlikely to have much success.

<B>Simon GARDNER</B>

OFFICIAL VISIT

<B>India seen staying away from Sri Lanka’s troubles </B>

■ President Rajapakse arrived in India this week to seek New Delhi’s support for Colombo’s flagging peace bid with the Tamil Tigers, but he is unlikely to meet with much success, officials and analysts said. Pressure from Indian Tamil groups in Prime Minister Manmohan Singh’s coalition and past experience, when India badly burned its fingers trying to bring peace to its southern neighbour, would discourage Delhi from getting involved in the island’s latest troubles, they said. Rajapakse will hold talks with Singh, Indian President A.P.J. Abdul Kalam and Sonia Gandhi, chief of the ruling Congress party whose husband, former prime minister Rajiv Gandhi, was assassinated by Tamil Tiger rebels in 1991. Rajapakse’s aides said the new president, on his first foreign visit, would brief them on the deteriorating security situation following a rash of deadly attacks against the military that have fuelled fears of a return to a two-decade old war.