By Muklis Ali

JAKARTA, Apr 3 (Reuters) Indonesian President Susilo Bambang Yudhoyono today said that Canberra and Jakarta need to review their relationship after Australia decided to grant protective visas to 42 asylum seekers from Papua province.

Indonesia called its ambassador back from Canberra for consultation after the Australian decision, which was announced on March 24, and there have been acrimonious comments since then from politicians and media on both sides.

Yudhoyono told reporters, in comments broadcast live, that Jakarta continued to view the Australian move as incorrect, and as one that had put bilateral relations in a difficult situation.

But he also said: ''I feel that both countries ... are still keen to have good relations and to honour each other's interests and sovereignty''.

''We seriously must sit together to make sure that we all have good faith, honesty and openness in continuing our cooperation and our friendship,'' Yudhoyono said.

The Australian move raised questions about an agreement to cooperate in dealing with illegal migration, and about Canberra's commitment to supporting Indonesian sovereignty, Yudhoyono said.

''Indonesia wants to have good relation with Australia and other countries without having to compromise our sovereign rights and dignity.'' Papuan independence activists have campaigned for more than 30 years to break away from Indonesia, while a low-level rebellion has also simmered. Some of the most prominent support for the separatists is from organisations in Australia.

VOLATILE RELATIONS Human rights groups accuse Indonesia of widespread abuses there, and the Papuans who sought asylum said they feared becoming victims of genocide. Jakarta denies such charges.

Yudhoyono had asked that the asylum-seekers be returned.

Prime Minister John Howard has sought to reassure Jakarta that Australia has not changed its support for Indonesian sovereignty over Papua, saying the process for dealing with asylum seekers was independent of foreign policy considerations.

Some independent analysts have agreed there was little Howard's government could legally do to affect the decision.

Despite such arguments, the visa decision prompted protests outside the Australian embassy in Jakarta, scathing comments from Indonesian politicians and the publication of a cartoon in one newspaper depicting Howard and his foreign minister, Alexander Downer, as copulating dingoes, or wild dogs.

An Australian newspaper shot back over the weekend with a similarly suggestive caricature of Yudhoyono and a Papuan.

Yudhoyono said he regretted the publication of both cartoons, saying the one of him was ''improper and smelled of insult''.

Traditionally volatile, ties between the two countries hit a low in 1999, when Australia led peacekeepers into the former Indonesian province of East Timor to quell militia violence.

But the relationship later improved with close anti-terrorism cooperation after the 2002 bombings on the Indonesian resort island of Bali which killed scores of Australians, and Canberra's prompt aid following the devastating tsunami of 2004.

Australia is also a major Indonesian trade partner, and diplomatic and political analysts suggest the economic and strategic ties of the neighbours are too important for the Papua issue to do serious long-term damage.

REUTERS SY BST1400