S.Lanka army says rebel ambush kills 7, Canada acts

COLOMBO, Apr 10 (Reuters) Suspected Tamil Tiger rebels killed five Sri Lankan soldiers and two aid workers in an ambush today, the army said, while Canada listed the rebels as a terrorist group alongside Al Qaeda only a week before key peace talks.

Violence has risen sharply in the past week and international ceasefire monitors say they fear that the coming talks -- seen as key to averting a return to the island's two-decade civil war -- and even the 2002 ceasefire could be in jeopardy.

The army said the Liberation Tigers of Tamil Eelam (LTTE) used a claymore fragmentation mine -- a block of plastic explosive impregnated with ball bearings -- to ambush an army patrol in the minority Tamil dominated north, killing five soldiers and two passing aid workers.

''This is another example of the LTTE demonstrating contempt for the genuine efforts of the international community to facilitate peace in Sri Lanka,'' a government statement said.

The attack came shortly after ambassadors from Sri Lanka's main donors the European Union, Japan and Norway left the rebel de facto capital Kilinochchi after a meeting ahead of a second round of peace talks due to take place in Switzerland next week.

''The fact there is an attack and deaths on the same day we are actually speaking rather colours the issue,'' European Union ambassador Julian Wilson told Reuters on his return to Colombo.

''It is particularly horrific that not only soldiers but also two aid workers have been killed.'' International Catholic aid agency Caritas said one of its vehicles had been caught in the blast. Two Sri Lankan staff working on relief programmes after the 2004 tsunami died and one was seriously wounded in one of the worst recent incidents.

A string of suspected Tiger attacks in December and January pushed the country to the brink of war. Tensions then fell with the prospect of talks but neither side trusts the other and peace broker Norway says neither has made good on first-round promises.

GENEVA TALKS The rebels and government are due to meet in Geneva on April 19-21 for the next round of talks, but the Tigers -- whose fight for a Tamil homeland has killed more than 64,000 people on both sides -- have yet to say if they will attend.

They said they had taken no part in the attack and that they condemned it. The rebels have denied previous attacks, blaming them on angry Tamil civilian groups -- a claim few diplomats or analysts believe -- but have rarely condemned them ''We really sympathise with the people who were injured and who died,'' rebel media co-ordinator Daya Master said.

Canada, home to tens of thousands of expatriate Tamils who analysts say are crucial to rebel fundraising, said it had decided to list the Tigers as a terrorist group -- a move already taken by the United States, Britain and India.

''The decision to list the LTTE is long overdue and something the previous government did not take seriously enough to act upon,'' said Public Safety Minister Stockwell Day, whose Conservative party won an election over the Liberals in January.

Some diplomats say listing the Tigers -- who repeatedly used suicide bombers in attacks during the war and who are accused of extorting money from Tamil expatriates -- alongside Al Qaeda would help bring them to the negotiating table, but others fear cutting off their funds might push them faster towards war.

The rebels accuse the army of using a group of ex-Tigers led by renegade ex-rebel Karuna Amman to attack them. The government pledged at the first round of talks to disarm armed groups in its territory -- but ceasefire monitors say they continue to operate.

Some analysts say the Tigers may threaten to back out of the talks -- repeating a tactic they have used before.

''Probably what will happen is the LTTE will say they won't come to talks, things will look very dismal and then at the last minute, they'll say yes,'' said analyst Rohan Edrisinha at think-tank the Centre for Policy Alternatives. ''We'll all breathe a sigh of relief and ... say how conciliatory they have been.'' REUTERS SRS VC2310