Sri Lanka rebels lift water blockade, truce holds

TRINCOMALEE, Sri Lanka, Aug 6 (Reuters) Sri Lanka's Tamil Tigers said today they would lift a blockade on water supplies to government areas and that a 2002 ceasefire still held, but warned further attacks by the military would mean war.

The military said fighting had ceased for now in the east and that artillery guns that pounded rebel positions earlier today were now silent.

Tiger political wing leader. S P Thamilselvan said the Tigers would unblock a sluice gate in the east - a blockage that plunged the island into a fresh bout of civil war last month - if the government agreed to their demands.

''Our leader has agreed to open the sluice on humanitarian grounds,'' Thamilselvan told reporters in the northern rebel stronghold of Kilinochchi after talks with Norwegian peace envoy Jon Hanssen-Bauer.

''The ceasefire is on at the moment, and if the military continues attacks and shellings and makes any more moves, we will consider it as a full scale war.'' Thamilselvan said he had given Hanssen-Bauer three to four weeks to ensure that the government complies with rebel demands that they guarantee water supplies to rebel areas and lift ''all economic obstacles in these areas on our people''.

But he rejected Hanssen-Bauer's request to overturn an ultimatum that prompted Nordic truce monitors from European Union nations to quit the island, which reduces the mission to just 20 people - not enough to do the job properly.

The Liberation Tigers of Tamil Eelam (LTTE) yesterday halted their first offensive on army territory since a 2002 truce and pulled back to their original pre-ceasefire positions.

Intermittent artillery fire from government bases around the northeastern port town of Trincomalee could be heard today morning - the 12th day of fighting -- with a multi-barrel rocket barrage just before dawn.

But the fighting eased off by early afternoon.

''Right at the moment there is no firing going on,'' said Maj.

Upali Rajapakse, senior coordinator at the national security media centre. ''There are no reports of Tiger fire at military positions today.'' WATER DISPUTE A dispute over a rebel-held water supply to government territory sparked days of aerial bombing around the northeastern port city of Trincomalee and heavy but localised fighting.

Thousands fled the government-held town of Mutur just south of Trincomalee as Tigers infiltrated it this week and a two-decade civil war that has already killed more than 65,000 people seemed to be restarting.

The government says Mutur town, now devastated and abandoned, is once again under their control. The army says it killed 150 or more Tigers there.

Many of the Muslim population fleeing Mutur say they believe the Tigers, who want a homeland in the northeast for ethnic minority Tamils, wanted them out of town. The army says there are reports the Tigers massacred 100 Muslim civilians.

The Tigers deny the charge. Exact casualty figures are unavailable but residents say both sides shelled the town.

''The government claim that we massacred civilians is completely false,'' said LTTE peace secretariat head S Puleedevan. ''It is an attempt to tarnish the credibility of the LTTE.'' REUTERS SRS RAI1506