Bomb defused in Sri Lankan capital after raid in US

COLOMBO, Aug 22 (Reuters) - Bomb squad officers defused explosives strapped to a vegetable-laden pushbike at a market in Sri Lanka's capital on Tuesday, just hours after officials in the U.S. said they had arrested suspected rebel arms procurers.

The bomb squad said suspected Tamil Tiger rebels had packed 15 kg of explosives around a Claymore fragmentation mine, a weapon often used on the military in recent months.

The device was found during a random check in Borella market in eastern Colombo, overlooking a busy road.

The find comes after two bomb attacks and an assassination in Colombo this month and after a suspected Liberation Tigers of Tamil Eelam (LTTE) front threatened to bomb civilian targets.

Sporadic violence continued in the Tamil-dominated north and east, the fourth week of the worst fighting between government forces and the rebels since a 2002 ceasefire. The Air Force said it bombed an ammunition dump and artillery point just inside Tiger lines.

International monitors say the truce is over in all but name.

Thousands of residents trapped by the fighting in the besieged northern Jaffna peninsula are waiting for an aid ship to sail to the Tamil-dominated north. Some back the Tigers.

"There are people who blame the LTTE for the situation. But if the LTTE had not taken up arms, the entire Tamil nation would have perished," said 64-year-old Thavam Mariadas, sitting outside a Jaffna school where 1,400 people are taking refuge.

U.S. officials said overnight more than a dozen people were arrested on suspicion of procuring surface-to-air missiles and raising funds for the Tigers.

Analysts say the Tigers -- who have been banned as a terrorist organisation by countries including the United States, India, Britain and the European Union -- have used the past four years of ceasefire to smuggle a lethal arsenal into the country.

NEW YORK ARMS STING

Several people who had agreed to pay more than $900,000 for hundreds of AK-47 rifles and 50 to 100 Russian-made surface-to-air missiles to shoot down Israeli made jets like those used by the Sri Lankan Air Force were nabbed in a New York sting operation, according to U.S. court documents.

On Jaffna, thousands of families have fled their homes, many taking refuge in churches or relatives' homes. Aid workers say more than 160,000 people have been displaced in the north and east because of fighting all sides estimate has killed hundreds.

Shortages are also rising fast in the rebel-held heartland south of Jaffna, cut off for most of the last two weeks after the army closed checkpoints. Some aid worker compounds have been raided for food around the northern rebel base of Kilinochchi.

The Tigers and the military accuse each other of being the aggressor, but both maintain they are honouring the ceasefire. Diplomats say both sides are flouting it, and see no push for an end to a two-decade war that has killed over 65,000 people.

Reporters Without Borders joined a chorus of rights groups in condemning the killing of a former minority Tamil politician and newspaper director gunned down in Jaffna at the weekend.

"All parties, especially the pro-government Tamil paramilitaries, must stop targeting civilians, journalists and humanitarian workers," the group said in a statement. "The press is again the victim of Sri Lanka's dirty war, and the government is partly to blame for this hellish cycle of violence."

Nordic truce monitors said on Monday they were temporarily withdrawing to Colombo to regroup ahead of a Sept. 1 ultimatum the Tigers gave European Union staff to quit the island, which leaves them with too few staff to do their job properly.

A return to peace talks is a dim and distant prospect and diplomats say it will likely be years at best before the Tigers, who have fought for two decades for a separate homeland for minority Tamils, are removed from any terror lists.