* Move designed to pressure Sri Lanka over civilians
* U.S. could later reverse course and support loan
* Sri Lankan ambassador says civilians are top priority
By Arshad Mohammed
WASHINGTON, April 29 The United States has decided to delay a $1.9 billion International Monetary Fund loan to Sri Lanka to try to pressure Colombo to do more to help civilians caught in the fighting between the government and Tamil Tiger rebels, U.S. officials said on Wednesday.
The officials, who spoke on condition they not be named, said the Obama administration last week conveyed its view to other members of the IMF board, which has yet to formally consider the loan.
The U.S. stance does not appear to have had any impact on the government so far in its battle to capture the last redoubt of the Liberation Tigers of Tamil Eelam (LTTE), which have been fighting a 25-year war for a separate ethnic Tamil homeland.
U.S. officials say the government has done too little to protect the civilians in the war zone and has failed to allow in sufficient international aid workers to care for the tens of thousands who have left.
The civilians, estimated by the United Nations to number as many as 50,000, are caught in a tiny LTTE-held area on Sri Lanka's northeast coast, which the military says is down to just 2 square miles (5 square kilometres).
The British and French foreign ministers urged Sri Lanka to implement a humanitarian ceasefire with the rebels to allow tens of thousands of trapped civilians to escape the battle zone. They also urged the rebels to let the civilians leave.
Sri Lanka's ambassador to the United States, Jaliya Wickramasuriya, said the government has generally come to oppose cease-fires, arguing that the rebels have used them in the past to "regroup, rearm, reposition."
He also said the government's primary concern was protecting civilians, arguing it had ceased using heavy weaponry and was proceeding slowly and "defensively" to try to release civilians from the area with minimal casualties.
MILITARY VICTORY, POLITICAL PEACE
"We are fighting against terrorism," Wickramasuriya said in an interview, likening the Sri Lankan push against LTTE leader Vellupillai Prabhakaran to the U.S. effort to capture Osama bin Laden, whose al Qaeda group carried out the Sept. 11 attacks.
"If bin Laden is trapped in Afghanistan, we don't want (the) U.S. to give him a ceasefire," he said. "In the same way, if Prabhakaran is trapped in Sri Lanka, we don't want anybody to tell us to give (him) a ceasefire."
The Tigers say the government claim to have ended heavy weapons use is a sham, and that artillery and air strikes continue to cause scores of civilian deaths, with 20 killed when a makeshift hospital was shelled on Wednesday.
Verifying claims from the battle zone, where 50,000 troops face an estimated few hundred to few thousand remaining rebel fighters among far more civilians, is difficult given lack of access and independent sources on the ground.
"The problem, from our vantage point, is that the Sri Lankans have refused to engage on the humanitarian crisis as a priority," said one U.S. official. Delaying an IMF loan "is an attempt to get their priorities back where they should be."
However, U.S. officials said Washington could ultimately support the loan if Columbo addressed the humanitarian issues or it concluded preventing the loan was counter-productive.
"I don't think there is any stomach to punish them from here to eternity on this," said another U.S. official. "I could see the loan going through (eventually) but right now it's very difficult for (IMF) board members to go through with this."
Asked about the matter, an IMF spokeswoman said: "Discussions with the authorities on an IMF-supported program are still ongoing. We do not have any schedule of the Executive Board meeting at this moment."
U.S. officials said they feared the government, in seeking a military victory, had neglected preparing for a political accommodation that may be necessary for a lasting peace.
Wickramasuriya said the government wanted to bring Tamil Tiger sympathizers into the political process and had done so in the past, noting that a prominent LTTE member had come over to the government's side.
Teresita Schaffer, a former U.S. ambassador to Sri Lanka now at the Center for Strategic and International Studies think tank, said the government was loathe to make concessions such as giving provinces more power to bring in LTTE sympathizers.
"This government, I think, has not thought very deeply about the fact that if they do have a military victory they will still need to make a political peace," Schaffer said. (Additional reporting by Lesley Wroughton, editing by Todd Eastham)