Taking Vaharai would drive a wedge between Trincomalee and Batticaloa, Tamil-dominated districts.

ECONOMIST: A slide back into all-out war

The same day, and again on Wednesday, airforce planes supported by naval artillery pulverised rebel positions near the northern port of Trincomalee.

ECONOMIST: Staggering back towards war | The

The latest round of fighting started as a spat over the waters of a small river in the eastern district of Trincomalee.

ECONOMIST: Sri Lanka at war

The government also needs the harbour and naval base at Trincomalee.

ECONOMIST: Sri Lanka at war

In a Trincomalee town hall with views of the glittering Indian Ocean, more than 80 families sleep on a concrete floor amid battered cardboard boxes of possessions.

ECONOMIST: The army thinks it can win. It is wrong

They aim to bolster their hold on the east, stop the rupture of the land link between their northern and eastern areas, and make Trincomalee harbour unusable.

ECONOMIST: Sri Lanka at war

Days after the government celebrated its latest victories in the eastern port town of Trincomalee last month, suspected Tigers bombed a bus in the area, killing the driver and wounding several passengers.

ECONOMIST: The army thinks it can win. It is wrong

Besides bombarding Palaly, they took over Muttur town, facing Trincomalee harbour, shelled the harbour, and launched an attack on Muhamalai, the gateway to Jaffna, and amphibious assaults on islands off the coast of Jaffna.

ECONOMIST: Sri Lanka at war