Military bases in the embattled northern and eastern regions as well as police in the capital strengthened security as a precautionary measure, officials said, while there was fresh violence in the east of the country.

Suspected Tamil Tiger rebels shot dead a former militant in the Batticaloa district, while in another incident in the same area a grenade attack wounded seven people, local officials said.

The killing came a day after the Tigers were accused of assassinating a top regional politician in the northern peninsula of Jaffna and were involved in a stand off with the navy.

The Liberation Tigers of Tamil Eelam (LTTE) said the Sri Lankan navy had sunk an "oil tanker" on Saturday in international waters where they had no authority to open fire.

"If any harm were to befall the crew of the LTTE vessel then the sole responsibility for the events lie with the Sri Lanka Navy and this incident would have very grave consequences," the LTTE said in a statement posted on the pro-rebel Tamilnet website.

It said the vessel's crew had allowed the navy to board the craft and carry out an inspection, but the navy had later fired on them.

"The crew who took to the life rafts and asked to approach the Sri Lanka Navy boats were arrested by the navy," the statement said, adding that it had lodged a complaint with the Sri Lanka Monitoring Mission (SLMM).

However, the navy said the Tigers themselves blew up the vessel after it was intercepted during an alleged gun-running operation off the northeastern coast.

The SLMM, a body led by Scandinavians who monitor the ceasefire between government forces and Tamil Tiger rebels in place since February 23 last year, said they were trying to investigate the differing claims.

"We wanted to go to the location given by the LTTE, but our monitors had to turn back and come after about 25 kilometres (16 miles) because of rough seas," SLMM spokeswoman Agnes Bragadottir said.

Later the SLMM arranged a military reconnaissance aircraft to fly over the area, Bragadottir said.

She said the navy had given the location of the incident as 110 nautical miles east of Mullaitivu coast which is within Sri Lanka's Exclusive Economic Zone.

However, the Tigers said the attack took place at 266 nautical miles east of the coast in international waters.

The Tigers said the navy indicated to the SLMM that they had not arrested any surviving members of the crew of the LTTE vessel. Bragadottir said they did not know the fate of the crew.

The defence ministry denied in a statement the navy had boarded the rebel vessel or arrested any survivors.

"We have asked the SLMM to interview any member of the navy or inspect any naval craft involved in the operation yesterday," defence ministry spokesman Sanath Karunaratne said.

He said the military was cooperating with the SLMM to step up search operations for survivors of the LTTE vessel.

The LTTE has boycotted peace talks with the government since April in protest at what it says is the slow implementation of promises given to them during six rounds of negotiations since September.

WAR.WIRE