Jakarta – Indonesia's president today offered to release imprisoned East Timor rebel leader Jose Xanana Gusmao in return for world recognition of Indonesian sovereignty over the disputed territory.

In an interview with Australian journalists in Jakarta, President B.J. Habibie said he would also withdraw thousands of Indonesian troops from, and grant special status to, the former Portuguese colony. Details of the offer were presented privately to UN officials by Foreign Minister Ali Alatas.

Habibie announced the proposal to the reporters as Gusmao celebrated his 52th birthday in Jakarta's Cipinang prison, where he is serving a 20-year sentence for fighting a guerrilla war for independence.

He said the United Nations, Portugal and the world community should now recognize East Timor as Indonesia's 27th province. "We will give Timor special status and we will ... release Xanana," Habibie was quoted as saying by Australian Associated Press.

"But then the former colonial masters (Portugal) and the whole world should stop making problems about East Timor and they should accept East Timor as an integral part of Indonesia. This is what I am going to do to end everything."

Habibie said he had the power to reduce Gusmao's sentence to the time the rebel commander has already served since his capture in 1992. He said he would do so once international agreement to the new plan had been secured.

[According to a June 20 report by Reuters, at a his birthday celebration Gusmao said offers of autonomy were not enough and the problem would not be solved without a referendum for self-determination. He also blamed the armed forces as being behind Habibie's the rigid stance. AFP reported that although journalists barred entry to journalists, around 50 East Timorese students and members of the Youth Association, Impetu, were allowed to visit Gusmao - James Balowski.]