John Aglionby, Matang Peusangan – The several thousand people gathering in glorious sunshine on the main road in Matang Peusangan to celebrate Indonesia's independence day last Sunday were expecting a chance to relax with their friends and family.

Even though many in the northern coastal town in Aceh province did not support Indonesia's campaign to crush the 27-year-old separatist insurgency of the Free Aceh Movement (GAM), they had not had a party for four years and did not want to miss the opportunity of enjoying the town's carnival.

But the calm was suddenly shattered when a loud boom, followed by another and another, resounded behind them. Turning towards the noise, people saw a convoy of about a dozen tanks only metres away, heading straight towards them.

The crowd scattered to the side of the road as troops brandishing assault rifles ran forward and shouted for their way to be cleared. Then the cheering began. For the "troops" were children on the way to the carnival, their vehicles were tricycles covered in brightly painted paper, wood and cardboard, and the bangs were merely fuel exploding harmlessly in bits of bamboo.

"They're so realistic, it's great!" laughed Cut Nuria, a shopkeeper. "The soldiers really do behave like that when they're on operations."

Casualties

The soldiers she was referring to are the 45,000 members of the army and the paramilitary police who began the fourth month of their most intensive operation to crush the rebels yesterday.

Stories abound of glorious Indonesian military victories, heroic GAM resistance and appalling human rights abuses against the increasingly impoverished people caught in the middle.

Jakarta claims that it has killed 710 guerrillas, arrested 515 rebels and persuaded 428 to surrender, losing 30 soldiers and five police officers. Civilian casualties are said to be about a dozen.

GAM says it has lost only 70 fighters, has killed "hundreds" of members of the security forces and that more than 2,000 civilians have been killed. Human rights activists admit they have little idea about the combatants' casualties but say that well over 1,000 civilians have probably been killed, mostly by the security forces.

The Indonesian Red Cross declines to discuss the matter publicly but a representative in Bireuen district admitted that most of the hundreds of bodies it has recovered appeared to be non-combatants.

It is impossible to gauge precisely how Indonesia's biggest military offensive since the 1975 invasion of East Timor is progressing, because under the martial law regulations in force foreign diplomats, aid workers and non-governmental organisations are banned from the province and their Acehnese counterparts are in effect prohibited from speaking publicly.

"We can't really speak out about Aceh at the moment because we simply don't know what's going on," a diplomat in Jakarta said. "We have never been less welcome anywhere in Indonesia." Indonesian journalists, whether by design or intimidation, have had little choice but to become "patriotic" if they want to stay in Aceh, and locals are increasingly wary of speaking to the media. One who recently spoke on camera about conditions and alleged military brutality was found dead the next day.

Foreign reporters are allowed to report only from the main towns, are not allowed to quote GAM "propaganda", and have to inform the authorities of everything they do. They are not allowed to accompany Indonesian soldiers on operations. But the claim by the military commander in Aceh, Major General Bambang Darmono, that GAM is "in chaos and disarray", and has been separated into small groups and driven into the hilly interior, appears to contain an element of truth.

Compared with the first week of the operation, when the Guardian was last in Aceh, the atmosphere in the main towns is noticeably more convivial. GAM is clearly no longer a threat, the price of basic goods, which rose by up to a quarter when the offensive began, has stabilised, public transport is running fairly efficiently, people are staying out later in the evenings, and children are attending school.

Gen Bambang says the villages will soon experience a similar upturn. "Previously we only used to come and go [to many villages]," he said. "Now I position troops there. So yes, perhaps there is still uncertainty. But day by day the situation will change. It just needs time."

Indonesia has not said how much time is needed, but Gen Bambang said the plan was not to annihilate GAM but to reduce it to such an insignificant rump that it would clamour to negotiate to be allowed to survive in Indonesia.

"If we don't continue our pressure until they're finished then anything could happen," he said. "If we keep up the pressure until [GAM] is reduced to a minimal amount, then they won't have any more meaning. But that could take years."

He also admits that the people are going to have to continue to suffer. "The operation's interests are not the same as the people's, we have to remember that," he said. "At the moment the operation's interests have to come first and then the people will benefit." His optimism is not shared by many, because there appears to be little concerted effort to win people's hearts and minds.

Gen Bambang seems more committed to a humane approach to the treatment of the Acehense than Jakarta in the past three decades. He says the right things, has replaced three battalion commanders whose attitude he found wanting, and last month published, with help from the International Committee of the Red Cross, a 200-page book on how Indonesian soldiers should implement international human rights law in the field.

But most of those around him are on a very different wavelength. A lieutenant colonel in Bireuen district, who commands more than 500 soldiers, has no time for pleasantries. "Why do we need to be polite [to the people]?" he said. "This is a martial law situation." With the occasional exception, the under-trained, under-paid and under-educated police are much more abusive. Police intimidation, approved by the army, has driven all the main human rights groups either underground or into silence.

Hundreds of people have fled to Jakarta or abroad. About 250 Acehnese who were so desperate that they tried to seek asylum in a UN compound in Malaysia yesterday were arrested by the local police.

The UN urged the Malaysian government to release them and issue them with temporary protection letters, not return them forcibly to Aceh. Most police officers in Aceh seem to consider extorting money part of their daily duty – the Guardian was given a travel permit only after being forced to pay an unreceipted "administration fee" greater than many Acehnese earn in a week.

Corruption is not limited to the police. The provincial civil government is considered among the most corrupt in the country, according to Fakhrulsyah Mega, a leader of Jari Indonesia, which monitors public transparency and accountability.

"The corruption is becoming increasingly sophisticated," he said. "But the result is the same. The people's suffering increases." Some government officials even admit publicly that the government is running anything but smoothly.

"Coordination between the different departments is very difficult at the moment," Hussein Wahib, of the province's Islamic affairs office, said.

Most Acehnese have little time for Jakarta, although they do not seem avid GAM supporters either. "We just want peace," said Abdullah, a farmer in Pidie district. "We are tired of being killed and being so poor we have to eat stones and drink the wind."

History of insurgency

• 1945-9: Aceh province plays a key role in Indonesia's independence struggle against the Dutch
• 1976: Free Aceh Movement (GAM) begins insurgency after decades of broken promises of greater autonomy from Jakarta
• 1989: Jakarta declares province to be "military operations area" and seals it off for almost a decade. Thousands of Acehnese killed
• 1999: Student-led referendum movement is blocked by Jakarta
• December 2002: After months of negotiations GAM and Jakarta sign a ceasefire
• May 2003: Ceasefire collapses. Jakarta declares martial law and launches offensive to crush GAM