Sadanand Dhume, Jakarta – Sitting in a corner of a crowded South Jakarta cafi in jeans and a T-shirt, Nazaruddin Abdul Ghani is surprisingly calm for a 22-year-old who's fleeing for his life.

On December 6, Nazaruddin says, he witnessed the execution of three fellow human-rights workers in his native Aceh province – either by soldiers in plain clothes or by militia members working with the army. Before the killings, he says, the workers were abducted and driven to a military barracks. "They accused us of being members of GAM," says Nazaruddin, referring to the violent separatist Free Aceh Movement. Managing to escape, Nazaruddin fled to Jakarta en route to a safe haven, probably Denmark.

President Abdurrahman Wahid, visiting the provincial capital of Banda Aceh on December 19 for the first time since he took power, admitted that Indonesia has mishandled the separatist crisis. "We have all made mistakes, including myself as president," he told religious leaders and diplomats. "I let this happen ... I have demanded that the military treat the Acehnese people not as enemies but as friends." But the 400 killings (by both sides) that have occurred in Aceh since a temporary ceasefire was signed six months ago illustrate how reality is increasingly out of step with Wahid's rhetoric.

Discredited by his freewheeling approach to governance and growing separatist challenges, Wahid is being forced to cede decision-making authority over Aceh and Irian Jaya – another trouble spot – to an increasingly assertive army. Military reform, say Western observers, has stalled. And though nobody expects soldiers to return to running the country, their actions could harm Indonesia's international standing, block the flow of aid to troubled provinces and further undermine the president's power.

"The civilian government just doesn't have any control over the military," says Harold Crouch, Indonesia project director for the International Crisis Group, a watchdog body. "President Wahid is unhappy, but there's little he can do about it."

Observers say that since September soldiers have restarted "sweeping operations" in Aceh, where entire villages suspected of supporting GAM often face retribution for attacks on security forces. But Aceh isn't the only place in Indonesia where Wahid's words have little weight. On November 29, police in Irian Jaya arrested Theys Eluay, the moderate head of the Papua Praesidium – the territory's main pro-independence body. Despite public pleas from Wahid, police have refused to release Eluay or other leaders. Meanwhile, the army has blocked United Nations efforts to investigate and punish the killers of three foreign UN staff in West Timor in September.

Wahid is increasingly isolated in his own cabinet, say observers. Military hardliners have found an ally in Vice-President Megawati Sukarnoputri, who's widely believed to share their fear of a break-up of Indonesia. Wahid is "pushing buttons and nobody is responding," says a Western diplomat. "People are doing whatever they want to do."

Biggest threat may be to Wahid

Meanwhile, military reform is at a standstill. Crouch of the ICG says that while the government has gone a long way toward getting the military out of politics, it has yet to assert civilian control over security affairs. Indeed, given its national presence, discipline and isprit de corps, it's no surprise that the army sees itself as the ultimate guarantor of national unity. According to Lt.-Gen. Agus Widjojo, army head of territorial affairs, the military is also under pressure "from within political elites, because they are convinced that this is moving in the direction of a probable national disintegration."

Widjojo says there's no evidence that the military is fighting a dirty war in Aceh. But Western diplomats and human-rights groups dispute this and say the consequences of more violence could be dire.

Indonesia's image has already been tarnished. On November 1, the US State Department warned Americans against travelling to Indonesia. Meanwhile, Western aid workers are pulling out of Aceh.

But the biggest threat may be to Wahid. "We're not sure how much longer Wahid's going to last," says a Western diplomat. "The authority of the central government is so weakened that we're going to see a lot of local politics and provincial power plays. The military has positioned itself to have little warlords. In the long term, I don't think the country will fall apart, but it may just implode."