Ambon – There is still gunfire every night in Ambon, the capital of the Moluccas, and sometimes a shattering bomb blast. Once a thriving commercial city, it is now a deadly maze of Christian "red" areas and Muslim "white" ones, a pattern of demarcation that has spread to the neighbouring islands. Children play near the front line and cheerfully tell visitors to relax when "there is no shooting at the moment." But virtually all adult Moluccans are tired of the killing, which has ruined their beautiful islands. Yet that does not mean it is over.

Ambon is now a city divided in two. Muslims call Christians Obet, a corruption of Robert. Christians call Muslims Acang, a corruption of Hassan. There is often no physical barrier separating red and white areas, but everyone knows where they are and rarely, if ever, does anyone set foot in the opposite camp's territory. It could mean having your throat slit. Visitors soon learn to recognise the border areas.

Everything there is smashed to smithereens.

Three long bouts of religious warfare in just over two years in the Moluccas, once known to European traders as the Spice Islands, have claimed at least 5,000 lives, and probably many more. At talks in Bali and Java aimed at reconciliation, the participants spoke of 8,000 dead. Some say 20,000.

Laskar Jihad, a group of Muslim outsiders generally blamed for setting off the third and most recent wave of violence in the Moluccas last year, now has its Christian counterpart, Laskar Kristus – the Army of Christ.

Its commander, Agus Wattimena, looks like a latter-day Jesus with his wiry frame and long flowing locks. His followers claim to be warriors who are defending the faith; they attribute their survival to the will of God.

Some of the younger troops hang out in Ambon's half-built Roman Catholic cathedral. Work on the building stopped when the war broke out.

Now it is a shelter for refugees, among them AGAS, a motley collection of teenage soldiers who will happily make you a pile of bombs if you give them $30. AGAS stands for Church Children who Love God. It also means "gnat". Many of the children have bullet wounds, and when fighting breaks out they rush out of school and down to the front line. They call it their crusade.

Laskar Jihad emotively claims that its enemy are "RMS rebels", a name calculated to strike dread into Muslim hearts. But the RMS, the Republic of the South Moluccas, has been defunct for decades, other than as a nominal government-in-exile in the Netherlands. It made its bid for independence in the 1950s but failed miserably. Its remnants held out on the large island of Seram, to the north of Ambon, for 13 years. Eventually they too were defeated.

Muslim sources in Ambon say their side suffered badly during the days of the RMS. Its leaders were mainly Christian officers who had fought for the Dutch colonial government. They were trying to resist integration into a centralised Indonesia ruled from Jakarta, the site of the government they had fought in the 1945-49 war of independence.

So when the current fighting broke out in January 1999, hardline Muslims quickly called the Christian side the RMS. At first it seemed laughable, but in a way it has come true. After Laskar Jihad arrived last year and ignited the third round of the war, some Christian leaders, facing annihilation and a state of civil emergency, founded a new movement of their own: the Maluku (Moluccas) Sovereignty Front, or FKM.

The FKM's aim is to re-create an independent South Moluccan state, though it says it is quite distinct from the RMS. It now has representatives in Jakarta, Europe and the United States. Its leader, Alex Manuputty, is a doctor and a member of the Indonesian Red Cross who lives in Kudamati, an area in the hills above Ambon city, which has become the Christians' command centre. But he says FKM does not want to see Christians dominating Muslims. It wants Moluccans on both sides to take control of their own destiny.

The government in Jakarta has not taken the FKM lightly. It has attempted to prosecute Dr Manuputty for separatist activities, a crime in Indonesia. But the attempt has failed: the Moluccas' legal system is in a mess, and most of the judges have fled.

Indonesia's security forces cannot bring an end to the fighting, say the Christians. Although Christian and Muslim police and soldiers work together when things are calm, the moment fighting breaks out they grab their ammunition and run to fight with their co-religionists. Some have even been filmed doing it. Members of the same units sometimes start shooting at each other. Soldiers and police sell weapons to both sides, at $700 for an M-16 or an AK-47.

For all Dr Manuputty's fine words about living together in peace, even moderate Muslims in Ambon see his FKM as a threat. Laskar Jihad has started putting angry references to FKM alongside those to the RMS in its propaganda outside Ambon's main mosque. Its members are turning more radical. Afghan-style turbans can often be sighted in the Muslim sector of Ambon, and it is becoming more common for women to cover their heads in public. Refugees from Muslim areas of the archipelago have horrific tales to tell of forced Islamicisation, with death the only alternative to conversion. And many believe this is part of a wider long-term strategy to turn not just the Moluccas, but all of Indonesia, into a fundamentalist Islamic state.