Mark Dodd, Dili – A dispute over illegal trade on the East Timor border with Indonesian West Timor is thought to have caused a series of grenade attacks on Tuesday that left at least five people dead and about 40 injured, United Nations military sources say.

It is believed that as many as four grenades exploded in a marketplace set up within metres of the border, seven kilometres south-east of the East Timor town of Balibo.

"It would appear at this stage to be related to illegal trade and a dispute between rival groups," a military source said yesterday.

A brisk trade in illegal smuggled goods such as clove cigarettes, instant noodles and cooking oil occurs along the porous 176-kilometre border and the premium on smuggled goods has sharply increased since the implementation of a tough tax regime on imported goods by the UN Transitional Administration in East Timor. Cash-strapped militias are considered likely to be involved in the smuggling.

While no blame has been laid for the attack, the site of the explosions is an area where armed militia have previously been sighted and fired on by Australian peacekeepers. Peacekeepers from the Sydney-based 4 Battalion Royal Australian Regiment were yesterday conducting a sweep of villages near the site of the blasts to ensure there were no more casualties. At least 20 wounded were being treated at the battalion's hospital in Balibo.