The United States ambassador to Jakarta has said that Indonesia must make better progress in holding its military to account for human rights abuses before the US fully normalises relations.
Ambassador Ralph Boyce said in an interview with the BBC that Washington was not simply going to restore relations when accountability for past abuses were still very much "an open question".
But he said that neither side believed that it was a good idea to have relations cut off.
The US banned weapons sales and direct military assistance to Indonesia because of 1999 violence in East Timor.
In August 2002, US Secretary of State Colin Powell announced a $50m anti-terrorism assistance package for Indonesia, including $400,000 to restart an exchange programme for high-level military officers.
Mr Boyce said the training of Indonesian officers – on courses "designed to promote professionalism, and respect for human rights, and rule of law and transparency" – was part of a "subtle effort" to improve relations.
"Neither we nor the Indonesian side believes it's a good idea to have our relations cut off, especially on the people to people level," the ambassador said. But Mr Boyce stressed that neither were relations yet normalised.
Washington cut ties after pro-Jakarta militias went on the rampage in East Timor, allegedly with the military's collusion, before and after the province's vote for independence from Indonesia in 1999.
Asked what Indonesia must do for Washington to restore ties, Mr Boyce said that, for a start, it should "demonstrate that when there have been abuses in the past ... that there are people held accountable for what they've done."
"That is something that I think is still a process very much under way, and one which I think is still yet to show significant results," Mr Boyce added. The international community has criticised Jakarta's human rights court for its poor record on convicting top officials over the bloodshed in East Timor.
Islamic militancy
There have also been questions raised over whether Indonesia did enough to crack down on Islamic militant groups prior to the Bali bombing in October, which has been blamed on regional militants Jemaah Islamiah.
Hamzah Haz, vice-president of Indonesia, has been accused of having ties with some militants.
Mr Boyce stressed, in response, that Indonesia was "a very decentralised ... and very democratising kind of place these days, and so there are many players on the scene now."
"The actions of certain individuals are not going to be held against the stated policy, and proven ability, to follow up of the government as a whole," he added.
Mr Boyce said that Indonesia's performance against terrorism since the Bali attack, was "nothing short of spectacular".