Mark Forbes in Denpasar and agencies – The US has restored military ties with Indonesia, lifting a 13-year ban imposed due to human rights violations, stating the relationship was of the "utmost importance" in the fight against terrorism.
The move is a coup for the Indonesian President, Susilo Bambang Yudhoyono, and will be welcomed by Australia. The Howard Government has gradually rebuilt ties, severed after an Indonesian military-backed campaign of murder and destruction against East Timorese independence supporters in 1999. It lobbied the US to do the same, claiming the move would increase regional security.
Next year, Australia's SAS will begin training with Indonesia's feared Kopassus troops, who have been accused of numerous human rights violations.
In a statement authorised by the US Secretary of State, Condoleezza Rice, a spokesman said restrictions on arms sales, military links and defence assistance would be waived in the interests of national security.
"The Administration considers the relationship between the United States and Indonesia, the world's third-largest democracy, to be of the utmost importance," Sean McCormack said.
Indonesia played a unique strategic role in South-East Asia and was a voice of moderation in the Islamic world, he said. "Indonesia has made significant progress in advancing its democratic institutions and practices in a relatively short time."
The US would help modernise Indonesia's military to support American security objectives, Mr McCormack said.
"The US remains committed to pressing for accountability for past human rights abuses, and US assistance will continue to be guided by Indonesia's progress on democratic reform and accountability."
State Department officials portrayed the move as a reward for the most populous Muslim nation's co-operation against al-Qaeda-linked militants.
Human rights groups condemned the policy shift, saying Indonesia had done little to punish offenders for the violence in East Timor. The East Timor and Indonesia Action Network said the US was supporting "an unreformed military which remains above the law".
Less than two weeks ago the US Congress had requested real improvements in military reform, human rights protections, and accountability for crimes against humanity before military links were boosted. "Secretary Rice has completely undermined that message," the group's statement said.
The US bans were imposed in 1992, after a massacre of Timorese protesters in Dili. They were tightened seven years later, when the military tried to prevent East Timor's people voting to split from Indonesia.
The decision will provide an immediate boost to Indonesia's military. Bans on providing spare parts for its fleet of F-16 fighters have kept most of the aircraft grounded. Earlier this year, the US agreed to allow exports of non-lethal military equipment and revive a small military training program.
Dr Yudhoyono, a US-trained former general and Indonesia's first directly elected president, lobbied Washington for full ties to be restored during a visit in May.
The FBI has been helping Indonesia in its hunt for Jemaah Islamiah terrorists behind a spate of bombings, including the two attacks on Bali.