Presidential election campaigns began for 9 April poll with risk of increased political violence. Supporters of current PM Jose Ramos-Horta and Fretilin party clashed 30 March. Ramos-Horta seen as favourite while incumbent President Xanana Gusmao to stand for PM later in year as candidate for newly formed Congress for National Reconstruction of East Timor. Australian-led international peacekeeping forces failed to capture rebel leader Alfredo Reinado in 4 March raid on his base; 4 rebels died and mass protests followed in Dili.

Violence surged toward end of month with increased targeting of and resentment toward international peacekeepers. Australian troops launched operation against rebel leader Alfredo Reinado 27 February in response to government request after Reinado’s group raided several police border posts, seizing weapons. Australian peacekeeper killed 2 civilians 23 February, after allegedly being attacked at refugee camp near Dili. More unrest feared in run-up to presidential elections in April. PM Jose Ramos- Horta urged UN to send more Portuguese police to bolster security; announced candidacy for presidency. Charges against former PM Alkatiri dropped 5 February. UN Security Council voted 22 February to extend UN peacekeeping mission (UNMIT) for further year.

Rogerio Lobato, former interior minister, went on trial 9 January on charges of setting up hit squads during April-May 2006 unrest. Former police inspector Neto Mok and 3 Timor-Leste defense force personnel named in UN Special Commission of Inquiry report remanded to Becora prison 12 January. President Xanana Gusmao announced would not run again in forthcoming elections. UN, T-L and Australia signed trilateral agreement 26 January establishing forum to discuss security issues and ensure coordination between government and peacekeepers. PM Horta submitted controversial bill to parliament providing for conscription into defence forces.

Low-level gang violence continued in Dili. Army rebel Alfredo Reinado, in hiding since August jailbreak, met armed forces chief Taur Matan Rauk in Dili 21 December for reconciliation talks before retreating to jungle hideout. New UN envoy Atul Khare arrived in country; pledged to make security sector reform his priority.

PM Ramos-Horta asked Australian and New Zealand troops to stay in Dili alongside UN police; said seeking trilateral accord with UN and Australia on command structure. Peace rallies in Dili to mark 15th anniversary of Santa Cruz massacre united rival gangs in Dili, but gang violence erupted again 19 November, killing Brazilian missionary. Former PM Mari Alkatiri announced would not stand for re-election in 2007.

Violence escalated after publication of UN inquiry into April-May unrest: report claimed former PM Mari Alkatiri’s government knowingly provided civilians with state weapons, called for further investigation of his failure to stop transfers and recommended prosecution of former minster Rogerio Lobato, armed forces chief Taur Matan Rauk, and dozens of others. Street fighting left several dead in final week of October. T-L government dropped request for all-UN peacekeeping force, deciding to keep Australian and New Zealand troops under separate but coordinated command.

UN force of 550 took over policing duties as clashes between gangs continued to break out in Dili. UN envoy Hasegawa ended 4-year tenure with bleak speech warning of “very fragile and volatile” situation and highlighting concerns over unrest in IDP camps near the capital. Australian foreign minister Downer, in visit to Dili, warned current UN deployment insufficient.

Situation remained tense with local trust in international police/defence forces and government greatly reduced. Process of removing illicit weapons and holding those responsible for April/May violence yet to begin; 56 prisoners, including Alfredo Reinado, rebel leader arrested in July, escaped from Dili jail 30 August. UN Security Council unanimously approved new and expanded UN mission (UNMIT) 26 August. Mission to consist of 1,600 police and 35 military liaison officers, but no troops. Previous request by Dili, UNSG Annan, China, France and others for UN control over all international troops rejected in resolution - allowing Australia, with 1,500 troops in multi-national force of 2,300, to retain control and financial burden for military component; Annan to review arrangements by 25 October. Intermittent violence persisted in Dili despite President Gusmao’s suspension of emergency rule. Attacks by youths on refugee camps saw Australian police fire warning shots. 25 gang members arrested for arson and attack on police 21 August.

Situation showed signs of improvement as former Foreign and Defence Minister Ramos-Horta sworn in as new PM 10 July, prompting more rebels to surrender weapons. New cabinet sworn in 14 July with PM retaining defence portfolio. TL asked UN Security Council for 800 international police for 2 to 5 years. UN Special Envoy told UNSC substantial long-term military and police presence required. Peacekeepers arrested 20 for illegal possession of weapons, including rebel leader Reinado. UN commission of inquiry set October deadline for its investigations into April-May violence. Former PM Alkatiri questioned over allegations he paid rebels to attack opponents. International police force gradually replacing military patrols in Dili as first Australian troops withdrew. Violent attacks by teenage gangs increased, including attack on UNICEF worker.

Political and security situation remained tense. PM Alkatiri resigned 26 June after mass demonstrations and President Gusmao threatened to resign if he stayed in office: sparked new violence in Dili. Foreign and Defence Minister Ramos-Horta resigned in objection to ruling Frelitin party support for Alkatiri but appeared ready to resume duties if asked. Former Interior Minister Lobato arrested for arming rebels; Alkatiri claimed immunity to avoid investigation. Rebels agreed to disarm; Australian troops began process 16 June. Australian government pushed for greater UN involvement but U.S. opposed deployment of UN peacekeepers to replace Australian-led contingent. UN appointed 3-member commission of inquiry to investigate April-May violence. UN mission extended until 20 August.