The East Timor rebel leader, Mr Xanana Gusmao, transferred yesterday from a jail cell to de facto house arrest, said he would work from there for independence of the territory.
"What is clear is that I will be meeting with all components of the people of East Timor to reach a peaceful settlement. We all can lay the foundation for an independent East Timor state," Mr Gusmao told journalists shortly after he moved to a guarded house in central Jakarta.
Mr Gusmao (53) served more than five years of his 20-year jail sentence in Cipinang prison, which he left yesterday.
Indonesia invaded the former Portuguese colony in 1975 and unilaterally annexed it in 1976. But the United Nations and most countries still recognise Portugal as the administrator.
The Indonesian Foreign Minister, Mr Ali Alatas, and Mr Jaime Gama, representing Portugal, on Tuesday concluded a two-day meeting with the UN Secretary-General, Mr Kofi Annan, to discuss Indonesia's latest offer to allow East Timor to secede if a majority of its people rejected the government's offer for wide-ranging autonomy.
Mr Annan had called on Indonesia to release Mr Gusmao or put him under house arrest so that he could play a larger role in the search for a settlement.
The Australian Prime Minister, Mr John Howard, has urged East Timor to remain part of Indonesia, saying that independence would heighten the threat of instability.
Mr Howard came under attack from the Opposition for his comments, which came amid reports of new troubles in East Timor.
"There would be an economic and strategic vulnerability, there would be the potential for ongoing tension between Indonesia and the independent East Timor of the type that mightn't exist if East Timor were an autonomous part of Indonesia," Mr Howard said.