(Updates with Tiger comment, details) By Simon Gardner COLOMBO, Jan 19 (Reuters) - Sri Lanka's military captured a strategic rebel-held town in the island's restive east on Friday as more than 10,000 refugees fled the area and Tamil Tiger rebels cut a retreat after weeks under siege. The capture of Vakarai -- a town around 240 km (150 miles) northeast of Colombo that belongs to the rebels under the terms of a tattered 2002 ceasefire -- comes after weeks of fierce fighting between the Tigers and the military, who have vowed to evict them from the east altogether. "Vakarai has fallen," said military spokesman Brigadier Prasad Samarasinghe. "They are withdrawing to the north." "We are checking the civilians who are fleeing in case the Tigers have infiltrated them and try to come and attack government areas," he added. "We want to help the civilians get back to resettle there immediately." There was little in the way of resistance, aside from some smalls arms and mortar fire. The military had recovered one rebel body so far, while nine other Tiger fighters were killed in a separate clash further south in Batticaloa district. The Liberation Tigers of Tamil Eelam (LTTE) said in a statement on their Web site www.ltteps.org they had decided to readjust their positions in the east and pull back. The Tigers accused the military of preventing aid from reaching the trapped civilians and causing a humanitarian crisis. Some on foot, others on tractors, thousands of refugees left the northeastern coast town of Vakarai at dawn and headed south towards government-held territory a few miles away, some carrying white flags. "Some of the people are making their way down the coast, others are coming through jungle in vehicles," said Selvaraj Jeyaraj, project coordinator for the Italian Red Cross, told Reuters by telephone from the eastern district of Batticaloa. "We are talking about 12,000 internally displaced, more or less," he added. Around 5,000 people had reached a main army checkpoint, while 3,000 others were stuck further inland, unable to cross a large river. Around 20,000-25,000 refugees had already fled Vakarai in recent weeks. THOUSANDS FLEE The LTTE resumed its fight for an independent state for minority Tamils in the north and east after the majority Sinhalese government rejected demands for a separate homeland. With a rash of suicide bombings, air raids and land and sea battles in recent months, analysts fear an escalation of the war that has killed more than 67,000 people since 1983. The military said 45 troops had been killed since Nov. 1 alone during its operation to capture Vakarai, and estimated more than 300 rebels died. Vakarai is in the middle of a 20-km (12-mile) stretch of rebel-held territory, which the military surrounded after capturing rebel areas in a series of battles in recent months. The rebels still control some nearby villages. The area around Vakarai is one of several pockets of territory the Tigers control in the island's east -- and is their last remaining direct access to the sea in the east, an important supply line. The Tigers' patches of eastern territory are cut off from their main northern stronghold by military-held areas. The army has accused the Tigers of using displaced ethnic Tamils as human shields and planting thousands of landmines to prevent them leaving. But there has been no independent confirmation any mines had been laid. "Thousands of people are streaming out," said UN spokeswoman Orla Clinton. "Because we haven't had access (to Vakarai) since Nov. 29, food has been very short -- these people are obviously weak and afraid and we are looking for assurances their protection will be assured." Aid agencies, embassies and journalists have been clamouring for weeks to access rebel-held areas. The government has refused. (Additional reporting by Ranga Sirilal in COLOMBO)
