Sri Lanka's ongoing peace process suffered a blow on Saturday with the assassination of a senior Tamil politician.

Subathran, 44, leader of the Pro-Indian Eelam People's Revolutionary Front-Varatharaah Wing, in the Jaffna peninsula, was gunned down by a sniper, Defence Secretary Fernando said.

Despite the ceasefire between the Liberation Tigers of Tamil Eelam and the Sri lankan government, the LTTE have been accused of killing more than 30 rival Tamils and military informants.

Subathran is the most senior politician to have been killed during the truce.

Meanwhile, the crew of an LTTE vessel suspected to be smuggling arms, sank the vessel when asked to stop by the Sri Lankan Navy on Saturday.

Defence Secretary Austin Fernando said they have reported the matter to Scandinavian team monitoring the truce between government forces and Tamil Tigers.

There was no immediate reaction from the LTTE, but rebel sources said that the navy had attacked the ship in international waters.

The Tigers argue that the navy has no jurisdiction over rebel vessels in international waters.

"We are told there were 12 Sea Tigers. They jumped over board. There are concerns that the ship has sunk," Sri Lanka Monitoring Mission spokesman Agnes Bragadouir said. "There is no information if the Sea Tigers have been rescued or not."

Officials and diplomats here expressed fears that the latest violence could jeopardise the already troubled peace process.

The Tigers began boycotting the peace talks from April 21.

The ceasefire between the government and the rebels is limited only to the land and attempts for the same on sea have ended in failure.