By Dumeetha Luthra
BBC News, Colombo
The military's strategy may have backfired, observers say
Sri Lanka's military has suffered two heavy blows in less than one week.
First, at least 129 Sri Lanka soldiers were killed in one day of fighting and more than 300 soldiers injured. It appears that an army offensive went badly wrong.
That figure represents the worst single day of casualties for the military since a ceasefire was signed in 2002.
The government claims it killed more than 200 Tamil Tiger rebels. However, no-one has yet been able to verify that and the rebels say they lost only 22 fighters.
Now more than 90 sailors are reported dead in a Tamil Tiger suicide attack.
The fear is that peace talks scheduled for the end of the month in Geneva, Switzerland, may not happen.
Analysts say the balance of negotiating power may have shifted.
Previously the government was seen to be willing but reluctant to come to the talks table.
The heavy casualties the forces have suffered could prove an opening for the softer elements within the government to have their voice heard
They had enjoyed several military victories, including the capture of Sampur, which is strategically placed on the southern edge of the Trincomalee harbour in the north-east of the island.
They had also advanced into Tiger-held territory in the Jaffna peninsula.
There was a clear element within the military and the government which was pressing to fight on and push the advantage in the field to translate into an advantage at the talks table.
The expressed readiness to come to talks was, as one diplomat put it, a sign that the government was open to negotiations - but not quite yet.
However, with the latest setbacks for the military, this strategy may now have backfired.
Analysts say that last week the Sri Lankan government started the fighting in Jaffna but underestimated the strength of the rebels.
The Tigers claim to have been waiting, prepared and expecting this clash.
Strategists say the soldiers walked into what was essentially a trap.
The international community had hoped that before the proposed talks on 28 October there would be a reduction in the violence.
The rebels are accused of using the truce to regroup
In fact, the country's key backers had called for a cessation of hostilities as a necessary precursor to the negotiations.
However, diplomats acknowledge that given the fluidity of the situation in Sri Lanka, the gap of several weeks between the agreement to talk and the date of those discussions was going to be a dangerous phase.
Observers say the military have been keen to push their military advantage while they still have the time; the Tigers for their part want an opportunity to regain a balance of power.
The rebels have never been known to come to the table from a position of weakness.
In fact, ahead of these talks both sides' commitment to the process has been questioned.
According to sceptics, the motivation for the Tigers agreeing to talks was not to resolve the situation, but to use it as an opportunity to regroup.
Even the monsoon rains have been cited as a reason why both sides are considering talking at this point.
Everything, anything, but the reality of a solution to Sri Lanka's conflict.
The agenda for the discussions still hasn't been set. No-one knows what the two sides will even be talking about.
And now the prospect of talks, however slim their chances for a sincere settlement, are hanging in the balance.
There is a real possibility that continued violence could scupper the discussions.
The heavy casualties the forces have suffered could prove an opening for the softer elements within the government to have their voice heard, a move away from the military solution.
Fighting in the north has led many civilians to flee their homes
However it could also mean the government is now unwilling to come to the table from a position of perceived weakness.
The hardliners may push for military successes to ensure their bargaining strength in Geneva is not weakened.
On the Tiger side, the fact they held their lines last week and have inflicted such losses on the government may result in a reluctance for immediate talks.
They may want to regain the territory they lost. On the other hand they may feel that already they have already regained the upper hand.
It is still too early to say what the longer term impact of this clash will be, but the continuing violence does not auger well for any prospective talks.