(Adds U.S. comment after diplomats meet on Sri Lanka, last three paragraphs)

By Claudia Parsons

UNITED NATIONS, Sept 24 (Reuters) - Sri Lankan President Mahinda Rajapaksa, who has launched a fierce offensive against rebel Tamil Tigers, told the United Nations on Wednesday he would not allow Tamils to be held hostage to terrorism.

The military in the last three months has stepped up an 18-month-old drive to wipe out the Liberation Tigers of Tamil Eelam -- regarded as one of the world's most resilient guerrilla groups -- and end a war that has killed 70,000 since 1983.

The rebel group, known as LTTE, want to establish a separate homeland for Sri Lanka's ethnic minority Tamils, in a nation that has been ruled by majority Sinhala-led government since independence from Britain in 1948.

Rajapaksa told the U.N. General Assembly the Tigers were "exploiting perceived ethnic grievances" to indulge in "blatant and brutal acts of terrorism."

He said the government was ready to address the causes of grievances and meet the aspirations of its people.

"What the government would not and could not do is to let an illegal and armed terrorist group ... hold a fraction of our population, a part of the Tamil community, hostage to such terror in the northern part of Sri Lanka," Rajapaksa said.

Sri Lankan officials have said the military has already killed 9,000 LTTE fighters in the north. Independent confirmation of casualty numbers is difficult, since media access to the war zone is restricted and both sides for years have distorted the figures to their benefit.

Sri Lanka recaptured the formerly LTTE-held east in July 2007, helped by the defection of a Tiger commander.

Rajapaksa pointed to that region as an example of the benefits on offer for Tamils in the north, saying economic development had been fast-tracked in the east and former rebels held positions in local government.

Rajapaksa said the government would only be ready to talk to the LTTE "when it is ready to commit itself to decommissioning of its illicit weapons and dismantling of its military capability, and return to the democratic fold."

He added that Sri Lanka would never permit the undermining of its territorial integrity or division of its territory.

The government in January officially threw out a ceasefire both sides had ignored and vowed to wipe out the LTTE.

The Tigers are on U.S., EU and Indian terrorism lists and have fought for more than three decades to establish a separate Tamil homeland. They have in the process silenced more moderate Tamil political voices.

Diplomats from the United States, European Union, Norway and Japan met on the sidelines of U.N. General Assembly to discuss Sri Lanka and voiced strong concern over the humanitarian crisis there because of the fighting, said senior State Department official Richard Boucher.

"Both sides need to make sure they are not catching civilians in the cross-fire and that they are letting people go to where they are safe and that humanitarian deliveries can get through," said Boucher. (Additional reporting by Sue Pleming; Editing by Doina Chiacu)

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