Two barefoot Indonesian soldiers in camouflage fatigues lounged on plastic chairs outside a little hostel in a lane, their black boots discarded in the stifling heat. Inside, university students Ariel, James and Hendrik whiled away Thursday afternoon this week in a common room adorned with a picture of the Last Supper.

They were refugees from Ambon, one of the Spice Islands of Indonesia, which has been torn apart by conflict between Muslims and Christians.

It was their misfortune to find themselves now in Ujung Pandang, Indonesia's fourth largest city, in the week that it too experienced, for the first time, the religious conflict which is convulsing parts of Indonesia. "We cannot go outside, it is too dangerous," they said, passing round Kansas cigarettes.

The soldiers were there to protect students sheltering in the Christian hostel from extremists among the Muslim majority of the old port city, situated on lush, mountainous Sulawesi island, who have turned against its 20 per cent Christian population. Military guards have been posted at Catholic and Protestant churches, community halls and schools. The trigger for the violence was an explosion at Indonesia's biggest mosque in Jakarta on Monday.

News reports from Ujung Pandang said a mob burned down a Catholic church in retaliation. It was much worse than that. The attack on Catholic property was widespread, and was organised not by poor people but by students who last year were prominent in the campaign for reform. They poured out of the Islamic Hasanuddin University campus on Monday evening and burned the church, the offices of a Catholic foundation, a dormitory, the pastor's residence, his Toyota car and a youth meeting hall.

"The soldiers came with tanks and they opened fire with rifles," said Arief, a leader of the students' union, as we picked our way over a pile of broken roof tiles in the ruins. "They shot a friend of mine, Joko, in the leg."

His fellow-students then marched into the city centre, he said, some dressed like ninjas (devils) with samurai swords and sarongs around their head, stopping cars and beating up Christians - identifiable from their identity cards. Muslims hung fringed prayer mats from their doors for protection as the students broke the windows of Christian houses, churches and secondary schools in the city of 1.2 million people known under Dutch rule as Makassar.

Tensions have been rising here since December when ship-loads of refugees, mostly Muslim, began arriving from Ambon, a community in Indonesia's Spice Islands, bringing horror stories of religion-motivated violence in which scores of people died and 3,500 buildings, including mosques and churches, were destroyed.

For four centuries hard-working people from south Sulawesi, particularly the mainly Muslim Bugis and Makassars, have wandered to neighbouring islands, forming an eight-million strong diaspora of small-time entrepreneurs in an archipelago united by inter-island migration. Thousands are arriving back now from places where violence has made life intolerable. Many of those who have arrived packed in fetid ships from Ambon have come to a foreign place which their grandparents left decades ago. Some 3,000 have come from East Timor, where they had moved in behind the invading Indonesian army in 1975, like Agus Muslimim, born in Ujung Pandang, whose clothing store in Dili's Mercado Lama (old market) was burned down last autumn by groups opposed to their presence in Catholic East Timor. More than 50,000 migrants from Sulawesi, Java and Sumatra have fled the Maluku islands, where more than 200 people have already died this year.

Islamic and Christian leaders in Ujung Pandang agree that the violence is politically motivated. Since the student movement brought down President Suharto last May, sinister forces have been at work throughout Indonesia, they say, pitting people against each other with the aim of redirecting the energies of the intensely Islamic students in a part of Indonesia with a history of revolt against Jakarta.

Students at Hasanuddin University were last year at the forefront of the reform movement, and at least six were shot dead in clashes with the army. Arief told me they had a saying: "the students feared their lecturers, the lecturers feared the rector, the rector feared the minister, the minister feared the president, and the president feared the students."

But the bomb in Jakarta succeeded in directing their anger against Christians. Many people in Ujung Pandang believe this was precisely the type of result intended by whoever planted the bomb, speculated by Jakarta newspapers to be a group within the military. In the mosque at Ujung Pandang, Dr H.M. Rafii, director of the Islamic Centre, told me he blamed "invisible people, who know well how to do their job, which is to destabilise people and who have a hidden agenda."

A cheerful man in white robes and rimless black hat, he said: "Doing harm in the name of religion, that's what I fear the most. Here you don't touch religion. No! No!" That was why there was a "hot reaction" from students to the bomb - but not from ordinary people," he said.

The same point was made by Rev Dr Zakaria Ngelow, rector of the Catholic Theological Institute, during a break on Thursday in an emergency forum of Muslim, Christian and Buddhist (Chinese) leaders and army and student representatives to promote national unity. "Religion is the number one issue in Sulawesi life, touch it a little and things get screwed up," he said. "Christians are afraid to go out. Like it or not we have to prepare for the worst. But at the highest and lowest level, there is no problem; the problem is among the students and the middle classes."

In the hostel guarded by the barefoot soldiers, the refugee students told me of how people who lived together in harmony for decades had turned on each other in Ambon. Some had fled knifewielding mobs and seen neighbours killed.

"I will spend the rest of my life here, not in Ambon," said Ariel. Others plan to move to quieter places like Bali. "It is a tragedy," he remarked. "I know people who lived in Ambon for three generations. Most are traders. It is their home. But they cannot live there now." Some inter-faith friendships survived, but Hendrik thought "it is very hard to rebuild emotional relationships with people who turned against you".

James commented: "Yesterday I went to the sea port to pick up one of my family and I met an old Muslim classmate, but he just ignored me." They all agreed that the unrest was political, related to the downfall of President Suharto and the first democratic elections in Indonesia, to be held in June. "This tragedy happens because of the political situation," said Hendrik. "It didn't happen in the past. We don't really understand why it happens now. We only see the result."