"The government appears to have no clear objectives in this war, no criteria for 'success' other than body counts and no exit strategy," the International Crisis Group (ICG) said.
In a damning report, Aceh: how to lose hearts and minds, the Brussels-based group said that tactics used in the operation launched on 19 May are counterproductive, and reminiscent of the era of the dictator Suharto.
These include forced participation in mass loyalty oaths, forced displacement of villagers, background checks on civil servants suspected of separatist sympathies and plans to create a new island penal colony.
The ICG said that "far from winning hearts and minds, the government is managing to alienate Acehnese even further."
Its tactics "do not help end separatism: they generate more support for it."
The ICG acknowledged that the Free Aceh Movement (GAM) poses a grave security threat. In addition to ambushing army and police patrols, it had engaged in assassinations, hostage-taking, arson and extortion.
But it quoted a non-governmental organisation source as saying the government could have capitalised on growing Acehnese disenchantment with GAM had it avoided a military response to the collapse of a peace pact.
Given current tactics, support for GAM in its strongholds could return, the ICG said.
The ICG said forced participation in loyalty oaths and in flag-raising are likely only "to remind people of everything they disliked about the Suharto years."
It said 37 houses were reportedly burnt to the ground in Bireuen district on 21 May for not displaying the Indonesian flag.
The provincial governor's instruction requiring all Acehnese to fly the flag was reminiscent of intimidatory tactics by pro-Jakarta militias in East Timor in 1999.
These "helped turn the Indonesian flag into a symbol of repression, not of patriotism, and the same is likely to be happening in Aceh."
About 40,000 people had been forced into refugee camps as of mid-July but preparations were "woefully inadequate," with a lack of drinking water and sanitation.
Around 40,000 people have been forced into refugee camps in the province
Those returning home often found their property looted, further fuelling resentment.
The ICG said military criteria for success appeared to be body counts which "do not measure the degree to which the military's own conduct is spawning a new generation of separatists."
It also questioned military figures on the rebel death number, saying that there has been no opportunity for independent verification of whether these are really guerrillas.
Police statistics regularly show the death number almost evenly divided between GAM and civilians, according to the ICG's report.
Although the original duration of martial law was to be six months, "as the emergency enters its third month, not a single major (GAM) commander has been captured," the report said.
But it was far easier to install the military than to pull them back. "Aceh is simply too lucrative a place for military officers who rely so heavily on non-budgetary sources of income. "
The report said chances of a return to negotiations are slim, due to "the current nationalistic mood" in the country, as well as the control over information from Aceh and political manoeuvring before the 2004 elections.
But a clear exit strategy is urgently needed.
This could include declaring an end to attacks; formally ending martial law; restoring full civilian control over Aceh; allowing 'normal' administrative and economic functions to resume and talking to residents about ways to strengthen the special autonomy already granted to the province.