ARAB seafarers called it Serendip, from the Sanskrit meaning "island of refuge." In a fable written more than 200 years ago, Horace Walpole coined the term "serendipity" to describe three princes of Serendip who were blessed with the faculty of making happy discoveries quite by accident.But the recent history of Sri Lanka, the former British colony of Ceylon, reads more like tragedy than fairy tale. Years of communal violence and separatist struggle have turned an island of refuge into an island of refugees. Unless its divided peoples can discover the formula for peace, Sri Lanka may soon deserve the name I found scrawled on the metal gate of one of its innumerable displaced-persons camps: Crow Island. Ever since Sri Lanka gained independence in 1948, the relationship between the Sinhalese and Tamils has been marked by rivalry, wavering between uneasy peace and open conflict. Paradoxically, each side sees itself as the embattled minority. Comprising 17 percent of the population on Sri Lanka, the predominantly Hindu Tamils see the evolution of a Sinhalese Buddhist state as a threat to their cultural survival. The Sinhalese, they say, have wielded majority rule like a sword, disenfranchising or marginalizing the Tamils. At least once a decade, Sinhalese mobs in the capital of Colombo and other southern towns have set upon their Tamil neighbors, burning homes, looting shops, and killing scores of people. Sinhalese soldiers and police stood b y or joined the mayhem. But where Tamils see chauvinism, the Sinhalese see a stable, representative democracy - Sri Lanka was the first country in Asia to enjoy universal suffrage - and a generous welfare state. Despite a per capita GNP of only $400 per year, literacy rates are near 90 percent, and life expectancy is 70 years. Medical care is free, and food rations are available for the needy. Tamil demands for autonomy or complete separation, in the Sinhalese view, not only threaten these accomplishments but invoke the ancient specter of a Dravidian invasion from the Indian mainland, home to 55 million more Tamils. Events reached a bloody watershed in July 1983. In three days of rioting that Tamils call a state-sponsored pogrom and Sinhalese a tragic aberration, an estimated 3,000 Tamils were killed, more than 18,000 Tamil homes were destroyed, along with 5,000 shops and businesses, and 150,000 people were driven from their homes. Out of this violence emerged two defining features of the recent conflict: Tamil refugees began to flee the country in large numbers and a militant separatist movement, the Liberation Tig ers of Tamil Eelam (LTTE), came into its own. The latest and most violent round of fighting between the Tigers and the Sri Lankan Army began in June 1990; more than 6,000 people have died and many thousands more are missing. An estimated 1 million Sri Lankans - Tamils, Muslims, and Sinhalese alike - have been uprooted from their homes, and 125,000 have fled across the Palk Strait into India. More than 210,000 Sri Lankan refugees, virtually all Tamils, are living in the south Indian state of Tamil Nadu. Half are in government-aided camps: tents, tarp aper sheds, thatched huts, cyclone shelters, schools, temples, and community halls. Hundreds of thousands more people are displaced within Sri Lanka. The Sri Lankan government has tried to maintain a civil administration and essential services in the war-affected areas and has been distributing dry rations of rice, flour, and sugar to an estimated 700,000 displaced people living inside and outside government welfare centers in the north and east. The International Committee of the Red Cross (ICRC) assists in transporting relief supplies to civilians in the conflict areas and operates a hospital in a small neutral zone cleared out of the rubble in Jaffna, the LTTE stronghold in the northlands. Farther south, in the shadow of a Catholic church and sacred shrine, the UN High Commissioner for Refugees (UNHCR) has established an open relief center at Madhu, which offers temporary shelter to about 25,000 people. When the fighting is intense in surrounding villages, the population swells; when the conflict recedes, villagers go home again. The church has never been attacked and the Sri Lankan Army and the Tigers have been persuaded to keep their distance. The patrons of Madhu include not only UNHCR and the Catholic hierarchy but the Indian government as well. There is little question that without the alternative to flight that is offered by the open relief center, tens of thousands more Sri Lankan refugees would have crossed to India. R. Muttiah, a 55-year-old farmer, walked dozens of miles to Madhu with his wife, five children, and one grandchild. "We came to Madhu so that we could go to India from here," he told me. "We decided to remain here because we felt this camp gave us protection from the Army attacks and aerial bombings that forced us to leave our homes." Thanks to the cooperation between the Sri Lankan government, international humanitarian agencies, private relief agencies, and even the Tigers, the relief effort overall is something of a model program for conflict areas. The conflict itself - in which scores of civilians are routinely evicted from their homes or rounded up, abused, and killed - is anything but exemplary. Most of the people I interviewed who have sought refuge in India or who are internally displaced say they will not go home until peace returns, although the thought of a prolonged stay in the camps and welfare centers is deeply discouraging. There are some things that the United States could do to improve prospects in either case. First, the US should respond generously to both UNHCR and ICRC appeals for their Sri Lankan programs. The agencies are playing vital and complementary roles serving displaced people: UNHCR in operating the open relief centers, and ICRC in carrying out its traditional mandate to provide medical aid in conflict zones, trace missing persons, and register detainees. Washington should also consider bilateral aid to the Sri Lankan government to maintain basic relief for displaced persons living in the northeast and in the south. With assistance programs costing as much as $5 million each month, Sri Lanka could certainly use the help. If such aid is provided, however, there must be clear assurances, subject to monitoring, that displaced civilians are not subjected to forced relocation, arbitrary arrest and detention, or other abuse at the hands of security forces. Third, the US should leverage India's recent friendly overtures to promote international assistance and protection for the Sri Lankan refugees in Tamil Nadu, preferably through UNHCR. When former Prime Minister Rajiv Gandhi was assassinated outside Madras on May 21, and the Tamil Tigers were fingered as chief suspects in the attack, anxiety ran high in the camps that a violent backlash would follow. Two months later, about 2,000 Sri Lankan Tamils have been arrested and threatened by authorities with "sev ere penal action" including deportation. The arrests are a sharp reminder that the refugees enjoy no legal status or protection in India. A UNHCR presence in Tamil Nadu could do much to improve that situation. Last and certainly most important, the Sri Lankan government and the LTTE must be brought back to the negotiating table to hammer out a settlement. The two sides have proven themselves incapable of good-faith parley on their own, so a third-party intermediary - be it India, the Commonwealth countries, a special UN envoy, or a Jimmy Carter - must be found. "If peace doesn't return and we continue to live like this," said one refugee, "we will be degraded and ultimately extinguish as human beings." The Sri Lankan government and the Tigers must see that their common, and truly unforgiving, enemy is time.