Condoleezza Rice / Reuters
Tickled pink ... Condoleezza Rice meets Sesame Street character Elmo in Jakarta / Reuters

US Secretary of State Condoleezza Rice shook hands with the fluffy puppet Elmo from Sesame Street at an Islamic school in Jakarta yesterday and later fended off questions about rising anti-US feelings in the world's most populous Muslim nation.

In Indonesia for two days before she flies to Australia on Thursday, Dr Rice has carefully promoted the idea of tolerance and understanding between Islam and the West.

The US will spend $US8 million ($11 million) over four years to fund an Indonesian version of Sesame Street, complete with puppets wearing Islamic veils - part of Dr Rice's broader message that Western culture can co-exist peacefully with moderate Islam.

In her first visit to Indonesia, Dr Rice met Foreign Minister Hassan Wirajuda and Indonesian President Susilo Bambang Yudhoyono, and discussed counter-terrorism, Indonesia's democratic reform, the reconstruction of tsunami-devastated Aceh, and the resumption of military ties between the US and Indonesia.

On a broader stage, Dr Wirajuda and Dr Rice discussed Indonesia's attempts to negotiate with the junta in Burma, Israel and Palestine, and Iran's nuclear plans.

A hundreds-strong protest outside the US embassy in Jakarta characterised Indonesian opposition to the US war in Iraq, but Dr Rice said there was also a lot of friendship between the two nations.

"I see many Indonesians who are friendly towards the United States," Dr Rice said. "I think the United States and Indonesia share a great deal. I understand that the United States has had to do things in the world that have not been popular.

"We're fighting a very tough enemy, an enemy that has been felt here in Indonesia with bombings in Bali, in Jakarta, that has been felt in London, that has been felt in Madrid, that has been felt in Russia, and of course in Washington and New York.

"I don't think there is any disagreement that we need to fight this common enemy."

Dr Rice is spending two days in both Indonesia and Australia, a long stay by her shuttle-diplomacy standards, and indicative of the importance that the US attaches to both nations.

"Indonesia, I believe has attached great importance to tolerance here, to its moderate politics ... that have really led to the ability of a lot of people of very, very different faiths to live in harmony here and Indonesia has been reaching out through its interfaith efforts, through its efforts to convince people Islam must be associated, as it is, with peace and not with extremism."

However a spokesman for the Islamic Council of Indonesia, once chaired by Abu Bakar Bashir, said Dr Rice's visit was a "disaster for Indonesia".

Standing outside the opulent Foreign Affairs Department building where Dr Rice briefed the press, Fauzan al Anshari said the US donations for education in Indonesia were obviously an attempt at propaganda, and an attempt to bend the curriculum to suit US ideas.