The announcement came even as representatives of the National Liberation Army, or ELN, and the Colombian government had been meeting in neighboring Venezuela.
Pastrana said negotiators were on the verge of establishing the ground rules for formal peace talks when ELN officials made new demands and rejected a series of new government proposals.
"Faced with the obstinate position of the National Liberation Army to keep the process frozen, I've decided to suspend the talks," Pastrana said in a nationally televised speech at a military academy in Bogota.
Some 3,000 people are killed each year in the war, now in its 37th year, which pits the ELN and the larger Revolutionary Armed Forces, or FARC, against the army and a right-wing paramilitary group.
The development dims hopes that Pastrana, who on Tuesday began the last year of his four-year term, would achieve results in his quest for peace. He was elected in 1998, pledging to open talks to end the war.
Talks with the FARC began in 1998, but there has been no substantive progress.
Soon after taking office, he ceded a Switzerland-sized swath of land to the FARC in an attempt to jump-start negotiations, and had planned to provide a smaller site to the ELN.
Both the FARC and the ELN complain that Pastrana's government has done little to rein in right-wing paramilitary forces accused by Colombian and international observers of the majority of Colombia's human rights violations.
An ELN commander, Antonio Garcia, claimed last week that Pastrana was using the negotiations to further his political career.
ELN officials could not immediately be reached for comment on the decision to suspend the talks.
In testimony to Congress earlier this year, CIA director George Tenent said that, "together with the FARC, the ELN has stepped up its attacks on Colombia's economic infrastructure."
The State Department estimates the ELN to include roughly 3,000 to 6,000 armed members. Founded in 1965, it is led by followers of Fidel Castro and Che Guevera. FARC, by comparison, has 9,000 to 12,000 fighters.
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