OLMERT MIGHT RESIGN

EU MUST ACT ON ZIMBABWE
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Israeli officials say report on airman delivered By LAURIE COPANS, Associated Press Writer JULY 12,08

JERUSALEM - Israel has received a report from the Lebanese militia Hezbollah on an Israeli airman missing for more than two decades, potentially clearing the way for a prisoner swap between the two foes, officials said Saturday. Prime Minister Ehud Olmert was expected to receive the report later Saturday and bring it for a vote before his Cabinet on Tuesday, the officials said on condition of anonymity since no official announcement was released.Hezbollah said in the report that it does not know what happened to Ron Arad, who has been missing since he was captured alive when his fighter jet went down over Lebanon in 1986, the officials said.According to the document, Hezbollah believes that Arad is dead, the officials said.Under an Israel-Hezbollah deal, Israel will hand over Samir Kantar, a Lebanese man serving multiple life terms for a 1979 attack in Israel's north. Israel is also expected to release four Hezbollah prisoners and dozens of fighters' bodies.In return, Israel was to get two soldiers captured by Hezbollah in a 2006 cross-border raid that set off a fierce 34-day war. Olmert has said that he believes the soldiers are dead.Israeli military officials say the exchange is likely to take place this week, pending final approval by the Cabinet.

Arad's daughter, Yuval, urged authorities not to declare her father dead nor to give up the search for him. Israel has been reluctant to announce that he is dead in part because rabbis require proof that he is no longer living.It sounds strange perhaps but you can't declare a person dead just because you don't know, Arad told Channel 10 TV Friday. She was an infant when he went missing.Arad was forced to parachute out of his fighter jet after one of its bombs apparently malfunctioned. The jet's pilot was rescued by Israeli forces, but Arad was captured by guerrillas from the Shiite Amal organization.Letters and photographs from Arad were initially sent to Israel, but talks for his release failed not long afterward and the navigator was not heard from again.A U.N.-appointed German official mediated the agreement, which Israel had originally approved June 29. Israeli negotiator Ofer Dekel had recently traveled to Europe to pick up the document on Arad.In exchange for the report, Israel is to provide information on four Iranian diplomats who disappeared in Lebanon in 1982. Iran claims they were kidnapped by Lebanese militiamen allied with Israel and turned over to Israeli troops.Israel denies holding them. Samir Geagea, former head of the disbanded Lebanese Forces, has said militiamen killed them.Israel invaded Lebanon in 1982, taking over large areas as part of a military sweep to expel Palestinian guerrillas.Kantar is serving multiple life sentences for one of the most gruesome attacks in Israeli history. He was convicted of shooting a policeman and then killing an Israeli man in front of his 4-year-old daughter before beating her to death.Kantar denies killing the girl.

Aide insists Israeli PM never stole a shekel JULY 12,08

JERUSALEM (AFP) - An aide to Israeli Prime Minister Ehud Olmert insisted on Saturday that he has never stolen a shekel, after new police suspicions over the premier's finances, the media reported.

The prime minister is neither a thief nor an imposter. He has never stolen a shekel or used public funds for family expenses, said Rachael Risby Raz, quoted by the media.Raz, who organised Olmert's travels while he was trade and industry minister, is a key witness in the latest case against Olmert.Israeli police said they have new suspicions over Olmert's finances on Friday after questioning him for a third time over graft allegations that have prompted calls for his resignation.Olmert is suspected of fraud by sending multiple bills for the same airline tickets to various entities including the state, and allegedly using ill-gotten gains to finance private trips for himself and his family, police and the justice ministry said in a joint statement.Initial allegations focused on claims that Olmert illegally received hundreds of thousands of dollars in cash-filled envelopes from a US financier before he became prime minister in 2006.

Hezbollah gains clout in Lebanon — but at a cost By HAMZA HENDAWI, Associated Press Writer JULY 12,08

AITA AL-SHAAB, Lebanon - In this dusty village on the front lines of Israel's 2006 war with Hezbollah, the Iranian-backed guerrilla group looks as strong as ever. But even as it reaches the zenith of its power in Lebanon, Hezbollah is generating new perils along the way. Tales of heroism by Hezbollah fighters still make the rounds in Aita al-Shaab, the streets are adorned with portraits of the group's martyrs, and yellow Hezbollah flags fly from lampposts. Villagers, still rebuilding from the devastation of the war, profess unswerving devotion to the Shiite Muslim group and its charismatic leader, Hassan Nasrallah.I am 90, but if they ask me to fight Israel, I will, said Hassan Marai, a tobacco farmer.Hezbollah is our only protector, Marai declared at his home, reduced to rubble in the war, but now partly rebuilt with money from Hezbollah and the wealthy Gulf state of Qatar.Hezbollah, or the Party of God, is both a military and political movement with members in Lebanon's parliament. A close ally of Iran and Syria, it emerged with a winner's swagger after holding off Israel's 2006 onslaught. Now, nearly two years into a power struggle with Lebanon's U.S.-backed government, the party is poised to gain what it long demanded — greater say in the politics of this fractured nation.With this added muscle, Hezbollah could block any attempt to disarm its fighters, ensuring its hold along the border with Israel. Hezbollah also could better counter U.S. influence in Lebanon and increase the sway of Shiites, who are believed to constitute the country's largest sect but have long felt squeezed out by Sunni Muslims and Christians.

However, Hezbollah's gains come at a cost. Its violent methods have deepened the bitterness among its political opponents in Prime Minister Fuad Saniora's camp. Hezbollah's military also has less room to maneuver, given that Israel gained a better picture of the militia in the 2006 war and will likely answer any provocation with massive retaliation. And many Lebanese — perhaps even some Hezbollah supporters in south Lebanon — could blame the movement if there is yet another destructive war.Meanwhile, Israel and Syria are holding indirect talks through Turkish mediators, and Israel would be unlikely to accept any deal that doesn't curtail Syria's backing for Hezbollah.The two-year power struggle in Lebanon came to a head in May when Saniora's government ordered the dismantling of Hezbollah's private telephone network — which the group maintains is its warning system against Israeli attack — and fired the pro-Hezbollah security chief at Beirut's international airport.

Hezbollah reacted strongly. Its fighters seized Sunni districts in Beirut and battled militias loyal to the government in the hills above the city and in the country's north. Eighty-one people were killed, and Saniora was forced to rescind the two decisions in a humiliating defeat.Under an Arab-mediated deal sealed in Doha, the Qatar capital, the government agreed to form a unity government that would essentially give Hezbollah a veto over Cabinet decisions. The U.S. considers Hezbollah a terrorist group, but faced with the prospect of more deadlock and bloodshed, gave the planned government its blessing.Hezbollah's new power was gained, however, by violating Nasrallah's long-standing pledge not to take up arms against other Lebanese factions, awakening memories of Lebanon's 15-year sectarian civil war that ended in 1990.Hezbollah did something it had vowed it will never do, said Mohan Abedin, a London-based expert on Shiite politics in the Middle East. It will never get away with it. Its enemies in Lebanon have strong backers and access to massive funds, he added, referring to U.S. and Saudi support for Saniora.In Tariq Jadidah, Beirut's largest Sunni district and scene of battles in May, signs abound of the sectarian rift widened by the clashes. Banners declaring we will never forget our martyrs stretch across some streets. Giant portrait posters of Saad Hariri, leader of the U.S.-backed parliament majority, are everywhere.Hezbollah turned Beirut into another Baghdad, said Tariq Jadidah resident Ahmed Hader. They set up checkpoints and asked motorists and pedestrians about their sectarian identity.A new government was formed July 11 after six weeks of wrangling. In the new Cabinet, the parliamentary majority holds 16 seats, the opposition gets 11, while three others were distributed by the president.The delay in forming the government was a signal that Saniora's camp was angling to limit Hezbollah's clout. At the end, it managed to deny the Hezbollah-led opposition any of the most important Cabinet positions, except for the one it had already held — foreign affairs.Hezbollah has not made clear its next step but is busy trying to counter criticism of the May violence. The resistance's weapons should not be used to achieve political gains, Nasrallah said in a video address to tens of thousands of supporters in Beirut days after the Doha agreement. This country cannot rise and continue except through cooperation, consensus and solidarity.Hezbollah supporters insist the group was only defending itself against a government move to uproot it. Nasrallah said that had the government shut the group's telephone network, it would have then tried to disarm it. Hezbollah is believed to have nearly 30,000 missiles, including some that can hit Tel Aviv, as well as land-to-sea missiles. Whatever Hezbollah does next, it will have to be careful. Its ties with some allies in the Sunni, Druse and Christian communities already have suffered because of the May violence, and it is hampered militarily in its stronghold of south Lebanon by the presence of 13,000 U.N. peacekeepers and 15,000 Lebanese army soldiers. If another war with Israel breaks out, The Israelis will come in massively, said Timor Goksel, who served as a spokesman and adviser to the U.N. force in southern Lebanon for nearly 20 years.

In 2006, many Lebanese complained that Hezbollah had dragged the whole country into war, and a repeat performance can only mean more anger and resentment, even among Shiite villagers in the south, many of whom are still reeling from the destruction. In Aita al-Shaab, Hezbollah as the effective government has not come up with the cash to complete rebuilding. Marai and two of his daughters couldn't move back into their home until May, nearly two years after the war, and the upper story is still not rebuilt. Paul Salem, director of the Carnegie Middle East Center, an arm of the Washington-based Carnegie Endowment for International Peace, said another war could be a political and military disaster for the guerrillas. Hezbollah is in a serious bind, Salem said. It has entered the cycle of full wars with Israel.

Police: Palestinian behind Jerusalem shooting By DIAA HADID, Associated Press Writer JULY 12,08

JERUSALEM - Police were searching Saturday for a gunman who wounded two Israeli policemen on patrol in Jerusalem's Old City, in what officials described as a nationalist attack by a Palestinian. The shooting, which took place just before midnight Friday at Lion's Gate, was captured on a security camera, but the assailant's face was not visible in the darkness, Israel Radio said. The gunman fled to a nearby cemetery and apparently was not hit by police fire, the radio said.In Jerusalem, green-clad Israeli security forces rounded up Palestinian men overnight in an Arab neighborhood close to the Old City, forcing some to lie on the ground stripped to their underwear while others stood against walls. Red police tape crisscrossed the Lion's Gate entrance, barring people from entry.

On Saturday morning, traffic crawled to a halt outside a main Israeli checkpoint between Jerusalem and the West Bank, apparently as authorities searched for the perpetrator.Also Saturday, Palestinians fired a rocket into Israel from Gaza, the army said, a violation of a three-week-old truce between Gaza's Hamas rulers and Israel.The attack in Jerusalem was the sixth since the beginning of the year. It came just a week after an Arab construction worker went on a rampage with a huge earth moving vehicle, killing three Israelis before he was shot dead. In March, a Palestinian from Jerusalem shot and killed eight Israelis in an attack on a Jewish seminary in the city.Police Commissioner Dudi Cohen said he did not believe the recent attacks were related. Several years ago, at the height of the second Palestinian uprising, Jerusalem was hit hard by Palestinian suicide bombers sent by militant groups. However, some of the recent attacks in the city appeared to be the acts of individuals.We don't see a connection between these events, said Cohen. At the moment, it was an isolated event.About two-thirds of Jerusalem's 750,000 residents are Jews. The rest are Palestinians who came under Israeli control when Israel captured their part of the city in 1967.Unlike their counterparts in the West Bank, Palestinian residents of Jerusalem enjoy freedom of movement and Israeli welfare benefits. But they also complain of official discrimination in the allocation of budgets and services and are struggling to obtain permits to build houses.Meanwhile, Israel's army said Gaza militants fired a rocket into Israel in violation of a cease-fire that took effect June 19. The rocket landed in an open area. There were no reports of injuries.There was no claim of responsibility for the rocket attack.Hamas officials say they are trying to enforce the truce and it appears smaller opposition groups are mainly involved in truce violations.On Thursday, Israeli troops shot and killed an 18-year-old member of the Al Aqsa Martyrs' Brigades, a Hamas rival, on the Gaza border. Al Aqsa has said it would avenge the death.Despite the sporadic violence, neither side has said it's walking away from the truce.

Gaza rocket strikes Israel Sat Jul 12, 7:58 AM ET

JERUSALEM (AFP) - A rocket fired from the Gaza Strip struck an open field inside Israel without causing any casualties or damage, police said Saturday. Several rockets and mortar rounds have been fired from Gaza in recent weeks despite an Egyptian-brokered truce between Israel and the Islamist Hamas movement, which seized power in Gaza in June 2007.Israeli troops on Thursday shot dead an unarmed Gaza militant near the fenced-off border of the impoverished territory, causing the first fatality since the truce came into force on June 19.The Al-Aqsa Martyrs' Brigades, an armed group loosely tied to Palestinian president Mahmud Abbas's Fatah party, said the man was one of its fighters and retaliated by firing two rockets into Israel.The group has vowed to carry out further attacks, while Hamas has said it will arrest anyone who violates the truce.

Will Scandal Finally Engulf Olmert? By TIM MCGIRK/JERUSALEM
Sat Jul 12, 12:55 AM ET

In many countries you expect police investigators to tiptoe around a prime minister. But not in Israel, not any longer. It is a measure of how far Prime Minister Ehud Olmert has free-fallen in the public esteem that police investigators are now openly saying that if he were an ordinary citizen - and not the highest elected figure in the land - he would already be under arrest.On Friday, Olmert was interrogated for the third time in a widening probe on alleged corruption and fraud that could eventually lead to the flame-out of his political career. A revolt has already begun in Olmert's Kadima party, which has decided to hold primaries by mid-September, a move designed to oust him.Polls show that if Olmert, tarred by scandal, were to keep clinging to the leadership of Kadima, the party would collapse - and it would drag the coalition government along with it. Zevulon Orlev, chairman of the National Religious party, called for Olmert to quit after police interrogated him on Friday, saying: In an enlightened country, he would have resigned a long time ago.Olmert could go sooner, if the corruption and fraud allegations stick. The prime minister says that he is the innocent victim of a police campaign against him. But after a combative, two-hour grilling at his official Jerusalem residence on Friday, police investigators issued a statement claiming that Olmert was suspected of serious fraud and other offenses. He was questioned about the allegedly double billing of charity organizations for his trips abroad as mayor of Jerusalem and trade and industries minister. Yad Vashem, the Holocaust museum, as well as charities helping physically and mentally handicapped children were among those that Olmert allegedly double-charged. Police investigators accuse Olmert of putting the surplus money into a private bank account, amassing upwards of $100,000 over the years, and dipping into it for his family vacations. The Prime Minister's Office denies the charges and says that Olmert paid for his private trips with frequent flier miles. His office blames the police for a misleading attempt to create drama.

But Olmert faces other suspicions, too. On Feb.17th, his lawyers will cross-examine an American multi-millionaire, Morris Talansky, who earlier told police that over the years he had given Olmert hundreds of thousands of dollars in envelopes stuffed with cash for campaign funds which were used for expensive items and vacations. Talansky also claims he gave Olmert loans which were never re-paid. Olmert denies the allegations but says that if he is indicted, he will resign. For many Israelis, sick of the scandal that has engulfed the prime minister for many months, that can't happen soon enough. Olmert, they say, has been too wrapped up in his own defense that he cannot run the country, or make peace with the Palestinians. View this article on Time.com

Lebanon forms unity government with Hezbollah By Laila Bassam Fri Jul 11, 4:00 PM ET

BEIRUT (Reuters) - Lebanon ended weeks of wrangling on Friday and formed a unity government in which Hezbollah and its allies hold effective veto power, as agreed under a deal that ended a paralyzing political conflict in the country. The decisive say granted to the former opposition led by Hezbollah, an ally of Damascus, shows that Syria has succeeded in wrenching back some political leverage in Lebanon, where it was the main power broker until its troops left in 2005.The birth of the government, the first under newly elected President Michel Suleiman, should close a long political crisis that had threatened to plunge Lebanon into a new civil war.But it also marks the start of a challenging new era in which leaders must contain rising sectarian tensions, prepare for a parliamentary election next year and start talks on the fate of Iranian- and Syrian-backed Hezbollah's military wing.A presidential decree announced the cabinet after Suleiman, a Maronite Christian, met Prime Minister Fouad Siniora, a Sunni Muslim, and Parliament Speaker Nabih Berri, a Shi'ite Muslim.This government has two main tasks: regaining confidence in the Lebanese political system... and securing the holding of a transparent parliamentary election, Siniora told reporters.The new team has one Hezbollah minister in addition to 10 ministers from its Shi'ite, Druze and Christian allies.The opposition was guaranteed 11 of the cabinet's 30 seats under a May deal to defuse a conflict that had sparked some of the worst fighting since the 1975-90 civil war. All major decisions require a two-thirds majority or 20 cabinet votes.

The Qatari-brokered May 21 agreement opened the way for Suleiman's election four days later, but factional squabbling over portfolios had held up the formation of a government.The majority coalition chose 16 ministers. Suleiman picked the remaining three, including Interior Minister Ziad Baroud.Siniora's close adviser Mohammad Chatah takes the finance portfolio. Hezbollah's Mohammad Fneish becomes labor minister and Fawzi Salloukh, of the Shi'ite Amal group, foreign minister.The cabinet's main task will be to ease sectarian and political tensions to avert further violence, adopt an election law agreed in the Qatar talks and supervise next year's poll.

POPULAR RELIEF

Finally! a 21-year-old Beirut man, who gave his name only as Ahmed, said of the new cabinet. Hopefully it will be a real national unity government and they won't waste time fighting at the table and will sort out the problems of the Lebanese.The United States welcomed the formation of a cabinet but said it would not deal with cabinet members from Hezbollah.This cabinet does include members of Hezbollah, as did the last one. We will not deal with those members of the cabinet. But we look forward to working with the prime minister, as well as his new foreign minister, State Department spokesman Sean McCormack told reporters in Washington.European Union foreign policy chief Javier Solana also hailed the formation of the new government, which he said marked a key achievement.

Important decisions need to be taken in the coming weeks and there is a lot of work to be done, Solana said in a statement, reiterating the EU's support to Siniora. Suleiman is due in Paris for Sunday's launch of French President Nicolas Sarkozy's Mediterranean Union project, his first foreign trip as president. He is expected to hold talks there with his Syrian counterpart Bashar al-Assad. Assad's presence at the summit, which Israeli Prime Minister Ehud Olmert will also attend, marks French recognition of Syria's role in facilitating a compromise in Lebanon. Damascus had given its blessing to the Doha deal, which effectively translated into political gains the military victory Hezbollah and its allies had won against their Western-backed foes in street fighting in Beirut and elsewhere earlier in May. With the government in place, Suleiman is expected to call rival leaders for round-table talks on divisive issues, with the fate of Hezbollah's weapons foremost among them. Hezbollah maintains a formidable guerrilla army that fought off Israeli forces in a 34-day war in 2006. Its domestic detractors say Hezbollah has had no reason to keep its weapons since Israel pulled out of Lebanon in 2000. Hezbollah and its allies argue that it needs its arsenal to deter and defend Lebanon against possible Israeli attack. (Additional reporting by Sue Pleming in Washington and by Tala Shukri; Writing by Nadim Ladki; Editing by Alistair Lyon and Samia Nakhoul)

Israeli police air new allegations against premier By STEVEN GUTKIN, Associated Press Writer Fri Jul 11, 3:46 PM ET

JERUSALEM - Police revealed stinging new allegations against Israeli Prime Minister Ehud Olmert on Friday, accusing him of pocketing tens of thousands of dollars by deceiving multiple sources into paying for the same trips abroad. The latest revelations came just after police grilled Olmert for a third time in a widening corruption probe — and made it even harder for him to hold on to his job and carry out peace talks with the Palestinians and Syria.Police said Olmert is suspected of obtaining $100,000 before he became prime minister by getting multiple sources — among them state and public organizations including charities — to pay for identical trips abroad so he could pocket the difference.The allegations were the most damaging for Olmert since police accused him in May of taking hundreds of thousands of dollars in cash-stuffed envelopes from an American entrepreneur when he was a Cabinet minister and mayor of Jerusalem.Olmert served as Jerusalem mayor for 10 years until 2003, when he was appointed trade minister in former Prime Minister Ariel Sharon's government. He held that position until he became prime minister in 2006 after Sharon suffered a devastating stroke.Police said Friday they were widening their investigation of Olmert to include the funding of his trips abroad.He has consistently denied any wrongdoing. Yet even before the latest accusations, Israeli pundits and media were nearly unanimous in their assessment that the prime minister is on his way out.It's hard to fathom what Olmert is trying to achieve by postponing his dishonorable exit from public life when it's obvious to everyone else that his public career is over, said the lead editorial Friday in the newspaper Haaretz.Olmert's lawyers are hoping their cross-examination next week of the key witness in the case — 75-year-old American Jewish businessman Morris Talansky — will bolster the prime minister's fortunes.

In a stunning deposition in May, Talansky testified he handed Olmert hundreds of thousands of dollars in envelopes over the years and said some of the money went to pay for expensive cigars, hotels and other luxuries. Police suspect the cash was either for illegal campaign contributions or bribes.Olmert's backers note he has been written off before only to re-emerge intact. This is the fifth major corruption case against him, and few people had thought he would survive the fallout from his much criticized handling of the war with Hezbollah fighters in Lebanon two years ago.Nevertheless, the weight of the corruption probes taken together, combined with Olmert's rock-bottom approval ratings and Friday's highly embarrassing disclosures, is overwhelming. Olmert has said he will resign if indicted.After police questioned the prime minister for two hours at his official residence in Jerusalem, the police and Justice Ministry issued a statement saying that Olmert, while serving as mayor of Jerusalem and as minister of industry and trade, is suspected of seeking funding for flights abroad in his official capacity from several sources at the same time ... including the state.Each of these sources was asked to pay in full for the same flight, the statement said.Police suspect the considerable sums that remained after a flight was paid for were transferred by Olmert to a special account (his) travel agency administered for him. These monies were used to finance private trips abroad by Olmert and his family, the statement said.Police officials said Olmert also billed multiple sources for other expenses, such as hotels, on dozens of trips abroad — with the illicit funds amounting to some $100,000.A senior police officer with the National Fraud Unit said the Rishon Tours travel agency acted like a bank branch for the Olmert family. Before going abroad, they would contact the agency to check the balance in Olmert's account there and order tickets, said the officer, who agreed to discuss the case only if not quoted by name.No one answered the phone at the agency's offices Friday, a short business day in Israel because of the Jewish Sabbath beginning at sundown.

Besides asking the state to pick up the tab for his trips, Olmert also approached leading Israeli companies for funding, the police official said. Companies paid for his trips even when he was trade minister and responsible for overseeing corporate practices — raising suspicions of conflict of interest and breach of trust, the officer said. All information from the police outside the official statement was obtained on condition of anonymity because the case is still under investigation and officers were not authorized to divulge details not included in the statement. Through a spokesman, the prime minister insisted he broke no laws. Prime Minister Olmert is convinced that he is innocent of any wrongdoing and firmly believes that as this investigation continues, that innocence will become apparent to all, said Olmert's spokesman, Mark Regev. Regev would not comment on the substance of the new suspicions. Olmert's Kadima Party, a centrist movement that favors territorial compromises with Israel's Arab neighbors, is planning primary elections in September to choose a new leader. Olmert has said he might run, but analysts predicted Friday's revelations would keep him out of the race. At stake is far more than the fortunes of the 62-year-old Olmert. Olmert's government is deeply involved in what insiders describe as imperfect yet serious peace negotiations with both the Palestinians and Syria. If new elections were held now, polls say former Prime Minister Benjamin Netanyahu, the hawkish leader of the right-wing Likud Party, would probably win. However, Foreign Minister Tzipi Livni is likely to win the Kadima primaries in September. Polls indicate she would give Netanyahu a good run in a general election. If she became prime minister, she would likely pursue Olmert's peace moves. Associated Press writers Amy Teibel and Laurie Copans contributed to this report.

Lebanese army occupies abandoned Shebaa Farm: witness Fri Jul 11, 6:54 AM ET

SHEBAA, Lebanon (AFP) - The Lebanese army moved on Friday into Bastara Farm, the only one of the occupied Shebaa Farms that the Israeli army evacuated when it pulled out of south Lebanon in 2000, an AFP correspondent said. Lebanese army vehicles and bulldozers could be seen moving for the first time into the farm, which lies some 300 metres (yards) away from other farms which Israel has occupied for more than 40 years.A road has been reconstructed to link this new position to other Lebanese army posts in the southeast of the country.The Shebaa Farms, a mountainous sliver of land rich in water resources measuring 25 square kilometres (10 square miles), are located at the junction of southeast Lebanon, southwest Syria and northern Israel.Israel seized the Farms from Syria in the 1967 Middle East war when it captured the neighbouring Golan Heights which it later annexed.Ever since, the Farms have been caught in a tug-of-war over ownership. Lebanon claims them, with the backing of Damascus, while Israel says they are part of Syria.US Secretary of State Condoleezza Rice, during a visit to Beirut last month, called for an end to the standoff.The United States believes that the time has come to deal with the Shebaa Farms issue... in accordance with (UN Security Council Resolution) 1701, Rice said.Resolution 1701 brought an end to a devastating 33-day war between Israel and Hezbollah in summer 2006 and called for the UN secretary general to propose a border demarcation for the Shebaa Farms.Israel occupied south Lebanon for nearly 20 years until withdrawing its troops in May 2000, but it remained in the Shebaa. The United Nations ruled at the time that the withdrawal was complete and that the Farms were Syrian.A seven-point plan drawn up by Lebanese Prime Minister Fuad Siniora and adopted by the United Nations envisages placing the territory under UN administration while waiting for the three countries to resolve the issue.

Fayyad calls on Palestinians to defy Israeli army Thu Jul 10, 4:49 PM ET

NABLUS, West Bank (Reuters) - Prime Minister Salam Fayyad called on Palestinians on Thursday to defy an Israeli army attempt to shut down a major commercial centre in Nablus. In a striking intervention in an affair that Israel says is aimed at disrupting funding for Fayyad's Islamist opponents in Hamas, the Western-backed premier visited the modern complex which rises above the centre of the West Bank city and urged businesses to reopen there despite an Israeli raid on Tuesday.Shopkeepers are invited to open their stores and ignore the Israeli decision, Fayyad said, after soldiers who searched the building ordered it closed on the grounds its owners had passed funds to Hamas. The Israeli army orders and decisions are not valid ... We will deal with them as if they don't exist.Fayyad, a former World Bank economist, was appointed by President Mahmoud Abbas a year ago after Hamas, which ran the previous, elected government seized control of the Gaza Strip in fighting with forces from Abbas's secular Fatah movement.The United States and its allies see Fayyad's efforts to improve Palestinian forces' ability to curb anti-Israel militants and his declared focus on promoting economic growth as key contributions to a peace process relaunched in November.Since his appointment, Fayyad has been increasingly critical of Israel's failure to ease restrictions on movement in the occupied West Bank or to remove Jewish settlements scattered across the territory, both factors he says hobble its economy.Nablus has been a focus of complaints that Israeli forces are undermining Palestinian security efforts by raiding into a major city that is, in principle, under Palestinian control and are stifling commerce by ringing the city with roadblocks.

SETTLEMENT COMPLAINTS

Earlier, Fayyad visited the town of Nilin, which Israeli troops sealed off and placed under curfew for several days this week after protests, occasionally violent, against continuing work on walls and fences in the West Bank that Israel says are intended to prevent Palestinian attackers reaching its cities.Israel has rejected a World Court ruling four years ago this week which found the barrier to be illegal.Fayyad praised local people's protests: Peaceful, popular action in defense of our land is a legitimate right to thwart plans to confiscate land for building walls and settlements.Palestinians accuse Israel of failing to meet commitments to halt settlement in the West Bank. Washington has also criticized recent Israeli decisions to expand settlements near Jerusalem.Israel says it does not regard settlements on occupied West Bank land that it annexed and placed within expanded Jerusalem city limits as being part of the West Bank. It says, therefore, building in such settlements does not breach its commitments.Abbas is so irritated by the settlement building that an aide said he is considering suspending the peace talks: The Palestinian leadership views gravely the continuing settlement expansion ... and is considering suspending peace talks with Israel, Yasser Abed Rabbo told Reuters.Abbas visits Paris on Sunday, as does Israeli Prime Minister Ehud Olmert, for a meeting of European and Mediterranean leaders: The president will inform the international community and Olmert in Paris of his decision, Abed Rabbo said.U.S. President George W. Bush hopes to broker a deal before he leaves office in January on establishing a Palestinian state. However, prospects for a major breakthrough seem slight.

Israeli PM's party to hold primary mid-September: officials Thu Jul 10, 2:49 AM ET

JERUSALEM (AFP) - Israeli Prime Minister Ehud Olmert's ruling party will hold a primary vote in mid-September under a deal reached following calls for the premier to resign over a graft scandal, party officials said on Thursday. The Kadima party's steering committee will convene on Thursday to ratify the agreement hammered out by Olmert and the party's leadership to hold the primary election between September 14 and 18, Kadima chairman MP Tzahi Hanegbi said.A second round will be held before September 25 if necessary, according to the draft proposal.Foreign Minister Tzpii Livni is viewed as the front-runner in the Kadima primary, and Transport Minister Shaul Mofaz and Public Security Minister Avi Dichter are also eyeing the party's top position.It nevertheless remained unclear if Olmert himself intended to run in the September primary.Olmert faced a chorus of calls for his resignation from both opposition and coalition members after claims that he had unlawfully accepted vast sums of cash from a US businessman before becoming premier in 2006.The centre-left Labour party, Olmert's key coalition partner, threatened to quit the coalition if the premier was not replaced, a move that would likely topple the Israeli cabinet and lead to new elections.Olmert, who has denied any wrongdoing and refused to step down, weathered the political turmoil only after agreeing to hold a primary vote in September.

Israel indicts two alleged Al-Qaeda operatives Wed Jul 9, 2:05 PM ET

JERUSALEM (AFP) - Israeli authorities on Wednesday filed indictments against two Bedouin citizens suspected of belonging to Al-Qaeda and planning attacks in the country, the Shin Beth internal security service said. Taher Abu Sakut and Omar Abu Sakut are accused of serious crimes, including membership in a terrorist organization, aiding the enemy in wartime and delivering information to the enemy in order to harm state security, the Shin Beth said in a statement.Lead defendant Taher Abu Sakut is accused of opening contacts with Al-Qaeda in 2006 and providing information on military bases, strategic installations and crowded places in order to facilitate the planning of attacks, the statement said.

Those sites included skyscrapers in Tel Aviv, the Ben Gurion international airport and smuggling routes between Palestinian areas in the occupied West Bank and Israel, it added.During the contacts, Taher requested that Global Jihad put him in contact with fighters from Iraq and Saudi Arabia, in order to perpetrate an attack in Israel against the Jews.The two Bedouin from the southern Israeli town of Rahat were arrested in June.About 170,000 Arab Bedouin live in Israel, mainly in the Negev desert and the Galilee, with many living in poverty and complaining they are treated as second-rate citizens.

Israel approves new homes in east Jerusalem settlement Wed Jul 9, 8:22 AM ET

JERUSALEM (AFP) - An Israeli commission has approved the building of 920 new homes in occupied east Jerusalem, the municipality said on Wednesday, in a new blow to shaky peace talks with the Palestinians. The district commission has approved for construction 920 housing units in Har Homa, a statement said, referring to a neighbourhood in east Jerusalem, known in Arabic as Jabel Abu Ghneim, that has more than 10,000 residents.The Har Homa project is part of a plan to build some 40,000 new homes over the next decade in neighbourhoods in both east and west Jerusalem, that the housing minister approved in June, a ministry official told AFP.Until now specific aspects of this project were unknown.Israel occupied and annexed the eastern half of the city after the 1967 war in a move not recognised by the international community or the Palestinians, who wish to make the Holy City the capital of their future state.

A total of 245,000 Palestinians live in east Jerusalem alongside more than 200,000 Jewish settlers.Israel pledged to halt all settlement activity in the occupied West Bank when peace talks were revived at a conference in the United States last year.But it considers the whole of Jerusalem its eternal, undivided capital and has insisted it will continue to build in both the city's eastern sector and in the larger West Bank settlement blocs that it intends to keep in any deal.Little progress has been made in the negotiations so far, with the thorny settlements issue one of the major bones of contention.The Jewish state's settlement expansion in Jerusalem has infuriated the Palestinians, who have accused Israel of obstructing peace efforts.The United States has heavily criticised its close ally over its settlement activity in the occupied territories, with US Secretary of State Condoleezza Rice warning that the settlements issue must not block any peace deal.

No party should be taking steps at this point that could prejudice the outcome of the negotiations, Rice said after meeting Palestinian president Mahmud Abbas in June.

Hamas and Egypt to discuss truce, prisoner swap deal By Nidal al-Mughrabi Tue Jul 8, 12:15 PM ET

GAZA (Reuters) - Hamas leaders plan to hold talks with Egyptian officials in Cairo on the future of a ceasefire with Israel that has been marred by violations since it began nearly three weeks ago. In the latest challenge to the Egyptian-brokered truce, militants in the Hamas-ruled Gaza Strip fired two mortar bombs at Israel on Tuesday, causing no casualties, the Israeli military said.

Similar attacks since the truce went into effect have led Israel to close crossings with Gaza that had been reopened under the truce deal to the limited entry of goods into the territory.Officials in Gaza familiar with the Egyptian-Hamas dialogue said the talks would get under way on Wednesday.We will evaluate the Israeli commitment. They are opening the crossings partially and that was against the agreement, Mahmoud al-Zahar, a senior Hamas leader, told reporters.

Zahar said he and other Hamas officials would urge Egypt to press Israel to stop the repeated closures.Hamas has called on all militant groups in Gaza to abide by the truce, but some factions have vowed to respond militarily to Israeli raids in the occupied West Bank, which is not covered by the truce.In response to mortar bomb attacks on Monday, Israel said it would keep Gaza crossings closed on Tuesday, but reversed the decision after a special request by Egyptian intelligence chief Omar Suleiman, the Israeli Defence Ministry said.Though Israel has responded to cross-border rocket attacks by frequently closing Gaza's goods crossings, records show up to a 44 percent increase in total goods imports in recent weeks.This includes a nearly 30 percent rise in petrol supplies and a 40 percent increase in diesel imports, the records show.Zahar said the discussions also would include prospects for a prisoner swap with Israel.Gaza militants have been holding Israeli soldier Gilad Shalit for the past two years and hope to trade him for hundreds of Palestinians in Israeli prisons.Accusing Israel of a lack of commitment to the truce, Hamas last week declared talks on an exchange suspended. Zahar said Egyptian mediators would brief the group on Israel's position.He voiced few hopes that Egypt could succeed in efforts to reconcile between Hamas and Palestinian President Mahmoud Abbas's Fatah faction. Hamas seized the Gaza Strip from Fatah in fighting a year ago.(Editing by Diana Abdallah)