Six years after wall frescoes by Polish Jewish artist and Holocaust victim Bruno Schultz were secretly brought to Yad Vashem from Ukraine, an arrangement is in sight that will end an affair that has cast a pall over Israel's relations with Poland and Ukraine.

The removal of the frescoes from the eastern Galician city of Drohobych, Ukraine, Schultz's hometown, resulted in worldwide criticism of Yad Vashem.

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The Ukranian Embassy's spokesman, Maksym Osavoliuk confirmed that talks were ongoing, which he called "fruitful" and noted "the Israelis showed good will and a desire to end the affair."

Individuals close to the affair told Haaretz that the Ukranian government wanted the agreement to include recognition that the frescoes were Ukranian property and were removed illegally from that country. In exchange, Ukraine is ready to consider allowing Yad Vashem to retain the frescoes as loans.

Yad Vashem responded that it knows nothing about talks with the Ukranians regarding ownership of the frescoes.

In an unusual step a few weeks ago, Yad Vashem allowed the Ukranian deputy minister of culture and tourism to view the frescoes, which are in a basement storeroom.

Schultz, who was also a teacher of literature, is considered today one of the most important early 20th century Polish writers. In 1941, after the German occupation, Schultz was employed by the town's Gestapo commandant, Felix Landau, in painting his childrens' room with works based on German folk tales. Schultz painted three works, depicting a queen, clowns and a carriage whose driver was depicted as a self-portrait. On November 19, 1942 Schultz was murdered with 230 of the town's Jews.

After World War II, the town became Ukranian territory. At the beginning of the 1990s, with the break-up of the Soviet Union and a revival of interest in Schultz's literary work, Poland and Ukraine initiated a joint museum in his memory. In early 2001, a documentary filmmaker identified Landau's villa and found the frescoes in a state of disrepair, and Ukranian and Polish experts began to examine how to conserve and present them. However, three months later the frescoes disappeared.

On May 29, Yad Vashem announced that it had them. Later it was revealed that a man employed by Yad Vashem had persuaded the present owners of the property to sell him the frescoes for an undisclosed sum.

Polish newspapers called Yad Vashem's action "barbaric" and Polish government leaders said they expected Yad Vashem to return the works, while the New York Times printed the story on page 1 and the New York Review of Books published an open letter protesting Yad Vashem's action signed by a number of American scholars. A year later, Israeli writers, including Aharon Appelfeld and A.B. Yehoshua responded in a letter that the Ukranians did not have the necessary know-how to conserve the frescoes.

A spokeswoman for Yad Vashem said the works would be displayed in the future "in keeping with artistic and curatorial considerations."