Palestinian Authority Chairman Mahmoud Abbas has reached an agreement in principle with Hamas leaders in Gaza on the organization's participation in PA diplomatic decision making and in a future Palestinian government, sources involved in Abbas's talks with Hamas reported yesterday.

The sources said that the details of the agreement, which Abbas reached with Hamas's Mahmoud al-Zahar and Ismail Haniyeh, will be ironed out after understandings have been reached with Israel and the international community on a cease-fire.

The main focus of the talks, the sources said, is the establishment of a "supreme diplomatic authority" to replace the PLO as the body responsible for approving any diplomatic agreement with Israel. This authority would include all the Palestinian organizations, both in the territories and abroad. Groups such as Hamas and Islamic Jihad are not part of the PLO.

Abbas and Hamas also agreed that Hamas would run candidates in the PA's parliamentary elections in July, and may even become part of the new government to be set up after these elections. However, Hamas would not participate in the government that Abbas and Prime Minister Ahmed Qureia are currently establishing.

The idea of a new body in which all Palestinian organizations would be represented arose several times during the cease-fire talks that Abbas's predecessor, Yasser Arafat, conducted with Hamas. In the end, however, Arafat always rejected it, fearing the loss of his Fatah faction's control over the decision-making process. Fatah is the dominant faction in the PLO, whereas Hamas demanded parity. It said that Fatah and Hamas should each get 30 percent of a new organization's seats, with the remainder divided among the other, smaller factions.

According to the sources, Abbas and Hamas have also agreed on two other principles. First, as reported in Haaretz last week, Hamas has agreed to accept the principle of a Palestinian state with the 1967 borders and its capital in Jerusalem, as a basis for talks with Israel. Until now, Hamas has always defined Israel, even in its pre-1967 borders, as "waqf land that must be liberated." A waqf is a Muslim religious trust.

Second, the parties have agreed that any cease-fire with Israel must include incternational guarantees, either Egyptian or American, of a halt to all Israeli military operations in the territories, including targeted killings, incursions into Palestinian areas, arrests and house demolitions.

Khaled Meshal, the head of Hamas's Damascus-based political bureau, told the London-based newspaper Al-Hayat yesterday that "with these agreements reached, the ball is now in the international and American court. There is no barrier to the PLO being the supreme legal framework of the Palestinian people after it is rehabilitated and rebuilt on appropriate foundations." But Hamas participation in the Palestinian government now being formed "is not on the agenda," he said.

Also yesterday, PA police destroyed illegal buildings in Gaza City for the first time ever. Most of the destroyed houses had been built by members of the Palestinian security services on beachfront property belonging to the Palestinian Authority.

Bulldozers escorted by armed policemen began the demolitions before dawn. By noon, about 10 buildings had been destroyed, as well as dozens of wooden structures that housed beachside cafes. The demolitions, which were ordered by Abbas, were welcomed by city residents. There has been much illegal building in other Gaza Strip towns as well, and Abbas has vowed to fight the phenomenon.