Senior officials in Jerusalem confirmed Monday that Syria has carried out a number of measures in recent weeks that reflect that it is taking talks with Israel seriously.

The sources refused to say whether they were referring to such measures as lowering the alert levels of the Syrian army or stemming the flow of arms to Hezbollah in Lebanon through its territory, but they did say that the effects of the measures were "tangible."

Prime Minister Ehud Olmert said he was pleased with the measures and with the negotiations with Syria. He predicted that Israel's talks with Damascus will soon cause Syria to come into conflict with Hezbollah and Iran. Olmert said that when Syria reaches that crossroad it will have to decide which direction to pursue.

"The Syrians will soon discover that you can fool some of the people some of the time, but you can't fool all of the people all of the time," Olmert said, paraphrasing U.S. president Abraham Lincoln.

Olmert said that he expects Hezbollah to try and avenge the death of top figure Imad Mughniyeh, who was killed in a bomb blast in February in Damascus that has been attributed to Israel.

Meanwhile, a Western source said Monday that Syria is interested in making as much progress as possible with Olmert so that his successor will be bound to whatever commitments he makes.

The sources in Jerusalem, meanwhile, said Syria is interested in having the U.S. or a European country mediate talks with Israel. France, which currently holds the Presidency of the Council of the European Union, is considered a strong candidate for the role. Paris has improved its ties with Syria over the past few months and brought it out of international isolation. Syrian President Bashar Assad and his French counterpart, Nicolas Sarkozy, discussed the matter at the Mediterranean summit earlier this month.

Olmert and Assad were in close proximity for much of the summit and at one point stood only meters away from one another. However, they never met or shook hands. Assad seemed determined not to make contact with Israel's prime minister.

"I knew Assad wouldn't want to be part of such a meeting," Olmert said. "We sent messages in advance that we did not intend to make contact during the summit. We thought such efforts would be artificial and unnecessary."

On the issue of finding a third party to mediate, sources say that Damascus may agree to direct negotiations. Talks are currently being held via indirect channels.

Meanwhile, Syria's Ambassador to the U.S., Imad Moustapha, Monday told the American branch of Peace Now that a peace deal with Israel, Syria and Lebanon was possible.

"Let's sit down, make peace and end this war status once and for all," Moustapha said. He later added that Israel had an opportunity to make peace with Lebanon at the same time.

Moustapha, a senior Syrian policymaker, is considered close to Assad. Also Monday, Haaretz learned that the U.S. State Department canceled a meeting with a visiting Syrian delegation in Washington last week because it was leaked to the press and because they believed the Syrians were behind the leak.