The deal between Hezbollah and Israel for the return of Ehud Goldwasser and Eldad Regev, two reservists abducted during a cross-border raid on July 12, 2006, which sparked the Second Lebanon War, will be delayed. In meetings held yesterday between Prime Minister Ehud Olmert and senior officials in the defense establishment, a number of issues were raised that appear to have delayed Israel's response to the German mediator, Gerhard Konrad. The delay will stall the deal, which until late last week was expected to be finalized in the coming days.

Olmert, according to a political source in Jerusalem, is inclined to reject the deal for the prisoner exchange as it is currently framed.

Olmert's stance on the issue of a deal with Hezbollah had been favorable until several days ago, in spite of the troubling issue of the release of Samir Kuntar, a Lebanese national held since 1979 following the murderous raid in which he participated in the northern town of Nahariya, which left four Israelis dead.

One of Olmert's concerns is the reaction of the cabinet to the deal, which it has to approve before it can be carried out.

Mossad chief Meir Dagan and Shin Bet head Yuval Diskin both believe that going ahead with the deal in its current form would create a precedent that could put the life of Gilad Shalit, the IDF soldier held by Hamas in the Gaza Strip, as well as the lives of any Israeli soldiers captured in the future, at risk.

Two months ago Olmert sent to Hezbollah, through the German mediator, Israel's "final" offer on the release of the two soldiers. Israel agreed to release Kuntar, and four Hezbollah men captured during the Second Lebanon War, as well as the remains of some of the fighters of the radical Shi'ite organization. Israel insisted that the deal would not include the release of any Palestinian prisoners, which had originally been a demand of Hezbollah.

However, contrary to what had been previously reported, it appears that Hezbollah has once more revived its demand for the release of Palestinian prisoners as part of the deal.

Sources in the Prime Minister's Bureau said last night that the demand for the release of Palestinians is a major stumbling block in the deal.

But security sources say that the Palestinian "element" was overplayed by Olmert's aides for reasons that are not clear to them. Similar claims were made by the members of the families of the two abducted soldiers, following a meeting with the Prime Minister late last week, although senior security officials stress that they are not aware of a renewed demand for Palestinian prisoners.

What is certain is that the heads of the defense establishment, with the exception of Chief of Staff Gabi Ashkenazi, are opposed to the deal as it currently stands.

While Ashkenazi understands the reservations of his colleagues, including the head of Military Intelligence, Major General Amos Yadlin, he is of the opinion that the growing interest of Israel is to close the Goldwasser-Regev case. The chief of staff is also concerned that the stalling of the swap may turn into a tragic missed opportunity unless it is finalized soon.