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The high command of the Israel Defense Forces believes that Israel contributed to the collapse of former Palestinian premier Mahmoud Abbas' government by making only stingy demonstrations of support, and is warning Israel not to repeat the mistake with Palestinian premier Ahmed Qureia, who is now trying to form a permanent cabinet.

Senior military sources, who reflect the dominant feeling in the IDF General Staff, said Tuesday that Israel should have treated Abbas differently, by giving him control of every Palestinian city he asked for and by refraining from discussing the fate of Palestinian Authority Chairman Yasser Arafat.

In order to prevent a similar debacle this time around, the IDF is advising the government to remove the military blockades from West Bank cities such as Bethlehem and Jericho, to differentiate between terror-free and terror-filled areas, and to allow free travel for Palestinian vehicles in the West Bank.

The army is disappointed that the government has for the most part ignored its recommendations, preferring instead the advice of the Shin Bet security service.

The senior military officers are worried by the possibility that maintaining widespread pressure on the Palestinian population will lead to a humanitarian crisis and increase Palestinian hatred of Israel. The IDF General Staff describes the ongoing pressure as "sacrificing the strategic interest for the sake of tactical considerations."

The broad assessment in the IDF is that if Qureia repeats his predecessor's failure to create a functioning cabinet, then Arafat will remain the sole ruler - leading to the collapse of the PA and anarchy in the territories.

According to the IDF, such is a scenario is precisely what Arafat wants, as is not ready for a two-state solution and is trying to bring the conflict to a deadlock. Arafat is aiming for one bi-national state in which the Palestinians' demographic edge will win out, and in this aspect his approach is not any different from that of Hamas and Islamic Jihad. On the other hand, the assessment goes, Qureia embodies some chance for compromise on the principle of a two-state solution.

The military sources said Israel and the United States are conducting unofficial talks with Qureia, in which they are discussing a proposal to establish an inclusive cease-fire, based on dismantling the terrorist infrastructure in exchange for ending all IDF activity in Palestinian territory. The components of the "terrorist infrastructure" are up for negotiation, and it appears that the Israeli position will become more flexible.

On a separate different issue, the military sources also said the costs of constructing the West Bank separation fence will run to NIS 10 billion. According to the IDF, the fence must create a smooth separation between Israel and the PA, and maintains that there is no point in building a segmented barrier.

The sources also said the IDF supports Prime Minister Ariel Sharon's position that Israel should carry out the prisoner exchange deal with Hezbollah, despite the moral dilemma presented by the family of missing navigator Ron Arad, who oppose the inclusion of Mustafa Dirani, the Lebanese militant snatched by Israel in 1994 to serve as bargaining chip for information on the fate of Arad.

The price of the deal must be a reasonable one, the sources said, and determined by the number and nationalities of the prisoners that Israel will hand over in exchange for kidnapped civilian Elhanan Tannenbaum.

The comments made by senior military sources indicated that the IDF cannot confirm the Arad family's contention that Dirani kidnapped the navigator or sold him to Iranians.

According to the IDF, Dirani was the head of the security apparatus of the Amal movement in Lebanon, and as a result was responsible for guarding Arad. The revolutionary guard took Arad from him and transferred him to the Iranians, the sources said, adding that Dirani now has no idea where Arad is.

The sources also said it is unclear whether Hezbollah leader Sheikh Hassan Nasrallah could shed any light on the matter. The assumption is that continuing to detain Dirani does not exert any pressure on Iranian President Mohammed Khatami, who apparently does know what happened to Arad.

These considerations have led the IDF to advise the government to carry out the prisoner exchange so as not to miss the opportunity for Tannenbaum to be returned to Israel - but not at any price. The IDF General Staff opposes the release of prisoners with "blood on their hands" and said the number of prisoners that Israel releases must be kept to a reasonable amount so that the deal won't provide an incentive for more kidnappings of Israeli citizens.