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The one jarring note in a rare, at times apocalyptic, address by the chief of Israel's secret service this week was optimism.

To be sure, the suggestion of a silver lining followed a catalogue of the dark challenges plaguing Israeli security. But the note was unmistakable, holding out hope in an entirely unexpected direction, that of budding democracy in the Palestinian Authority.

In what was said to be the first time that the voice of a sitting Shin Bet director was broadcast on Israeli airwaves, current security service chief Avi Dichter Tuesday addressed what has become a central event in the enunciation of Israeli policymaking, the Herzliya Conference on Israeli security and aspects of national strength.

This year's conference, the showcase event of the Interdisciplary Center think tank in the coastal resort and high-tech city, had already attracted intense interest in Washington and beyond. The reason was Dichter's direct superior, Ariel Sharon.

In recent weeks, Sharon has strewn intriguing clues about a new West Bank and Gaza policy paradigm like a trail of bread crumbs, all of them pointing in the direction of Herzliya.

It remains to be seen whether Sharon, slated to close the conference with a major address on Thursday, truly intends to lift the shroud off a strategic program, or will content himself with a new set of hints.

The conference has long been a venue for peeks behind the curtain of Israeli secrecy. It was at the first Herzliya gathering in 2000 that then-Mossad director Ephraim Halevy made the first public speech by any head of the international intelligence agency.

Until recently, the identities of the directors of the Shin Bet and its global counterpart, the Mossad, were a top state secret.

For much of the address, Dichter's view was grim, as he listed unrelenting efforts to carry out suicide bombings, Iranian measures to strike at Israel and Israeli interests abroad, and even a nightmare scenario of extreme Jewish terrorism leading to a worldwide Muslim-Jewish confrontation.

"Looking ahead," Dichter said, "I regret to say that I do not expect dramatic changes from the Palestinian Authority with respect to battling terrorism."

Nonetheless, he added, when compared to the non-democratic or nominally democratic states of the region, "I would allow myself to state that within the Palestinian Authority there are democratic figures and democratic processes that are no less in stature than these in the nations that surround us, and, in some instances, even exceed them."

Qualifying his remarks by saying his characterizations were "relative, relative, relative," Dichter said that the reforms to which the Authority has committed itself "will paint the Palestinian Authority in stronger colors of democracy.

"Many in the Palestinian Authority, many of its leaders and rank-and-file, recognize this and understand this very well."

Concluding his remarks, Dichter voiced belief that the proponents of democratic reforms within the PA had the power to institute them, if they acted on their will.

"I would allow myself to declare that there is life after terrorism," Dichter said to applause. "But not only for us. For them as well."

It was clear from Dichter's remarks that he viewed the West Bank fence as a central factor to combat violence. The barrier route has been much maligned in international circles because of alterations in the route that in places cut inward from the 1967 Green Line border, well into land controlled or owned by Palestinians.

Palestinians have said that the resulting hardship hitting local residents, along with the appearance of an Israeli land grab in the absence of peace talks, would in the end yield only intensified violence.

But Dichter's view was unequivocal. "It is critical to accelerate the building of the fence in Judea and Samaria [the West Bank] and of the 'Jerusalem envelope' [security plan], whether this comes from the state budget, from other funds, or even from a donation box in every household in Israel - as far as I'm concerned it can be called the Fence for the Existence of Israel," he said, the last phrase a play on the Hebrew for the tree-planting works of the Jewish National Fund.

Despite vast gaps, the sections of the barrier already built have hampered, slowed and redirected would-be suicide attackers to the extent that security forces have seized three bombers laden with explosives en route to attacks within Israel in the last 10 days alone, the Shin Bet chief said.

The barrier's tortuous route has cut through Palestinian fields and orchards to enclose West Bank settlements and buffer Ben-Gurion International Airport from attacks by shoulder-fired missiles. It has also cut many farmers away from their own lands, and threatens to keep them in political, geographic and economic limbo.

Dichter said the issue of the Palestinian enclaves created by the fence route should be addressed, but only after clear priority was granted the construction of the barrier, which is a concrete wall in some areas, and is made up of trenches, chain-link, razor wire and electronic detection devices in others. The fence was critical to halting attacks, he said, adding, "Fence now, enclaves later."

Dichter was unsparing when he discussed the battle of Israeli soldiers, police, and Shin Bet agents against Palestinian gunmen and suicide bombers. With more than 900 Israelis dead, the majority of them civilians killed in terror bombings within Israel proper, he said: "We must say this honestly: the defense establishment, and, within it, the General Security Service [Shin Bet] have not provided the people of Israel the security 'suit' that they deserve."

More than 2,500 Palestinians have been killed in the uprising, not including more than 200 who have carried out suicide bombings and other suicide terror attacks.

If the Palestinian Authority is to ultimately opt for democracy, Dichter indicated that he did not expect Yasser Arafat to be the agent for positive change.

It was clear to Arafat that "he's the only one in the Palestinian Authority who is capable of uniting the security forces in order to act against terrorism and to succeed," Dichter maintained.

But instead of doing so, Arafat betrayed the trust placed in him by Israel and other nations, both during the years of the Oslo process and the last three years of conflict, Dichter continued. "His men expected to receive orders from him to act to end terrorism, but he chose to look on from the grandstand."

Dichter reserved his most chilling remarks for a scenario that has thus far taken place only in the dreams of the militant fringe of settler extremists - and in the Shin Bet's worst nightmares.

"In my view, the dream of these extremists - in their words, to remove the 'abomination' from the Temple Mount, the mosques on the Mount - should trouble us greatly," Dichter cautioned, noting that Jewish extremists had killed seven Palestinians and wounded 19 in the first two years of the uprising.

"For the State of Israel and the Jewish people in the Diaspora, Jewish terrorism is liable to create a substantial strategic threat, and to turn the conflict between Israel and the Palestinians to a confrontation between 13 million Jews and one billion Muslims across the world."