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Terrorist organizations are trying to abduct Israeli citizens in an effort to boost their grass-roots, which has been waning ever since Israel's pullout from Gaza, Military Intelligence Chief Aharon Ze'evi-Farkash told a Knesset committee on Sunday morning.

"Terror organizations are constantly trying to carry out attacks against Israeli targets, including kidnapping Israeli civilians, to bring about a situation in which Gazan children will starve and turn to them in support," Ze'evi-Farkash said.

He added that the Palestinian Authority had a vested interest in maintaining calm, noting that PA Chairman Mahmoud Abbas has ordered the prohibition of public arms displays.

Israel won't hand over more West Bank cities to PA controlDefense Minister Shaul Mofaz said that Israel will not transfer any more West Bank cities to the control of the Palestinian Authority. Israel has agreed to make a number of goodwill gestures to the Palestinians including removing some roadblocks, easing the passage of laborers and merchants into Israel, and supplying military equipment.

Mofaz will recommend on Sunday to Prime Minister Ariel Sharon that defense equipment be transferred to the Palestinian Authority, based on a list prepared by the Americans. He will also suggest speeding up talks on operating the Rafah and other Gaza border crossings.

However, Mofaz objects to transferring additional West Bank cities to Palestinian control and to providing the PA with weapon.

Israel wants Washington to see renewed talks with the Palestinians as a resumption of the political process, following the disengagement from Gaza and before PA Chairman Mahmoud Abbas goes to Washington next week. The talks would address prisoner releases and other issues.

On Friday, Sharon's adviser Dov Weissglas suggested at a meeting with Palestinian negotiator Saeb Erekat that Sharon and Abbas decide at their meeting Tuesday to resume the negotiation committees. He proposed that the two leaders would meet again in a few weeks for a briefing on the committees' progress.

Israel also proposed that one of the leaders' future meetings would be held in the palace of Jordan's King Abdullah.

Erekat will deliver the PA response to Israel's proposals when he meets with Weissglas this afternoon. The two are expected to set the agenda for Sharon and Abbas' meeting.

Government sources said over the weekend that if no agreement is achieved, the two leaders will not meet Tuesday.

In preparation for the Sharon-Abbas meeting, Israel has withdrawn its objection to providing the PA with ammunition. The sources said the IDF and Shin Bet now recommend allowing the PA to receive ammunition from Egypt.

In the past few months Israel had consistently rejected the Palestinian requests for ammunition, despite the support of American envoy General William Ward. Israel suggested instead that the PA confiscate the terror organizations' ammunition.

The sources listed the following reasons for the change: the intelligence evaluation that Palestinian defense forces were short of ammunition; the PA's moves against Hamas and the assumption that they would continue; and the arms and ammunition smuggled to the terror organizations via the Philadelphi route, which tipped the balance against the PA.

Sharon and Mofaz accept the defense establishment's recommendations. But both Mofaz and other senior defense establishment officials object to giving additional arms to the PA. Security sources said Israel may give the Palestinians riot control gear, such as tear gas, but not arms that could be used against Israel, as has happened in the past.

In certain circumstances the defense establishment would be willing to consider giving the PA ammunition, although the PA appears to have received some of the ammunition that was smuggled from Sinai in Rafah. Israel would also consider giving the PA logistic equipment that the European donor states have purchased for the PA's security forces.

Foreign Minister Silvan Shalom said in an interview with Israel Radio over the weekend that the PA must not be allowed to obtain more guns. He said Egypt had not done enough to prevent arms smuggling into the Gaza Strip via Rafah.

"The Palestinians have no ammunition problem, their problem is not wanting to make a strategic decision to fight Hamas," he said.

Sources close to Mofaz believe that the PA has not proved it is serious in fighting terror in the cities now under its control. Over the past year Israel transferred two cities, Jericho and Tul Karm, to the PA, but recaptured Tul Karm shortly after in response to attacks launched by the city's Islamic Jihad network.

The Palestinians have presented Israel with numerous requests for the Sharon-Abbas meeting. These include releasing prisoners, first and foremost those jailed before the Oslo Accords; handing over additional West Bank cities; reopening the Palestinian institutions in East Jerusalem; releasing Popular Front leader Ahmad Sadat and Fatah finacier Fuad Subaki who are jailed in Jericho; and removing roadblocks and making other alleviations.

Jerusalem sources said Israel would not consider opening the institutions in Jerusalem or releasing Sadat and Subaki. The remaining issues will be discussed in the joint committees.

The Justice Ministry is considering the cases of 20 veteran Palestinian prisoners with "blood on their hands" who were jailed before the Oslo Accords and are considered old and sick.

The PA also needs Israel's help in holding the elections, scheduled for January 2006, in the West Bank and East Jerusalem.

In response to Erekat's call for a joint Israeli-Palestinian committee to coordinate the elections, Weissglas said Israel objects to Hamas' participation in the elections and that the committee must discuss this.

The IDF and Shin Bet support lifting the closure on the Palestinian territories and letting a few thousand Palestinian laborers into Israel, some of them from the Gaza Strip. This measure would come into effect after the end of the Sukkot holiday in late October. Mofaz also supports removing roadblocks and other traffic obstructions where possible without endangering security.

Israel predicts that the deployment of Egyptian forces along the Philadelphi route will be completed only in a few weeks. The sources said that although there is a certain improvement in the Egyptian forces' fight against smuggling, it is far from satisfactory.

Israeli-Palestinian work teams are to meet today for the first time to discuss the Rafah crossing.