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The Prime Minister's Office denied on Tuesday reports by the Syrian news agency Sham Press saying that indirect peace talks between Israel and Syria were set to resume in two days in Turkey.

According to the report, quoted from the Jordanian magazine "A Liwa", the two sides were preparing to discuss the establishment of negotiation teams as well as other issues on the negotiation agenda.

The Prime Minister's Office issued a statement saying that the officials leading the negotiations were in the United States together with Prime Minister Ehud Olmert, and will still be there in two days.

Syrian sources told "A Liwa" that Syria is demanding mutual security agreements in talks. The sources stressed that Syria was demanding that Israel return the Golan Heights, the territory that Israel captured from Syria during the 1967 Six-Day War, and that its sovereignty over the territory would be modeled after Israel's return of the Sinai Peninsula to Egypt in 1982. The Sinai agreement stipulates that Egypt receive complete sovereignty over the territory while maintaining special security arrangements with Israel and arrangements regarding the entry of Israelis into its territory.

Turkish sources told "A Liwa" that during the previous round of negotiations between Israel and Syria, the sides discussed Israeli withdrawal from the Golan, commercial ties between the two nations, division of the water reserves from Israel's Sea of Galilee and diplomatic relations.

In remarks published earlier Tuesday, Syrian President Bashar Assad said that Israel must be prepared to return all Syrian lands captured in 1967, which stretch as far as Tiberias, in any peace deal between the two sides.

Briefing editors of United Arab Emirates newspapers during a visit to the Gulf Arab state, Assad also said U.S. sponsorship would be essential in the next stage of indirect talks launched last month under Turkish sponsorship.

"At this stage we are not talking [with Israel] about anything else. What is on the agenda is the return of all land," al-Khaleej newspaper quoted Assad as saying during a visit on Monday. "In direct negotiations we will tackle the details which include the files of water and relations and other matters."

"As for water there are international rules that govern these matters and are usually referred to, but if the question of water is intended for [Syria to] give up the [condition on] 1967 borders that stretch to Tiberias then there will never be a compromise on the 1967 borders," he said.

Transportation Minister Shaul Mofaz said on Tuesday that territorial concessions should not be discussed at this stage in peace talks with Syria.

"We need to talk to them, but the distance between talking and making concessions is big," Mofaz said.

Mofaz, who intends to vie for the leadership of the Kadima party, spoke at an observation point at Mizpe Shalom in the Golan Heights. He said that he believes peace needs to be made in stages, and Israel should take Syria's expressed desire for peace talks with a grain of salt. "I fought against the Syrians, I sat with them and I know all of the issues and details," he said.

Israel and Syria said last month they had launched indirect peace talks mediated by Turkish officials, the first negotiations between the two sides in eight years.

The last peace talks broke down in 2000 over control of the shore of Lake Kinneret, from which Israel draws much of its water. Tiberias is on the western shore of the lake.

Syria says it had Israeli assurances through Turkey that Israel would be willing to give back the Golan Heights in return for peace.

"The negotiations are in their primary stage. In later stages they would require international sponsorship especially from the United States, a superpower that has special ties with Israel," al-Bayan newspaper quoted Assad as saying.

Many analysts say U.S. hostility to Syria makes a peace deal with Israel unlikely before President George W. Bush leaves office in January.

The United States said it did not object to talks but repeated its criticism of Syria's "support for terrorism."

Sean McCormack, the U.S. State Department's spokesman said that Washington has not yet been asked by Syria or Israel for a role in the Syrian-Israeli talks and indicated that Washington wants for now to focus on the Palestinian-Israeli track which the Bush administration helped to relaunch last year.

Israel annexed the Golan in 1981 in a move condemned internationally. As well as strategic high ground, the fertile Golan Heights ensure Israeli control of important water resources in the arid region, land for vineyards, orchards and cattle-grazing.

Some 18,000 Israelis have moved to the Golan Heights and about 20,000 Syrians Druze live there. Israel gave the Druze the option of citizenship after annexing the territory but many rejected it.