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The Knesset approved Wednesday evening a cabinet reshuffle that makes former justice minister Haim Ramon, who resigned his post ahead of a conviction for sexual misconduct, vice premier. The move marks his return to political life.

Meir Sheetrit, long overlooked by Prime Minister Ehud Olmert, who saw him as a potential political threat, became interior minister.

Sheetrit moves from the housing ministry to replace new finance minister Roni Bar-On, who replaces Abraham Hirchson, the Olmert confidant who resigned over a police investigation into allegations of embezzlement at a workers' union he headed in 2003.

Absorption Minister Ze'ev Boim was appointed housing minister in place of Sheetrit.

Ya'akov Edrey, previously a minister without a portfolio, was appointed both interior minister and head of the Negev and Galilee Development Ministry. MK Ruhama Avraham was appointed Knesset liaison minister.

Ramon was also appointed minister at the Prime Minister's Office, in charge of state policy and will be a member of the security cabinet.

Sheetrit's appointment came as a surprise to the political establishment. The Interior Ministry portfolio, which includes responsibility for local authorities, will help Sheetrit amass political power.

But Sheetrit made it clear that he would not stay silent should he be passed over for interior minister, and sources believe that Olmert feared he would become a source of internal opposition within Kadima.

Sheetrit has said in the past that he intends to contend against Olmert for chairmanship of Kadima, and Olmert may have feared a push for early party primaries.

Ramon rejected Olmert's intial offering

The prime minister had planned to announce the reshuffle Tuesday, but had to postpone it after Ramon rejected his initial offer, terming it so inappropriate that he would rather quit politics altogether, and then demanded a day to think it over.

Ramon was forced to resign as justice minister after being indicted for forcibly kissing a female soldier. His conviction made it impossible for him to return to his former job, and Olmert wanted Bar-On in the Finance Ministry, which was Ramon's preferred substitute.

However, Ramon initially expressed interest in the alternative that Olmert proposed, under which he would become vice premier in place of President-elect Shimon Peres, be a member of the diplomatic-security cabinet and serve as a minister in the Prime Minister's Office with diplomatic responsibilities, "influence and a direct line to the premier."

He even spoke with Foreign Minister Tzipi Livni about the proposal a few days ago, and the two were apparently ready to cooperate.

On Tuesday, however, Ramon discovered that his diplomatic responsibilities, especially with regard to negotiations with the Palestinians, were very unclear, and also seemed to contradict understandings that Olmert had reached with Livni about her responsibilities.

Ramon said that he was unwilling to enter the government under those circumstances, and if that was the best that Olmert could offer, he would rather just quit politics.

Olmert then suggested that instead of the position in the Prime Minister's Office, Ramon take the Negev and Galilee development portfolio that Peres is vacating.

But Ramon was not thrilled by that offer, either, and demanded time to consider his options.