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Lebanese Prime Minister Fuad Siniora rejected Israel's call for direct, bilateral talks to reach a peace deal between the two bordering countries.

"Lebanon's known position before this government is that there is no place for bilateral negotiations between Lebanon and Israel," Siniora's media office said in a statement late Wednesday.

Hezbollah legislator Nawar al-Saheli told The Associated Press that the Israeli offer is :ridiculous propaganda."

Government spokesman Mark Regev said earlier Wednesday that Israel is interested in talks that would bring every issue of contention to the table. He said the talks would also cover a key border dispute over the Shaba Farms, a small piece of land controlled by Israel, the dispute over which is a key sticking point between Israel, Lebanon and Syria.

Regev's comments were the government's most explicit overture toward Lebanon. Last week, when Prime Minister Ehud Olmert hinted Israel would be interested in talks with Beirut, the Lebanese government rejected the notion. On Wednesday, a Lebanese government official said that position hadn't changed.

Wednesday's announcement came amid a flurry of developments in the region. Officials say they are close to a prisoner swap with Hezbollah guerrillas in Lebanon, and Israel also recently opened peace talks with Syria.

Meanwhile, a cease-fire between Israel and the Palestinian militant group Hamas is set to begin on Thursday.

U.S. pushes for Israel-Lebanon peace talks, deal on Shaba

The United States has begun mediating between Israel and Lebanon in an effort to resolve their dispute over Shaba Farms in the hope they would then start peace talks.

U.S. President George Bush and Secretary of State Condoleezza Rice informed Olmert of this during his visit to Washington two weeks ago, and Rice repeated it during her visit here earlier this week. According to a senior Israeli official, Rice gave Lebanon a message from Olmert on this issue on Monday.

The London-based Arabic daily Al-Hayat reported Tuesday that during her brief visit to Beirut on Monday, Rice told Lebanese officials that the U.S. was working to obtain an Israeli withdrawal from Shaba. "Our efforts are continuing, and will be stepped up in the coming weeks," the paper quoted Rice as saying.

Next month, UN Secretary-General Ban Ki-moon will brief the Security Council on the implementation of Resolution 1701, which ended the Second Lebanon War. His report is expected to clarify the UN's position on the Shaba dispute.

Shaba, located on the border between the Golan Heights and Lebanon, was omitted from Israel's May 2000 withdrawal from Lebanon because the Security Council said it was Syrian territory, not Lebanese. However, both the Lebanese government and Hezbollah have since insisted that Shaba is Lebanese, while Syria has refused to either back or dispute this claim. Following the Second Lebanon War two years ago, therefore, the UN agreed to set up a task force to determine where exactly the Lebanese-Syrian border lies.

A senior Israeli official said that both Rice and Bush told Olmert they want to support Prime Minister Fuad Siniora's government in Lebanon and weaken Hezbollah. The best way to do this, they argued, is to cede Shaba to Lebanon, thereby eliminating Hezbollah's claim that only it can liberate Shaba.

Moreover, they argued, progress on Shaba may lead to the opening of peace talks between Lebanon and Israel. Beirut has previously said that a withdrawal from Shaba is a precondition for talks.

Olmert responded that he agreed in principle, but had several conditions. First, he said, any resolution of the Shaba dispute must include full implementation of Resolution 1701, which, inter alia, requires Hezbollah's disarmament and an end to arms smuggling from Syria. Moreover, he said, until the UN decides whether Shaba is Syrian or Lebanese, there is no point in discussing its future.

In general, he said, the outstanding issues between Lebanon and Israel are not complicated, and should be easier to resolve than Israel's disputes with Syria. "I'm willing to sit down to direct negotiations with Lebanon in order to resolve everything necessary, including Shaba Farms," the official quoted him as saying.

European diplomats told Haaretz they also expect Israel to withdraw from Shaba, should the UN indeed declare it Lebanese.

The Lebanese government had proposed in 2006 that Israeli troops be replaced by the UN Interim Force in Lebanon (UNIFIL), which would hand the area over to Lebanon should the UN conclude finally that the area is Lebanese. However, Israel opposes this idea, and this week, Hezbollah said it would still consider Shaba occupied territory even if it were under UNIFIL's control.