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President Shimon Peres on Tuesday pardoned the notorious Lebanese terrorist Samir Kuntar, ahead of his release as part of a prisoner exchange between Israel and the Lebanese militia Hezbollah scheduled for Wednesday.

Kuntar, who has been serving multiple life sentences in Israel, was convicted of murdering four Israelis in a 1979 terror attack in Nahariya. Kuntar and four Hezbollah fighters imprisoned in Israel will be transferred to Lebanon in exchange for two Israel Defense Forces reservists, Eldad Regev and Ehud Goldwasser, whom Hezbollah abducted in July 2006.

In the pardon letter submitted to Justice Minister Daniel Friedmann, Peres wrote that "I made this difficult decision after speaking with the Shahar, Keren and Haran families - the families of the victims of the despicable murderer Samir Kuntar. I, along with all of Israel, feel their pain. A bitter unbearable pain."

Peres went on to say "in this decision there is no forgiveness or absolution for the murderer's heinous actions. I will not forget, and I won't forgive."

Court pardons and frees three Hezbollah prisonersThe Nazareth District Court ruled on Tuesday to pardon and release three of the four Hezbollah fighters set to be returned to Lebanon within the framework of the prisoner exchange Wednesday.

The three stood trial in Israeli criminal courts over membership in a terrorist organization, murder, attempted murder and weapons-related crimes during the Second Lebanon War. They, along with a fourth Hezbollah fighter, were transferred to the Hadarim Prison earlier this week, where Samir Kuntar is held.

Earlier Tuesday, the cabinet gave its final approval for the return of five Lebanese prisoners and the bodies of 199 militants to Hezbollah in exchange for Goldwasser and Regev. The ruling was part of the approved exchange deal, which requires the courts to pardon the prisoners prior to their release and transfer to Lebanon.

The court pardoned the prisoners after the Northern District prosecution submitted a request asking for the release of the three, Maher Kurani, Mohammed Sarur and Hussein Suleiman, so that they could be transferred to Lebanon on Wednesday in accordance with the finalized details of the deal.

According to the prosecution's request, "the execution of the deal is expected to take place in a multi-level complex manner, and could very well be postponed, deferred or canceled due to various reasons at any stage. Only if all the conditions are met... will the prisoners be transferred to Red Cross representatives in Lebanon. Therefore, we ask the court to approve their release only if the conditions are met."

Suleiman was involved in the cross-border raid in which the IDF reservists, Ehud Goldwasser and Eldad Regev, were kidnapped, sparking the 34-day Second Lebanon War between Israel and Hezbollah. His task was to ward off any Israeli attempts to rescue the hostages. Sarur was stationed as a fighter in Galilee village Aita al-Shaab, where he was supposed to ambush IDF troops. Kurani took part in an ambush west of the town of Shihin. The three prisoners declined defense in their trials and wrote to the court that their fate would only be decided in a prisoner exchange deal.

The exchange deal was ratified by the cabinet with a majority vote of 22 ministers in favor and three opposed.

A majority approval had been expected, despite Prime Minister Ehud Olmert's pronouncement Monday that Hezbollah had handed over an "absolutely unsatisfactory" report on its efforts to discover the fate Israeli navigator Ron Arad, who disappeared in Lebanon 22 years ago.

Israel had demanded the Arad report as part of the exchange deal, but government officials said it would not be a deal-breaker.

The cabinet had met for the special session to discuss Hezbollah's report on its efforts to determine Arad's fate. The ministers were briefed on its assessment following deliberations by the heads of the country's intelligence organizations.

The Prime Minister's Office said following the meeting that the cabinet decided to reject the Hezbollah report. According to a source in Ehud Olmert's entourage to Paris, the result of the cabinet's final vote on the prisoner exchange was to be based on what it heard in the briefing.

But the director of the Rosh Hanikra compound where Israel is to receive Goldwasser and Regev said that military and other preparations for the exchange had begun at the site early on Tuesday, long before the cabinet ratified the deal.

Former IDF chief rabbi Israel Weiss, who took part in a 2002 prisoner excahnge in which Hezbollah returned the bodies of three IDF soldiers as well as captive civilian Elhanan Tennenbaum, said that the first task of examining the bodies would be to make a positive identification. Weiss told Army Radio that it would also be possible to determine when the soldiers died.

The Goldwasser and Regev families renewed their campaign this week to convince cabinet ministers to support the prisoner swap with Hezbollah, fearing that despite the cabinet's approval of the deal on June 29, last-minute problems might pop up.

In particular, the families worried that criticism of Hezbollah's report on Arad could provide an excuse for cancelling the deal.

Statements by Olmert during his visit to Paris had left room for doubt on whether the cabinet would approve the deal. While attending the Union for the Mediterranean summit meeting, Olmert told United Nations Secretary-General Ban Ki-moon that Hezbollah's report on Arad was "absolutely unsatisfactory." Olmert also thanked Ban for the UN's mediation efforts in the prisoner exchange.

Speaking after his meeting with Ban, Olmert said that Israel was still determined to shed additional light on the fate of Arad, who has not been seen since his plane was shot down over Lebanon in 1986.

"The prime minister made clear to the secretary-general that he considers the report to be absolutely unsatisfactory," Olmert's aide told reporters in Paris at the close of the Union for the Mediterranean summit.

Asked whether Israel was sufficiently satisfied with the report to push forward with the prisoner swap, the aide said "I don't know. We are working on clarifications."

Olmert, who voted in favor of the swap at the previous cabinet session, did so only after a period of indecision, which was widely covered in the media up until the last minute. Defense Minister Ehud Barak's aides said Monday that this time, too, Olmert will in the end vote in favor of the deal.

Barak and Olmert met with senior defense officials to discuss Hezbollah's report on Arad ahead of the Tuesday cabinet session. On Sunday night, the heads of the security establishment and intelligence agencies met to discuss the report, and the disagreements remained: the head of the Mossad, Meir Dagan, and the head of the Shin Bet security service, Yuval Diskin, oppose the swap deal in its present form. The head of Military Intelligence, Maj. Gen. Amos Yadlin, as well as his commander, Chief of Staff Gabi Ashkenazi, support the deal, despite their reservations about the report on Ron Arad.

Ofer Dekel, the chief Israeli negotiator for the deal with the Hezbollah, is scheduled to present the report to the cabinet along with the framework of the deal.

Barak plans to put pressure on ministers to approve the agreement, and he feels a majority will support it. He postponed his planned Washington trip due to the sessions on the swap. His meetings with senior American officials were scheduled to start today, but will be put off until August.

The defense minister told a meeting of the Labor Party caucus Monday that the report did not provide definitive answers to what happened to Arad after his capture and reiterated that Israel was solely responsible for finding out Arad's fate.

"On the second anniversary of the 2006 Lebanon War, we should put it clearly - Resolution 1701 didn't work, doesn't work and will probably not work," Barak said. "It is a failure."

In contrast to Olmert, however, Barak - for the second time in 24 hours - expressed full support in the prisoner exchange agreement with Hezbollah.

"The report on Ron Arad as conveyed by Hezbollah does not provide a clear answer as to his fate, and does not resolve the case. We are committed to continue our efforts to clarify his fate. Despite this, as minister of defense and as a former commander in chief and officer, it is my moral and military obligation to continue to advance the return of Eldad Regev and Ehud Goldwasser."