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SEVILLE - The formation of a Palestinian unity government based on the Mecca agreement between Mahmoud Abbas and Khaled Meshal could unfreeze deadlocked negotiations to free kidnapped soldier Gilad Shalit, senior security sources say.

Defense officials suggest that by freeing Shalit, Meshal would be giving Abbas something tangible in return for his concessions in the Saudi-led negotiations. This would also shift international attention away from Hamas' fundamental positions, which would not change.

However, the sources warned that tough negotiations are expected over the number of Palestinian prisoners to be released in the Shalit deal, the gravity of their offenses and their affiliation.

The sources said that so far the various mediators, including Egyptian Intelligence Minister Omar Suleiman, failed to bring about a breakthrough in the talks.

Several times the talks were "almost" on the verge of completion, but reverted to the starting point. The defense establishment fears that a deal to release Shalit would not bring the release of Israel's abducted soldiers in Lebanon, Ehud Goldwasser and Eldad Regev, any closer.

Defense Minister Amir Peretz yesterday discussed Goldwasser and Regev with French Defense Minister Michele Alliot-Marie.

Peretz also spoke to his Turkish, Belgian and Italian counterparts in Seville, where he is attending a meeting of defense ministers from NATO and six Arab and North African states. At noon today, NATO's ministers are scheduled host their seven peers at a working luncheon.

'2007 will be the year'

Peretz emphasized the danger of Iran's nuclear program. He told his colleagues, "2007 will be the year when political and strategic efforts will foil Iran's nuclear program." He implied that if this proves insufficient, more belligerent measures would be taken in 2008.

Defense sources expect Iran to announce significant progress today. They believe Iran will try to prove that its nuclear program is irreversible and therefore there is no point in the world's - and Israel's - effort to foil it. This would put Israel in an embarrassing position. After years of warning of Iran's nuclear progress, it will have to try to refute the Iranian arguments that Iran has already consummated the process.

Peretz spoke Secretary General Jaap De Hoop Scheffer and his aides about upgrading Israel's relations with NATO. Peretz showed Scheffer Labor's peace plan, but Scheffer reiterated NATO's position, which conditions any involvement on an Israeli-Palestinian agreement. Without such an agreement, neither the Security Council nor NATO's 26 members will agree to send a NATO force to the region.