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The European Union intends to offer Israel economic benefits in exchange for relieving the restrictions on the Palestinians, EU sources said.

A high-ranking EU delegation due to arrive in Israel in about a month will discuss ways to strengthen the economic, political and cultural cooperation between Israel and the EU.

The EU's action plan is based on a statement of intentions formulated by Israel and the EU at the end of 2004.

The Europeans are expected to offer a package deal - advancing the relations with Israel simultaneously on all fronts. They stress that they will not allow accelerated progress in economic issues, while the political process is bogged down.

"The extent of the EU's economic cooperation with Israel will be equivalent to the extent of Israel's political cooperation with the EU," a senior EU source said. "The more we advance on the political clauses, the easier it will be for us to make progress in the economic ones."

The delegation will be headed by Christian Leffler, the EU's Middle East and south Mediterranean director. He is expected to ask Israel to alleviate a series of restrictions on the Palestinians as part of the political cooperation clause in the action plan. These will consist of opening roadblocks inside Palestinian Authority territory, relaxing the restrictions on the transport of Palestinian merchandise to Israel and overseas and facilitating the passage of Palestinian laborers to and from Israel.

The Europeans hope to hear from Israel that it is still committed to the road map - that is, to negotiations with the Palestinians over a permanent settlement based on two states, and does not regard the disengagement plan as the end of the road.

EU officials believe that Israel will agree to remove some of the roadblocks, subject to security considerations. In exchange Leffler may tell Israel that the EU agrees to exempt Israel from customs on exports of products manufactured jointly in Israel and Jordan.

Israel asked for the custom exemptions a few years ago and is still waiting for an answer. An customs-exemption on Israeli-Jordanian products will advance the cooperation between Israel and Jordan and strengthen the peace agreement between them.

The Europeans are expected to tell Israel that if it agrees to their requests, the EU will grant Israel in the future similar custom benefits for joint production with other Middle East countries.

The EU's action plan with Israel is part of the European Neighborhood Policy (ENP) including some 17 East European and Middle Eastern states.

The ENP is intended to turn the EU into the second superpower in the world, after the United States. After the collapse of the Soviet Union the EU expected international recognition of its status as an alternative superpower, but this did not happen as the U.S. preferred to be the sole superpower. The EU realized it would have to increase its political-economic volume to attain the superpower status. It launched the plan to add to its ranks East European member states and now declare it has accumulated an economic and political power that cannot be ignored.

The ENP is intended to add more countries to the EU - not as full members but as close partners. The policy is based on understandings anchored in respective action plans, which will be implemented on the basis of cooperation, rather than coercion, EU officials promise.

The standing clauses in all the action plans are political cooperation, expanding democracy, preserving human rights and academic cooperation. The economic clauses include coordinating infrastructure systems of transportation, communication, energy and environment.

The EU also insists on developing and preserving four basic economic liberties - freedom of movement for merchandise, capital, services and people. "The clause on people's freedom of movement startled certain East European states, which feared mass emigration. Consequently it was modified and the labor market will not be opened to neighboring workers completely," a senior EU official said.