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Iraq has stepped up its attempts to move weapons and financial aid to the Palestinian Authority areas, in an effort to resume terror attacks against Israel. Baghdad's plan is to refocus international attention on the Israeli-Arab conflict and hope for a second front in case of a U.S. attack against Baghdad.

The defense establishment has spotted new signs of attempted Iraqi weapons smuggling to the West Bank and Gaza, including from Jordan. The Iraqi-backed Arab Liberation Front yesterday held a rally in Gaza where financial grants from Saddam Hussein were handed out to 32 families of Palestinian dead. The rally included an appearance by Hamas spiritual leader Sheikh Ahmed Yassin, who called for "unity in the ranks of the resistance," and drew a connection between Palestinian resistance to the Israeli occupation and the U.S. threats to strike at Iraq.

Major General Amos Gilad, the government coordinator in the territories, is, meanwhile, in Washington for meetings with political and military officials, reporting on developments form the IDF's perspective in the PA areas. Security sources in Israel expressed disappointment last night with Mohammed Dahlan's failure to reach an agreement with Hamas to restrain its activists against Israel. Dahlan is considered one of the most influential of Fatah leaders in Gaza and the West Bank and serves formally as National Security Advisor to PA Chairman Yasser Arafat.

According to Gazan sources, Dahlan's loyalists have so far refrained from a head-on clash with the heavily armed Abu Samhadne clan, which controls the drug trade in southern Gaza, and with the two most powerful clans in Rafah, the Abu Taha clan and the Abu Jazir clan. Clan fighting and blood feuds have claimed 75 Palestinian lives in Gaza during the past two years.

Palestinian sources said that there had also been some weakening of the influence of PA Interior Minister Abdel Razak Yehiyeh, but that Finance Minister Salam Fayad's stature was rising because he was identified with the efforts to rid the PA of corruption and reform the PA's bureaucracies.

Meanwhile, there are growing reports from Bethlehem, Tul Karm and Nablus about local Fatah leaders clamping down on Tanzim and the Al-Aqsa Martyrs Brigade, considered military wings of the Fatah political movement. Reports from Bethlehem say that at least 10 Al-Aqsa operatives have been paid off $300 a piece to commit to ceasing their armed activity.

Medical sources are reporting that the lengthy curfews have resulted in illicit use of ambulances as taxis, with the price starting at NIS 50 for a ride inside Ramallah to as much as NIS 1,000 to carry passengers from Nablus to the Allenby Bridge.

In another development,