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Prime Minister Ehud Olmert is to convene the political-security cabinet this week to discuss Israel's response to the firing of Qassam rockets and increased smuggling of weapons into the Gaza Strip.

Security sources said Israel is not expected to embark on a military operation in the Strip before Olmert's visit to Washington scheduled to take place in three weeks.

However, calls are inc reasing for a widespread operation in the Strip to strike at Hamas and other Palestinian organizations' military infrastructure before they obtain additional weapons.

Meanwhile, a senior political adviser to Palestinian Authority Prime Minister Ismail Haniyeh, Ahmed Yousef, said yesterday that Israel has agreed to release Palestinian prisoners, including senior Hamas activists, as part of an agreement to secure the release of kidnapped Israel Defense Forces soldier Gilad Shalit.

Yousef told Haaretz that Egypt is conducting energetic talks to move closer to an agreement between Israel and the Palestinians for Shalit's release. "The problem is timing and the identity of the prisoners to be released," Yousef said. "The Egyptians are dealing with the deal's mechanism, the prisoners will be released in a number of groups, and it must be determined how many prisoners will be in each group and who they are. Israel has shown for flexibility on Shalit, and is even willing to release non-Palestinian Arab prisoners."

A senior Hamas official said progress was made following transmission of a clear message from Israel to Egypt on the guarantees Jerusalem is willing to give to ensure the release of Palestinian prisoners after Shalit's return.

National Infrastructures Minister Benjamin Ben-Eliezer visited Cairo Thursday, and spoke with senior Egyptian officials regarding Shalit.

Senior Fatah officials said a deal would not be finalized until Hamas and Fatah reached an agreement over a unity government and cease-fire. The two organizations are to meet in Cairo after Thursday's Id el-Fitr holiday.

Defense Minister Amir Peretz has held consultations over the past few days to seek an exit from the political deadlock with the Palestinians. Peretz believes the lack of progress is dangerous for Israel, and if it continues, will lead to major Israeli military action in the Strip.

Large-scale action in Gaza will be more complex than similar action in the West Bank due to the Strip's dense population, and the security establishment fears it would result in numerous Israel Defense Forces casualties. Nevertheless, the IDF does not discount a reoccupation of the area.

The head of the Shin Bet security service, Yuval Diskin, and the GOC Southern Command, Yoav Galant, are leading a chorus of warnings against the unprecedented, rapid arming of Palestinians that started after Hamas' electoral victory. Israel had believed weapons smuggling was related to Palestinian infighting, however, the introduction of anti-tank missiles can only be for use against the IDF.

"We will never recognize Israel, and the end of the Zionists will be like the end of the Crusaders, Persians and British who left here," Palestinian Authority Foreign Minister Mahmoud Zahar said Friday in a speech in Khan Yunis. "We want all of Palestine, every centimeter, from the sea to the river, from Rosh Hanikra to Rafah. If we can establish a state in the 1967 borders we will do so, but that does not mean we will give up our right to a centimeter of the land of Palestine," he said.

He assured Palestinian prisoners that Hamas would work to free them, even if it means kidnapping additional soldiers.

Zahar is considered an extremist within Hamas and close to the head of the organization's Damascus-based political wing, Khaled Meshal, although his stand on recognition of Israel is similar to that of Haniyeh.

Zahar also said that Hamas intended to soon deploy its militia, the Executive Force, in the West Bank to prevent additional attacks on organization members in various West Bank cities.

Following Zahar's remarks, Abbas canceled a planned meeting with Haniyeh.

Senior Fatah officials said Syria rejects any softening of Hamas' position as long as Israel does not open negotiations with Damascus. Iran continues to send money to the Hamas leadership abroad, and is demanding that it maintains its stand. Hamas' hard-line positions are also apparently in response to support from the Palestinian street.

Gunmen opened fire on Haniyeh's convoy in the Bureij refugee camp Friday, hitting a car carrying Hamas security forces behind the prime minister's vehicle. Palestinian security sources said the relatives of a Fatah man killed in a clash between the organization and Hamas were behind the attack, and that security forces returned fire.

Also Friday, gunmen, apparently from Hamas, fired four mortars at General Intelligence command headquarters in the northern Gaza Strip. No injuries were reported.

It is unclear whether Palestinian Authority Chairman Mahmoud Abbas brought Ismail Jaber, formerly a top security commander, out of retirement yesterday to lead security forces in the West Bank in response to Zahar's announcement.

The IDF has almost completely stopped the controversial use of artillery fire in the Gaza Strip. The thousands of shells fired by the IDF have been aimed at open areas to avoid hitting civilians, however, a number of Palestinian civilians have been killed and dozens wounded.

The new division commander for the Gaza front, Brigadier General Moshe Tamir, believes that artillery fire does not further the goal of limiting Qassam attacks.

Military sources told Haaretz that entry of infantry personnel and Armored Corps to the launch areas obviates the need for artillery for the time being.

Meanwhile, the IDF continued its search for weapons-smuggling tunnels in the Strip over the weekend. A 50-year-old Palestinian man was killed early yesterday by IDF fire near the Sufa crossing east of Rafah. Palestinian sources said the man was a civilian, however, the IDF Spokesman's Office said the soldiers had returned fire when the man was hit.

An anti-tank missile was fired at IDF forces over the weekend, and at least 12 Qassam rockets were fired at the Negev. A Sderot resident was slightly injured by shrapnel.