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Prime Minister Ehud Olmert believes negotiations with Syria should be seriously considered "if this would bring an end to its involvement in terrorism and extricate it from the axis of evil." Speaking at a briefing on the situation in the South to the Knesset Foreign Affairs and Defense Committee on Monday, Olmert said that the Syrian leadership is aware of his position.

Israel is also planning to initiate a broad diplomatic effort in order to reach an agreement with Egypt on regulating the security situation along the Gaza-Sinai border, and countering arms smuggling into the Strip. The political-security cabinet instructed the foreign and defense ministries to step up contacts with Egypt on this issue.

A committee member attending the Foreign Affairs and Defense Committee meeting earlier this week said that the prime minister's comment was "not just words."

A senior political source well versed in relations between Israel and Syria, described Olmert's statement as "another step forward," even though Olmert has in the past signaled to Damascus through the Knesset Foreign Affairs and Defense Committee.

Four months ago, on the eve of the Annapolis conference, Olmert told committee members that he believes "the participation of Syria in the conference could, under certain conditions, bring about a resumption of the negotiations, and this is valuable from Israel's point of view."

He added that "no responsible person in Israel would think that negotiations with Syria does not have many advantages for Israel."

Syria sent a delegation to Annapolis, headed by deputy foreign minister Faisal Mekdad.

Merely two months earlier, in September 2007, tensions between Jerusalem and Damascus rose dramatically following Israel's strike in the eastern part of Syria, which foreign press reports claimed was an attack against Syrian nuclear installations.

About three months prior to the attack Olmert called for direct negotiations with Syria, and declared that Israel is interested in peace with Damascus. The statements were made at the completion of a security-political meeting on the situation on the northern border, and ostensibly due to Syrian rearmament and concerns that miscalculations would lead to a confrontation.

Political sources noted yesterday that Defense Minister Ehud Barak also believes that Israel should make an effort to achieve progress on the Syrian track, but not necessarily at the expense of the Palestinian track.

Several months ago, speaking at the Saban Forum, Barak said that there may be another outbreak of fighting between Israel and Syria and then "we would have to look into the eyes of the soldiers and tell them that we have made every effort to reach agreement."

At the end of last week, Haaretz reported that Syrian President Bashar Assad had said recently that he would be willing to meet Prime Minister Olmert in Moscow and discuss a peace agreement.

Assad conditioned the meeting on Israel restoring the proposal made by prime minister Yitzhak Rabin to the Americans in 1994, that Israel would withdraw to the 1967 lines in the Golan Heights, in return for peace.

Meanwhile, Israel intends to push for an agreement with Egypt on regulating and safeguarding the Gaza-Sinai border and to better counter the smuggling of weapons into the Strip. The United States and the European Union have already been involved in the preparations for these talks.

During yesterday's political-security cabinet meeting, Foreign Ministry officials presented a plan for progressing diplomatically on this issue with Egypt. The plan's basic principle is that "in the absence of a major ground offensive, it is important to create a new situation in the Gaza Strip, which will include broader military operations and also an effort to reach a new arrangement with Egypt from a position of strength."

According to the plan, in order to bring about a stop to the Qassam attacks, it is necessary to strike Hamas in Gaza, but at the same time solve the problem of smuggling, which enables the organization and other militant groups to replenish their weapons arsenals, and also acquire more advanced equipment.

The Foreign Ministry concluded that the solution to smuggling will not come from IDF operations in the Strip, but through Egyptian action, and therefore it is important to take diplomatic action vis-a-vis Cairo.

Foreign Minister Tzipi Livni said that the situation at the border has changed dramatically and therefore it requires a change in the Israeli outlook about a possible solution.

"We need to choose between Hamas and Egypt," she said. "Dealing with a situation from the past is not relevant. A draw is not acceptable and we need to create a new reality from a position of strength."