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MIDDLE EAST TALKS: Release of 44 prisoners is all that prevents accord

ISRAEL AND the Palestinians stood tantalisingly close to a fresh peace accord yesterday but a final agreement was still stalled by a dispute over the number of Palestinian prisoners to be released.

Early optimism ebbed away as both sides waited for the other to make the concessions necessary for the deal to be signed. "We're still waiting for them to call," said Saeb Erekat, the Palestinians' chief negotiator. "I hope they will call, so we can meet and conclude the only remaining issue, which is the prisoners."

Asked if the ceremonial signing of a new agreement, scheduled to take place in Egypt, was possible, Haim Ramon, the Israeli minister for Jerusalem, said: "Certainly, if the Palestinians pick up the phone."

Yasser Arafat, the Palestinian leader, was in Alexandria yesterday to put his name to a version of the Wye Agreement, signed but not implemented by Israel lastOctober. The Israeli Prime Minister's aircraft was waiting to fly to Egypt, but only if Mr Arafat agreed to his terms.

Israel is offering to release 356 Palestinian prisoners, while the Palestinians want 400 set free. The Prime Minister, Ehud Barak, says he will not free Palestinians who killed Israelis, but has hinted at flexibility over those who were jailed before the signing of the Oslo accords in 1993.

Some 200 members of Mr Arafat's own Fatah organisation are still in prison and his failure to get them freed is bitterly criticised and resented by many Palestinians. Likewise, Mr Barak is vulnerable to claims by the Israeli opposition that he has let the murderers of Jews return to the streets.

The agreement was originally to have been signed in Alexandria yesterday afternoon in the presence of the Egyptian President, Hosni Mubarak, and Madeleine Albright, the US Secretary of State.

The Israeli media has been referring to the signing as "a festive ceremony", but the form of the festivities has never been clear and there is no reason for the agreement not to be signed over the next few days. The presence or absence of Ms Albright at the signing is unlikely to affect the outcome of the agreement.

If no agreement is reached, then Mr Barak is threatening to implement the original version of the Wye Agreement "to the letter". Mr Ramon said yesterday that in this case only about 100 security prisoners would be set free and agreements reached in the past two months would go back to the drawing board. This would include deals on such issues as safe passage between Gaza and the West Bank and the scale of an Israeli withdrawal.

Under the original Wye Agreement, the Palestinians were to get full or partial control of 40 per cent of the West Bank, but equally important for Palestinians is freedom of movement between the slices of territory ruled by Mr Arafat. Palestinian critics of the Oslo process accuse the Palestinian leader of making concessions to Israel, but only receiving a series of tiny enclaves in return.

Under the modified version of Wye now on the verge of being signed, Mr Arafat has reportedly negotiated continuity between the territories he rules on the West Bank. Even more important will be the "safe passages" linking the one million Palestinians in Gaza and the 1.5 million on the West Bank. Passage will initially be by bus. But the degree of freedom of movement will depend on the stringency of Israeli security measures.

Israeli officials say that Mr Arafat may be delaying the final stage of the negotiations because he wants to draw in the Americans. Mr Barak says he wants to reduce the US role.

The last time an Israeli-Palestinian agreement was signed in Egypt in 1994 - giving the Palestinians control of most of Gaza and all of Jericho - Mr Arafat had to be cajoled into signing the papers during the ceremony itself.