Sharon prepared to lift Arafat blockade

Israeli Prime Minister Ariel Sharon is ready to lift restrictions that have confined Palestinian leader Yasser Arafat to his West Bank headquarters for three months, but he added that Israel will retain a veto on his foreign travel, and keep up its military offensive against the Palestinians.

Early today, Israeli tanks and troops entered the West Bank town of Qalqilya from all sides, residents said. They said about 50 armoured vehicles entered the town, destroying a police post.

In a statement, the Israeli military said soldiers are "searching for terrorists, weapons and terrorist infrastructure." The statement said there were exchanges of fire between soldiers and gunmen, and a police post of the elite Force 17 unit was destroyed. Israeli forces were continuing their operation in the Deheishe refugee camp next to Bethlehem.

Mr Sharon made his second conciliatory gesture over the weekend, indicating that he favours allowing Mr Arafat freedom of movement after Palestinian security arrested the last of the suspects on Israel's list of militants involved in the assassination of Tourism Minister Rehavam Zeevi last October.

"People have been arrested," the Prime Minister told a meeting of disabled war veterans. "I have said that after they are arrested, we shall let him out of there."

The gestures toward the Palestinians appeared likely to cost Sharon the support of the most hawkish wing of his broad-based coalition government. Cabinet minister Benny Eilon of the National Union bloc said he and fellow minister Avigdor Lieberman would submit their resignations from Sharon's ruling team on Tuesday.

However, Mr Sharon held out little hope of a letup in Israel's relentless military assault on the Palestinians.

"We are in a war," Sharon told his Cabinet during its regular weekly session on Sunday.

In Egypt, meanwhile, Saudi Arabia's Foreign Minister Saud al-Faisal offered Israel "complete peace from Arab nations" in exchange for Israeli withdrawal from Arab lands captured in 1967, and the creation of an independent Palestine with Jerusalem as its capital.