Jerusalem bomb kills 10, prisoner swap goes ahead

11.30am - UPDATE

JERUSALEM - A suicide bomber blew up an Israeli bus in Jerusalem on Thursday, killing 10 people in the deadliest such attack in four months, as Israel and the Lebanese guerrilla group Hizbollah carried out a prisoner exchange.

Al Aqsa Martyrs Brigades, linked to Palestinian President Yasser Arafat's Fatah faction, issued a letter left by the bomber saying he was avenging an Israeli raid in Gaza on Wednesday that killed eight Palestinians, including five gunmen.

The explosion on Bus 19 peeled back part of its roof, shattered windows and scattered body parts up to 15 metres away on Gaza Street near Prime Minister Ariel Sharon's official residence.

Sharon was at his ranch in southern Israel at the time. Police said the bomb was packed with nuts and bolts to maximise casualties. Dozens of wounded were rushed to hospital.

"It was like a pastoral scene -- the sun was shining and it was serene outside -- but the bus was a nightmare. Bodies were sitting in their chairs, burnt, motionless," said witness Drora Resnick.

"There were burnt children sitting together. People started rushing off the bus, but they were still there, not moving."

Hours after the blast, Israel released some 400 Palestinian prisoners into the West Bank and Gaza, and returned over its border with Lebanon the bodies of 59 Lebanese and Arab fighters killed during a 22-year occupation of southern Lebanon.

Some of the prisoners knelt in prayer as they alighted from Israeli tour buses and others waved farewell to jailers.

"Most of those freed were due to be freed in a few months' time anyway," said released prisoner Annam Sayel, 20, who was sentenced in August 2002 to 28 months in jail for throwing petrol bombs and stones at soldiers.

The key to the German-mediated deal was the identification at a Cologne air base of the bodies of three Israeli soldiers handed over by Hizbollah with abducted Israeli businessman Elhanan Tannenbaum.

After Israeli forensic experts identified the remains of the soldiers, abducted at the Lebanese border in 2000, a plane carrying their coffins and Tannenbaum brought them to an airbase near Tel Aviv, where Sharon attended a memorial ceremony.

"The reality of our lives sometimes forces upon us a terrible combination of sadness and joy," said Sharon as he sent condolences to families bereaved by the bombing. Later, he was to meet security chiefs to discuss a response.

A second aircraft arrived in Beirut with 29 mostly Lebanese prisoners released by Israel. Thousands of people waving Lebanese and yellow Hizbollah flags lined up to give them a hero's welcome.

The Jerusalem bombing came in the midst of a visit by US envoy John Wolf, who met this week with Israel and Palestinian officials to try to revive a violence-stalled peace "road map".

The White House repeated a call for Palestinian Prime Minister Ahmed Qurie, who condemned the bombing, "to take steps to dismantle the terrorist infrastructure" in the West Bank and Gaza Strip.

David Baker, an official in Sharon's office, said the attack showed why Israel was building a barrier in the West Bank.

Israel says the barrier will keep out suicide bombers who have killed hundreds of Israelis since the start of a Palestinian uprising in September 2000. Much of the international community has criticised the project, which Palestinians call a land grab.

In Beirut, Hizbollah chief Sheikh Hassan Nasrallah said his guerrillas would capture more Israelis as a last resort if Israel did not release its last Lebanese prisoner, Samir al-Qantar.

Qantar's release could hinge on a second stage of negotiations for information on missing Israeli airman Ron Arad, who bailed out during a mission in 1986. Tannenbaum said he went to Lebanon partly to seek information on Arad's fate.

Israelis say he was handed by Lebanese guerrillas to Iranian backers and might still be alive. Iran says it has no information on his fate.

- REUTERS