Militants hit Gaza army post, Barghouthi withdraws

GAZA - Palestinian militants blew up an Israeli army post on the Gaza-Egypt border on Sunday, killing at least four Israeli troops in the deadliest attack since Yasser Arafat's death a month ago kindled new hopes of peace.

The violence sent a message of militant muscle to Israel and moderate Palestinian leader Mahmoud Abbas, who became the only serious candidate for a January 9 election to succeed Arafat after jailed uprising leader Marwan Barghouthi withdrew from the race.

The attack also came as Israeli Prime Minister Ariel Sharon's plan for withdrawing from occupied Gaza appeared to be gaining momentum.

Hamas and a group known as the Fatah Hawks, from the dominant Palestinian faction to which both Abbas and Barghouthi belong, claimed responsibility for the carefully orchestrated assault on Sunday.

The militants said they burrowed for 600m to reach the Israeli post at the Rafah border and set off a 1500kg bomb.

Militants opened fire and later detonated another large blast nearby.

Israeli officials said four soldiers died and at least nine others were wounded.

Palestinians said one gunman was killed in the battle. Another man was shot dead in the area soon after, they said.

The Fatah group said it was avenging the "assassination" of Arafat, referring to rumours widespread among Palestinians that their veteran leader was poisoned -- despite denials from French and Palestinian officials and no clinical evidence that he was.

The attack looked certain to fuel the growing cycle of bloodshed in Gaza after a spell of relative calm that followed Arafat's death.

Israel has vowed to respond to violence but said that it could cut back on military operations if militant groups waging a four-year-old uprising stop attacks on Israelis and the new Palestinian leadership can bring the fighters under control.

"We are willing to display restraint but I think it also puts a great deal of pressure on the Palestinian leadership to take the necessary steps," said the Israeli prime minister's spokesman, Raanan Gissin.

Abbas, who has often spoken out against violence, looked set to succeed Arafat virtually unchallenged after Barghouthi withdrew from the presidential race on Sunday.

The firebrand uprising leader, jailed for life by Israel for masterminding attacks on Israelis, said in a letter that he would back Abbas -- ending speculation over his election bid that had thrown the race into confusion.

Barghouthi had been running neck-and-neck with Abbas.

Israel agreed on Sunday to free up to 200 Palestinian prisoners to show goodwill ahead of January 9 elections for Arafat's successor and after Egypt's release of a convicted Israeli spy.

Gissin said there could be more prisoner releases if the new Palestinian leadership reined in militant groups. It said Israel could also discuss its "disengagement" plan from Gaza if it saw leaders it could talk to.

Welcomed by Western countries as a step towards peace, the Gaza plan took a major step at the weekend as the centre-left opposition Labour party started talks with Sharon's right-wing Likud on a government to champion withdrawal.

Palestinians remain deeply uneasy about Sharon's initiative, fearing it will cost them the West Bank. Palestinians want both territories captured in the 1967 Middle East war for a state.

Sharon needs Labour to rebuild his shattered government, avert early elections and overcome rightist rebels opposed to withdrawing from any captured land as a "reward for terror."

Sharon wants to evacuate all the settlements in the Gaza Strip and four of 120 in the West Bank next year in a bid to "disengage" from fighting with the Palestinians. Polls show most Israelis want to part with impoverished Gaza.

- REUTERS