Hezbollah sees Israeli prisoner swap this month

BEIRUT (Reuters) - Lebanon's Hezbollah said on Wednesday it had agreed to a U.N.-mediated deal to exchange prisoners with Israel and expected the swap to take place around the middle of this month.

"We have accepted this agreement and consider it a great accomplishment," said Sayyed Hassan Nasrallah, leader of the Iranian-backed group, confirming Hezbollah's acceptance of a deal approved by Israel on Sunday.

The exchange should take place around July 15 or "a little before or a little after", Nasrallah said. "I think in one to two weeks the issue will be completed."

Under the deal, Hezbollah will return two Israeli soldiers whose capture on July 12, 2006 triggered a 34-day war with the Jewish state. They are believed dead but Nasrallah refused to give any information on their condition.

Hezbollah seized the soldiers during a raid into northern Israel, saying it planned to use them to negotiate an exchange.

"We have completed the whole mission," Nasrallah said, in reference to the group's aim of securing the release of all Lebanese held by Israel.

The Jewish state will hand over five Lebanese prisoners and the remains of around 200 Lebanese, Palestinians and other Arabs who infiltrated northern Israel.

BARGAINING CHIP

The prisoners include Samir Qantar, the most prominent Lebanese held by Israel. He was serving a life sentence for killing a man and his 4-year-old daughter during a 1979 raid on the northern Israeli coastal town of Nahariya.

Israeli Prime Minister Ehud Olmert had described Qantar as the last "bargaining chip" for word on the fate of Israeli air force navigator Ron Arad, who bailed out of his plane during a bombing raid on Lebanon in 1986.

Nasrallah said the group would in a day or two hand over a report on Arad's fate. His trail was lost in 1988 while he was in the hands of Shi'ite militiamen.

Hezbollah had reached a "firm conclusion" on what had happened to him, Nasrallah said, without going into details. Nasrallah has in the past said he believed Arad was dead but did not know the location of his remains.

As part of the deal, negotiated by a German intelligence officer, Nasrallah said he would write to U.N. Secretary-General Ban Ki-moon asking him to help secure the release of Palestinians held by Israel, especially women and children.

Nasrallah said the negotiator would also receive a report from Israel on the fate of four Iranian diplomats who were kidnapped by Christian militiamen during Israel's invasion of Lebanon in 1982.

Iran believes the four to be alive and held in Israeli prisons, Tehran's embassy in Beirut said in a statement on Wednesday.

(Reporting by Beirut bureau; editing by Andrew Roche)