Israel raises issue of captive soldier in Gaza truce

By Jeffrey Heller and Dan Williams

JERUSALEM (Reuters) - Israel told an Egyptian mediator on Monday a ceasefire deal with Hamas must address the issue of a captive Israeli soldier, Israeli officials said, posing what appeared to be a new condition for a truce.

Hamas officials said a truce agreement and the release of Gilad Shalit, held by Gaza militants since 2006, should remain separate issues, and they were awaiting clarifications from the negotiator, Egyptian intelligence chief Omar Suleiman.

Suleiman told reporters before holding talks with Prime Minister Ehud Olmert and other Israeli leaders that he had "high expectations" a ceasefire deal could be reached.

Shortly after Suleiman met Israeli leaders, Islamic Jihad militants launched a rocket which killed a 70-year-old Israeli woman at an agricultural community close to the border with the Gaza Strip, security and emergency services said.

But Israeli officials focused on Shalit's fate -- a hot domestic issue for an embattled Olmert as he fights for his political survival in the face of bribery accusations -- in summing up the prime minister's meeting with Suleiman.

In the latest development in the Olmert investigation, police said on Monday they seized documents from Jerusalem's city hall where Olmert served as mayor between 1993-2003.

The officials said separate Egyptian efforts to broker a prisoner swap that could free hundreds of Palestinians in Israeli jails in return for Shalit had broken down and any truce accord must include a resumption of talks on the issue.

"We are conditioning any progress on this issue (the truce) on the inclusion of our demand for Shalit's release," one senior Israeli official said on condition of anonymity.

Mark Regev, a spokesman for Olmert, stopped short of making any direct linkage.

"Hamas continues to hold hostage the young Israeli serviceman ... He must be released," Regev said. "Hamas cannot expect Israel to ignore the fact that they are holding one of our young servicemen."

A source familiar with the ceasefire talks said Israel and Hamas had already agreed efforts to arrange a prisoner exchange would intensify once a truce was declared.

SIX-MONTH TRUCE

Following meetings with Suleiman in Cairo last month, Hamas offered a six-month halt to hostilities in the Gaza Strip if Israel lifted an embargo on the coastal Palestinian territory.

"Hamas has given all that is needed to ensure the success of the Egyptian effort and the ball is now in the Israeli court," Hamas official Sami Abu Zuhri told Reuters.

Washington has backed Cairo's mediation in the hope of curbing violence, including rocket fire from the Gaza Strip and Israeli raids in the territory, which has threatened to derail peace talks between Olmert and Palestinian President Mahmoud Abbas.