Shin Bet (Israel Security Service) head Yuval Diskin told the cabinet Sunday that Israel should consider major changes in the agreement that placed European monitors at the Rafah crossing and effectively put responsibility for halting arms smuggling into Gaza onto Egyptian shoulders.
Diskin said the Egyptians had proved "ineffective" in the South and said the whole mechanism that was created at Rafah was "problematic."
The agreement to open the Rafah crossing using European monitors was hammered out amid great fanfare last November by US Secretary of State Condoleezza Rice and expires in three months.
Thus far, an interministerial committee made up of representatives from the Foreign Ministry, Defense Ministry, Prime Minister's Office and the IDF have dealt with the agreement. Diskin said it was time for the agreement to be "reopened."
He said the Philadelphia corridor, which separates Gaza from Egypt and which Israel left as part of the disengagement from Gaza last year, was "wide open" and that tons of explosives had been smuggled into Gaza recently.
The statements came as Israel was waiting for a beefed-up UNIFIL force to deploy on the Israeli-Lebanese border together with the Lebanese army, as well as along the Syrian-Lebanese border to halt arms shipments from Syria and Iran to Hizbullah.
"The strengthening of the terrorist organizations in Gaza is a strategic problem that, if we don't deal with as needed, will leave us with a situation in a number of years similar to that in Lebanon," he said, estimating that this would take only three to five years if Israel did not act. "We don't need to wait three years and then investigate."
Diskin said that, in addition to the explosives coming "over and under" the Philadelphia Corridor, terrorists were also moving through the border, and millions of dollars were being brought to the Hamas-led Palestinian Authority through the Rafah crossing.
Recently, he said, the PA Agricultural Minister brought into Gaza a suitcase carrying $1.5 million. In June, Hamas Foreign Minister Mahmoud Zahar carted $20m. in cash across the Egyptian border, weakening efforts to financially strangle the Hamas-led government.
Diskin said PA President Mahmoud Abbas was straining to retain his relevance. He said Fatah - Abbas's power base - was at its worst position ever and was on the verge of dissolution.
Diskin also asserted that Hizbullah head Hassan Nasrallah was seen as a "national hero" on the Palestinian street and that the Palestinians were trying to determine the lessons of the war.
He said the Palestinian terrorist organizations were learning from Hizbullah's guerrilla warfare tactics and had paid attention to the effectiveness of antitank missiles and the type of bunker system Hizbullah developed in southern Lebanon.
Other Palestinians, he said, were taking away different lessons from the war and were concerned that Israel would take out on the Palestinians frustrations stemming from the war in Lebanon if Kassam rocket fire from Gaza continued.
Diskin said that this message was relayed recently by Abbas to PA Prime Minister Ismail Haniyeh. He said Abbas warned Haniyeh that if Haniyeh were not careful, Gaza could soon look like the Hizbullah neighborhoods of Beirut that were devastated by the IAF.
Diskin said Israel had regained a degree of deterrence in Gaza by adopting a policy of destroying homes where arms and munitions were stored. He said the number of Kassam rocket attacks on Israel had dropped recently, but that this could be attributed to the intra-Palestinian negotiations taking place now, and it was too early to determine whether the drop represented a new trend.
Diskin also said Hizbullah was sending large amounts of money into Judea and Samaria and encouraging attacks against Israel.
Regarding the number of Hamas leaders in Israeli jails, Diskin said Israel had arrested eight Hamas ministers since Gilad Shalit was kidnapped in June, but was currently only holding four; was preparing indictments against 27 of the 28 Hamas parliamentarians it arrested; and still held 13 senior officials of Hamas's welfare and charitable organizations.â€¢