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Hamas announced on Wednesday that it has accepted the Egyptian cease-fire initiative "in principle" and that it was now awaiting Israel's response.
The announcement came after a Hamas delegation concluded two days of marathon talks with representatives of the Egyptian General Intelligence Service in Cairo.
Hamas denied reports in the Egyptian media to the effect that it had accepted the Egyptian initiative unconditionally.
Jerusalem had no formal response Wednesday. Prime Minister Ehud Olmert, Foreign Minister Tzipi Livni and Defense Minister Ehud Barak were expected to discuss the developments at a meeting Wednesday night.
The three of them are believed to be in agreement on how to respond to the Egyptian proposal.
Barak, according to officials, is in favor of accepting it and ending the operation in the Gaza Strip, and Livni has been advocating a unilateral cease-fire on Israel's behalf.
Barak, officials said, believes that the ground operation in Gaza has achieved its goals, primarily restoring Israel's level of deterrence in the face of Hamas and severely weakening the organization.
Sources close to Hamas said that while some progress had been achieved in the talks, it was premature to talk about a cease-fire agreement.
They said that the Egyptians put heavy pressure on the Hamas officials and even threatened them against rejecting the initiative.
"There are still some sticking points," on of the sources said. "We still haven't reached an agreement over the length of the proposed cease-fire and the future of the border crossings into the Gaza Strip."
They said that Hamas is prepared to accept a short-term cease-fire with Israel, while the Egyptians were pressing for a long-term truce.
Hamas, the sources explained, is also insisting on a role in the management of the border crossings, particularly the Rafah terminal.
The Egyptians want to hand over the terminal to forces loyal to Palestinian Authority President Mahmoud Abbas, which used to run the border crossing until they were kicked out by Hamas in 2007.
Despite the differences, Egyptian government officials expressed optimism regarding the prospects of achieving a cease-fire between Hamas and Israel in the coming days.
Egyptian Foreign Minister Ahmed Aboul Gheit said he would relay Hamas's position to Israel on Thursday. He said that Hamas has responded "positively" to the Egyptian proposal.
On Thursday, Amos Gilad, the head of the Defense Ministry's Diplomatic-Security Bureau, is scheduled to travel to Cairo for talks with Egyptian Intelligence Minister Omar Suleiman to review the cease-fire proposal and present Israel's conditions.
Defense officials said that Gilad would return to Israel and present the plan to Barak, Livni and Olmert, who would then make the final decision of whether to accept the offer.
The IDF will likely withdraw its troops immediately following the announcement of the cease-fire, officials said.
Israeli officials said the sequence of the events would most likely be as follows:
â€¢ An immediate cease-fire
â€¢ A withdrawal of IDF troops
â€¢ Discussions with the Egyptians on the mechanism to prevent arms smuggling into Gaza
â€¢ Discussions on when and how to open up the border crossings.
One of the key elements to be determined is the duration of the cease-fire, with Hamas wanting another six-month cease-fire and Israel wanting something much longer.
Overnight Wednesday, France and Germany published a joint announcement calling on Israel and Hamas to cease Gaza warring. According to the statement released by German and French foreign ministers Frank-Walter Steinmeier and Bernard Kouchner, Berlin and Paris are willing to provide guarantees to prevent weapon smuggling into Gaza and the opening of the crossings, as part of a permanent truce to follow a temporary humanitarian cease-fire.
Foreign Ministry Director-General Aaron Abramovich went to the US Wednesday to discuss with the Americans how to stem the tide of arms smuggling even before the arms reach the tunnels at the Gazan-Egyptian border.
At issue is how to stop the arms from going from Iran to North Africa, and then via the tunnels into Gaza.
The Prime Minister's Office issued a statement saying that a steering committee made up of Defense and Foreign Ministry officials had been discussing the elements Israel would like to see in the agreement, and Abramovich would be discussing these issues with the Americans.
The statement denied reports that Olmert had vetoed a request by Foreign Minister Tzipi Livni to discuss the agreement with the Americans. The statement said Livni would go to the US as the talks progress.
The Israeli embassy is still in the process of lining up meetings for Abramovitch's 24-hour visit, during which he will to try to enhance the American commitment to an international guarantee that Hamas will be prevented from rearming.
Israel sees this as a necessary component for putting a cease-fire in place.
Abramovitch will primarily be speaking to US State Department officials, as well as meeting with members of Congress and Jewish organizations. There is a possibility that he would meet with White House officials as well, though the latter are in the midst of clearing their desks, since Friday is the last work day before the inauguration of US President-elect Barack Obama.
An embassy official, however, said that the focus would be on the State Department, where many of the staff would be staying on after the transition, and any agreement made would be a commitment the incoming administration would feel an obligation to keep.
"We don't all want to wait until next week," he said of needing to deal with the situation in Gaza now, adding, "The problem's not going to go away because a new administration is coming in."
In a related development, German Foreign Minister Frank-Walter Steinmeier is scheduled to arrive in Jerusalem for the second time this week for talks expected to focus on technical assistance the Germans can give the Egyptians to stop the arms smuggling.
UN Secretary-General Ban Ki-moon is also scheduled to discuss the cease-fire in talks in Israel Thursday with Olmert, Livni, Barak, President Shimon Peres, and head of military intelligence Maj.-Gen. Amos Yadlin. Ban is also scheduled to meet with Likud head Binyamin Netanyahu.
Meanwhile, the Hamas delegation was expected to brief the movement's leaders in the Gaza Strip and Syria about the outcome of their discussions in Cairo. The delegation consisted of Salah Bardaweel and Ayman Taha from the Gaza Strip and Imad al-Alami and Muhammad Nasser from Syria.
Hamas representatives said that despite their acceptance of the Egyptian initiative, they still had a number of reservations.
"The Egyptian initiative is the only one that was presented to Hamas," Bardaweel told reporters in Cairo.
He stressed that Hamas did not have any dispute with Egypt.
"We don't have differences with the Egyptian leadership," he said. "They are acting as mediators with the Zionist enemy."
Bardaweel, who is a Hamas legislator, said that Hamas did not ask the Egyptians to amend their initiative.
"We didn't ask for amendments," he said. "We only presented our views and comments on it."
Bardaweel added that the Hamas delegation made it clear to the Egyptians that Hamas won't accept anything less than a halt to the "Zionist aggression," a full Israeli withdrawal, the permanent reopening of all the border crossings and the lifting of the blockade on the Gaza Strip.
But there were clear discrepancies between Bardaweel's comments and those of the Hamas leadership abroad, which sounded less enthusiastic about the cease-fire proposal.
Mohammed Nazzal, a senior Hamas official in Syria, said the group rejected a long-term cease-fire or the presence of an international force in the Gaza Strip and would refuse to stop the smuggling of weapons.
Nazzal said that the Hamas delegation in Cairo made it clear to the Egyptians that these demands were final and that Hamas would not make any concessions.
He said that Hamas has neither accepted nor rejected the Egyptian proposal.
"We have presented our reservations to the Egyptians and they will bring them to the Zionists," he said in an interview with Al-Jazeera. "We told the Egyptians that if our reservations are accepted, then we will deal with the initiative in a positive manner."
The Hamas leader denied that progress had been made during the Cairo talks, saying this was merely "media speculation."
Osama Hamdan, the Hamas representative in Lebanon, said that the Egyptian initiative must be changed to serve the national interests of the Palestinians.
"There isn't a political initiative that can't be amended or changed," he said.
"We welcome the Egyptian effort to end the Israeli aggression," he said. "But this initiative needs to be changed so that we could solve the points of differences between us and the Egyptian brothers. It must be changed for the interests of the Palestinians."
Arab political analysts appeared to be divided in their interpretation of the outcome of the Cairo discussions. Abdel Bari Atwan, editor of the London-based Al-Quds Al-Arabi, said the talks had failed because Hamas continued to cling to its reservations about the Egyptian initiative.
He said that Bardaweel and the Hamas representatives were forced to make the announcement in Cairo so as to give the Egyptians credit for their efforts.
"If they hadn't made the announcement, they would have been arrested by the Egyptian authorities and wouldn't have been allowed to return home to the Gaza Strip," he said.
Another Cairo-based analyst, Abdel Hakim al-Masri, said that it was obvious that some progress had been achieved at the Cairo talks. He said that Hamas was now much more willing to accept a cease-fire with Israel and that the movement was searching for an "honorable" and face-saving way out of the conflict.
Masri predicted that a final agreement on a cease-fire would be reached in the coming days, despite Hamas's reservations.
Hilary Leila Krieger contributed to this report from Washington.