Palestinian Civil Affairs Minister Mohammed Dahlan agreed on Sunday to prevent attacks on Israel, and Israeli Vice Prime Minister Ehud Olmert agreed to ease security restrictions, announcing that a crucial border post would be placed under Egyptian control.

The moves, aimed at smoothing the way for Israel's planned withdrawal from the Gaza Strip in August, came on the final day of the World Economic Forum, a glitzy gathering that saw world leaders pushing for government reform in the
Middle East.

Speakers included American first lady Laura Bush, the Jordanian king and queen, and the president of Opec.

The day's most dramatic gesture came when Dahlan and Olmert embraced with a hug and warm handshake, to the delight of the audience, which included top officials from the United Nations, World Bank and American actor Richard
Gere.

Rare gesture

In a similar greeting, Iraqi Foreign Minister Hoshyar Zebari shook hands with Israeli cabinet minister Benjamin Ben-Eliezer, a rare gesture between officials whose countries have no diplomatic ties.

The hug between Dahlan and Olmert followed the Palestinian minister's pledge to halt attacks on Israel after Israel turns the Gaza Strip over to Palestinian control.

Ben-Eliezer's handshake with
Zebari (R) made headlines

Olmert followed with a promise for "substantial, tangible changes" in Israel's economic blockade of Gaza that will allow Palestinians to improve their lives.

But the euphoria was short-lived. A later session between the two sides degenerated into finger-pointing.

Asked privately whether he thought Dahlan's pledge was genuine, Olmert shrugged and said Dahlan has made two similar promises that proved ineffective.
 
Olmert's own pledge to allow Palestinians to revitalise their economy appeared shallow when he was asked to describe the specifics.

His chief concession was that Israel would give up control of the Rafah crossing between Egypt and the Gaza Strip, handing it over to the Egyptians within a few months of Israel's evacuation of the volatile border area.
 
Demand denied

"We are negotiating with the Egyptians," Olmert said during an interview with The Associated Press. "They will take it over."
 
Dahlan welcomed Olmert's remarks. "This is a good step," he said. Israeli officials in Jerusalem said no decision has been made on the border crossing.
 

Olmert (R) and Dahlan greeted
each other with a hug

But Olmert said Israel will deny a chief demand of the Palestinians - and of the World Bank - and prevent the reopening of a Palestinian-owned airport in Gaza, even after the Israeli pullout.

Olmert said Israel wasn't prepared to allow Palestinians to oversee international flights into Gaza, saying they pose too big a risk for the import of missiles able to strike Tel Aviv and other nearby Israeli cities.

Gloomier still for the devastated Palestinian economy, Olmert confirmed that Israel would not heed international pleas to allow Palestinians to travel to jobs inside Israel.

Israel intends to fully bar Palestinians from working inside Israel by 2008.
 
Shalom's threat

Meanwhile, Israeli Foreign Minister Silvan Shalom said he asked Jordan's King Abdullah II to intercede with the Palestinians to stop violence in Gaza so the Israeli pullout could go forward.

If not, Shalom warned that Israel would have to stop the attacks itself, another threat to the fragile truce agreement reached in February.

Senior ministers from Egypt (R)
and Israel attended the summit

And in neighbouring Syria, leaders of major Damascus-based Palestinian factions held a rare meeting on Sunday to follow up on a truce with Israel reached earlier this year.

Olmert said the ban on Palestinian employment inside Israel was part of a deliberate process to separate the two economies, which are eventually expected to be neighbouring states.

Israel doesn't want to depend on "foreign" workers, Olmert said. "It's not good for them, it's not good for us," Olmert said. "When there is one terrorist act it immediately brings a closure. They lose their jobs. We lose our business."

New realities

Earlier on Sunday, the World Bank's Nigel Roberts blamed Israel's restrictions on travel and trade for wrecking the Palestinian economy.

He called on Olmert to allow Palestinians to use the now-closed roads, airport and seaport, and to allow more Palestinians to work inside Israel.

Olmert said Israel was only ready to "develop some platform for trade", rejecting most of the World Bank requests.

The World Economic Forum will
return to Jordan in 2007

"We want them to get ready for the new realities, through jobs in the Palestinian Authority," Olmert said.

"We kicked out all the Thais, the Chinese, the Filipinos out of Israel, so it's not something that discriminates Palestinians from other foreign workers. We don't want anyone."
 
The World Bank estimates Palestinian unemployment at 30%.
 
Israel, Jordan and Palestinian officials agreed on Sunday to go ahead with a three-year feasibility study to save the shrinking Dead Sea, which lies directly behind the conference centre.

Klaus Schwab, founder and executive chairman of the World Economic Forum, announced that next year's gathering would be held in the Egyptian Red Sea Resort of Sharm el-Sheikh.

He said the summit would return to Jordan in 2007.