READYING FOR GREATER CONFLICT

The Arafat Regime, the "Authority", is near collapse -- not just financially, but credibility wise as well. The Israeli government is near "unity" -- with General Sharon in charge. And the armies of both, as unequal as they are, are preparing for a round of combat that could in all likelihood make what has come before pale in significance.

Meanwhile, the Arab client-regimes are as weak and bankrupt as usual; unable to face little Israel on either the international diplomatic battlefield or the one of armed conflict. Why doesn't the Arab League at least declare a cessation of political and economics contacts with Israel -- a regional boycott -- under today's circumstances. Why doesn't the U.N. General Assembly suspend Israeli credentials, as it has the power to do, while the Palestinians are being subjected to such cruel and Apartheid-like treatment? Why don't the Arab countries use their economic leverage to pursue their own vital interests, as the Americans are so fond of telling everyone they pursue theirs?

PALESTINIANS UPGRADE ARSENAL WITH SMUGGLED ANTI-TANK, ANTI-AIRCRAFT WEAPSONS

[Middle East Newsline: Wednesday, February 7, 2001]: TEL AVIV - Israel braced for an escalation in violence following its election as military sources said the Palestinian Authority had received hundreds of rocket-propelled grenades as well as anti-tank and anti-aircraft weapons.

The sources said the weapons arrived in barrels brought by boat from the Mediterranean Sea. The boat, believed to have come from Egypt, dropped the barrels in the sea off the Gaza coast, where some of them were picked up by Palestinian fishing boats.

Other barrels drifted to shore and were taken to PA installations. The sources said Israeli naval vessels stopped one shipment over the weekend. But the navy failed to stop other shipments.

Last week, Israel seized 50 rocket-propelled grenade launchers, 1,000 rockets, and scores of 60 mm mortar rounds, military sources said.

The result is an Israeli assessment that the PA is prepared to face Israeli tanks and even attack helicopters in any confrontation with Israel. Military sources said an escalation of violence could take place immediately after the Israeli elections on Tuesday.

Intense gun battles took place overnight Tuesday between Israeli and Palestinian forces. One Israeli soldier was killed by a Palestinian sniper near the Egyptian border.

PALESTINIANS TO FOIL "RAGING BULL" SHARON

JERUSALEM, Feb 11 (Reuters) - Radical Palestinian groups called Israeli Prime Minister-elect Ariel Sharon a "raging bull" who had to be isolated and vowed on Sunday to step up violence against him.

Nationalist and Islamic groups directing the four-month-old Intifada (uprising) against Israeli occupation said the Palestinians, Arabs and international forces should not let Sharon impose stability on the area by force.

"The arrival of the terrorist Sharon in the post of prime minister of the Zionist entity...imposes a new phase in the comfrontation, necessitating that Palestinain, Arab and international forces work to isolate this raging bull by all means."

"The Islamic and nationalist forces assert the importance of tightening Sharon's isolation from all sides and not giving him a chance to impose any stability," the groups said in a statement.

"This necessitates escalating the Intifada and resistance to make his policies a burden on Israeli society that will make it crucial to bring about his downfall to end his dark history and darker future," it added.

The groups declared Tuesday, February 13 a "day of rage" to be marked by popular marches and demonstrations against Israel's policy of settlement on occupied West Bank and Gaza Strip land.

They also declared Friday, February 16 a day of "total confrontation" to Sharon's policies and called on the Arab world to organise marches in support of their revolt...

ARAB STATES FREEZE MILLIONS IN AID TO PALESTINIANS
By Amos Harel, Military Correspondent

[Ha'aretz - 11 February]: Arab countries have suspended the transfer of hundreds of millions of dollars collected in recent months for the Palestinian people for fear the money will end up in the wrong pockets - exacerbating the already rampant corruption in the Palestinian Authority, Israeli security sources told Ha'aretz.

Arab states decided at an October conference in Cairo to transfer some $1 billion to the PA to alleviate the suffering of the Palestinians, caused by Israel's clampdown on them due to the violence of the Al Aqsa Intifada.

However, not all the money was sent, and the PA has accused the Arab leaders of being indifferent to the Palestinians' plight. The Arab aid to the PA was to come in the form of humanitarian consignments of food and drugs and to be transferred via the border crossings with Israel.

It now appears that a considerable sum was, in fact, raised, but not sent to the PA. Sources told Ha'aretz about $230 million was raised - a large proportion in Saudi Arabia and the Persian Gulf states. The contributing Arab countries and the banks through which the money was to move demanded that Chairman Yasser Arafat show complete transparency in the funds transfers and give a detailed report on how it was spent. This Arab demand followed past experience with money sent to Arafat's regime.

A great deal of money sent to the PA, especially from Europe, the United States and Japan, after the establishment of the PA, did not reach its intended destination. Through the collection of arbitration fees, monopolies and numerous other schemes, a large proportion of that money ended up in the bank accounts of PA officials, including Arafat, himself, and his economic advisor, Muhammad Rashid.

Because the PA has evaded the current demands made by the Arab donors, the money - most of which is being held in the Islamic Bank in the Persian Gulf - has been frozen. Israel doubts the PA will accede to the Arab donor demands, because it wants control over the flow of money.

FAIR PROSPECTS SEEN FOR ISRAELI UNITY GOVERNMENT
By Michele Gershberg

JERUSALEM, Feb 11 (Reuters) - Israel's mainstream Likud and Labour parties launched a new round of coalition talks on Sunday which some party members said could lead to a unity government with a better chance at forging a Mideast peace deal.

"I think they (Labour) want to join," Likud member and Israeli Mayor of Jerusalem Ehud Olmert told Army Radio.

"This doesn't have to take weeks. If it's possible then it's possible within days," said Olmert, who is a member of the right-wing Likud's coalition negotiating team.

Labour dove and Nobel peace laureate Shimon Peres told Reuters the Likud offer was "reasonable." "Now we have to see if we have common ground politically and ideologically."

Prime Minister-elect Ariel Sharon, head of the Likud party, is racing to form a coalition before a late March deadline or face new elections for prime minister and parliament.

Outgoing Prime Minister and Labour chief Ehud Barak met Sharon on Sunday for a second round of talks between the two since last Tuesday's prime ministerial election.

"The two men continued to discuss the diplomatic and security situation as well as negotiations on the establishment of a national unity government," Barak's office said.

Peres told BBC Television there was a "fair chance" of a partnership. Sharon said after the meeting he was optimistic about prospects for a unity government, Army Radio reported.

"We are very optimistic. We think their (Labour) intentions are serious and positive," a spokeswoman for the Likud negotiating team said. "I assume there is still a way to go but in general it is the desire among Israeli people."

A Likud poll conducted before the election divided Israelis surveyed by party affiliation and showed that 65 to 90 percent of respondents favoured a unity government, she said. Eighty percent of Labour voters surveyed backed a joint coalition.

Barak announced after his defeat that he would resign from parliament and as head of Labour once Sharon set up a government.

PERES FOREIGN MINISTER?

Peres said Sharon had sweetened his offer by proposing Labour take two of the three top government portfolios: foreign affairs, defence and treasury. He said "it's a possibility" he would be foreign minister if the two parties reach agreement.

Shalom Yerushalmi, political commentator for the Maariv daily, said Sharon would like to see Barak accept the defence portfolio and have Peres take on the foreign affairs post.

"Sharon is hoping to surround himself with two moderate statesmen...to pave his way into a cold and suspicious Western and Arab world," he wrote on Sunday.

Sharon trounced Barak on promises to end more than four months of Palestinian unrest before pursuing a peace deal.

Arabs loathe the 72-year-old army general for orchestrating Israel's 1982 invasion of Lebanon during which Palestinian refugees were massacred by Israeli-allied Lebanese militiamen.

A unity government is viewed as Sharon's best chance of creating a stable power base in Israel's fractious parliament and avoiding an alliance with extreme right and religious parties likely to pose an obstacle to peacemaking.

The hawkish leader has tried to soften his image into that of a pragmatic peacemaker. Yet Sharon has not spelled out the details of his own negotiating position and remains an outspoken opponent of concessions Barak appeared ready to make for peace.

Some Labour stalwarts fear joining a Likud-led coalition will weaken their already ravaged party and give legitimacy to hardline policies.

"I am against a national unity government," Labour lawmaker Yael Dayan told Israel Radio. But she added that if most of the party supported an alliance with Sharon then she would too.