Israel may set free 1,000 PLO prisoners

Israel is preparing to release 600 to 1,000 of its 5,000 Palestinian security prisoners to coincide with an agreement on the next stage of its troop redeployment from West Bank Arab towns.

A Foreign Ministry spokesman disclosed this confidence-building gesture yesterday after an encouraging meeting between the Israeli Foreign Minister, Shimon Peres, and the leader of the Palestine Liberation Organisation, Yasser Arafat, in Alexandria on Wednesday. President Ezer Weizman is also looking into pardons for 29 Palestinian women prisoners.

Israeli officials are predicting that the second-stage negotiations could be completed by the end of this month, even if they do not make the 25 July deadline. Mr Peres flew home boasting of "new ideas for resolving the outstanding issues in a pragmatic spirit". Mr Arafat described the Alexandria talks as "very positive''.

The Foreign Ministry spokesman said in Jerusalem yesterday: "There have been very important understandings on principles." He was reluctant to celebrate a break-through before Israeli and Palestinian officials finished drafting the text of an agreement. "The formulas are extremely important," he cautioned. "Once you have to write them down, the technicalities become the main issue.'' Diplomats, lawyers and generals resumed this unenviable task in the northern Israeli town of Zichron Ya'akov yesterday. They will continue over the weekend.

Mr Peres and Mr Arafat will assess the state of play on Sunday night, then decide whether the talks should be switched to Egypt, as the Palestinians have proposed, and whether another summit is necessary. Among the issues where understandings have been reached, according to the Israelis, are: troop redeployment; water resources; security arrangements for the 130,000 Jewish settlers on the West Bank; and Palestinian elections.

The two leaders agreed on both the imminent withdrawal of the Israeli garrisons from six Arab towns - Kalkilya, Tulkarm, Jenin, Nablus, Ramallah and Bethlehem - and the later evacuation from Hebron and Arab villages.

Israel is resisting Palestinian demands for the restoration of historic water rights in the West Bank, offering instead a greater share of new resources. It is proposing to let the Palestinians take 40 million cubic metres of water a year from new drillings in the aquifer east of the mountain chain that runs the length of the West Bank. Austria is also offering loans on generous terms for building a desalinisation plant in the Gaza strip, which would provide another 50 million cubic metres a year.

On elections, Israel has agreed that Jerusalem Palestinians will be able to stand, provided they have a second address on the West Bank. Jerusalemites will vote at polling booths along the municipal border. These tortured provisions will enable the Israeli government to claim that the future of Jerusalem, which it insists is Israel's "eternal, undivided capital," has not been compromised.

The two sides have still to agree, however, on the size of the elected Palestinian national council. Israel is now proposing that it have 50 members. The Palestinians want 100. The Israelis want it to look like an administrative authority; the Palestinians the legislature of a state- in-the-making.