Olmert ponders the release of Palestinians held since 1990s

Israel is considering the first release of former Palestinian militants – held on serious charges since the early 1990s – as part of the "gesture of goodwill", the Prime Minister, Ehud Olmert, told the Palestinian President, Mahmoud Abbas, yesterday.

Such a release, if it went ahead, would almost certainly mean the freeing of Palestinian prisoners with "blood on their hands" because of their involvement in attacks on Israelis before the Oslo peace accords. It would be designed to prove that the moderation of the West Bank Palestinian leadership under Mr Abbas bears fruit.

Mr Olmert promised Mr Abbas that there would be a release of prisoners on 25 August. Saeb Erekat, one of Mr Abbas's chief negotiators, said more than 150 would be freed but that figure was not confirmed by Israel.

The release of prisoners detained before the Oslo accords has been a longstanding demand of Mr Abbas. He pressed such releases on Mr Olmert's predecessor, Ariel Sharon, when he was Prime Minister under Yasser Arafat.

Mr Abbas argued at the time that there was no rationale for continuing to detain men – many now in their 40s and 50s – who had been sent on missions against Israel by a collective leadership which had included Mr Abbas himself.

But the demand, which Mr Abbas repeated to Mr Olmert when the two men met yesterday, has been freshly underlined by the prospect – however uncertain – of possible releases of Hamas prisoners in return for Gilad Shalit, the Israeli corporal abducted by Gaza militants in June 2006.

Mr Abbas was angered by the idea that Israel might be prepared to release Hamas militants in return for Cpl Shalit while at the same time refusing to agree releases of Fatah and other prisoners in order to progress negotiations that have had international backing since last year's Annapolis summit.

Rafiq Husseini, the head of Mr Abbas's office underlined that point on a visit to the West Bank village of Ni'ilin last week He said that if Israel was "teaching" Palestinians the only way to secure prisoner releases was the "kidnapping of soldiers or settlers" then "it is going to be a course adopted by the Palestinian people".

Another factor that may have fuelled Mr Abbas's demand – which secured what one source said was an Israeli promise to "consider seriously" the release of pre-Oslo prisoners – may be the recent swap with Hizbollah for the bodies of two abducted Israeli soldiers.

While Palestinian adherents of Mr Abbas's Fatah movement serving long sentences continue to languish in Israeli jails, Israel released Samir Kuntar, the Lebanese convicted for the 1979 attack during which an Israeli father and his two young children died.

Israel has meanwhile ignored a public request by Gordon Brown to allow some revival of Palestinian institutions in East Jerusalem. Avi Dichter, the Interior Minister, renewed, for a further six months, the closure of the old Palestinian Authority offices in Jerusalem's Orient House this week.

The institutions include the East Jerusalem Chamber of Commerce which Mr Brown explicitly called on Israel to allow the Palestinians to reopen.

The British consulate general in Jerusalem said yesterday that Mr Brown had highlighted the issue as one on which the Israelis could give help "in easing the obstacles to Palestinian economic growth". A consulate spokesperson said: "The British Government regrets Israel's decision to renew its closure of Palestinian institutions in East Jerusalem."