ISRAEL MAKES AN OFFER TO PALESTINIANS

Seeking to build on a shaky cease-fire with the Palestinians, Israeli Prime Minister Ehud Olmert offered Monday to free prisoners, lift checkpoints and release money withheld from the Palestinian Authority in return for decisive steps toward peace.

In one of his most conciliatory speeches, Olmert spelled out Israel’s probable concessions as part of a peace accord, including a withdrawal of troops and many of its settlements from the West Bank and the release of “numerous Palestinian prisoners, including ones who were sentenced to lengthy prison terms, in order to increase the trust between us.”

“I hold out my hand in peace to our Palestinian neighbors in the hope that it won’t be returned empty,” he said during a ceremony at the tomb of David Ben-Gurion, Israel’s first prime minister.

The offer is a shift for Olmert, who had declared in his political campaign in the spring that none of the Palestinian leaders were capable of making a deal with Israel.

Since his election, Olmert has worked to isolate the Hamas-led Palestinian government. On Monday, he invited the Palestinians to help negotiate a lasting settlement, saying they stood at a “historic crossroads.”

Olmert’s initiative breathed new purpose into his coalition government, which has been divided and increasingly unpopular since the country’s summer war against Hezbollah militias in Lebanon. The inability of the army to stop Hezbollah rocket fire into northern Israel deepened Israeli concerns about the country’s security, forcing Olmert to shelve his central campaign pledge to pull out of large areas of the West Bank and unilaterally redraw the Jewish state’s borders.

But his proposal faces several obstacles, including resistance by some Palestinian militant groups to the 2-day-old cease-fire in the Gaza Strip.

Hours after Olmert’s speech, two rockets fired from the Gaza Strip fell harmlessly in the Israeli border town of Sderot, violating the truce and threatening to undercut U.S.-backed diplomatic steps toward a meeting between Olmert and Palestinian Authority President Mahmoud Abbas.

The military wing of the Fatah Party said it fired the rockets to protest Israel’s assaults on fighters in the West Bank, which is not covered by the cease-fire and where Israeli raids have continued.

Palestinian leaders reacted to Olmert’s initiative with caution and skepticism.

“We want serious negotiations,” said Nabil abu Rudaineh, a spokesman for Abbas, whose Fatah Party is more moderate than Hamas. Abu Rudaineh welcomed the prospect that prisoners and money would be released, but added, “We want to see acts, not just words.”

Ghazi Hamad, a Hamas government spokesman, dismissed Olmert’s speech as “a new maneuver,” but did not reject the idea of talks between the two sides.

“Olmert is speaking about the Palestinian state without giving details about the borders,” Hamad said.

In Washington, State Department spokesman Sean McCormack said that the Bush administration viewed Olmert’s speech as “constructive” and that it was working with moderate Arab states to help Israel and the Palestinians overcome their differences.

President Bush and Secretary of State Condoleezza Rice plan to visit Jordan on Wednesday for talks about the conflict here and the war in Iraq.

Olmert spelled out his conditions for a revival of Israeli-Palestinian peace talks, which collapsed about six years ago with the start of a Palestinian uprising.

First, he said, the Palestinians must release Israeli Cpl. Gilad Shalit, whose capture in a cross-border raid by Hamas and other armed groups in June set off five months of fighting that the weekend cease-fire aims to end.

The Palestinians also must establish a new government committed to principles set forth by the United States and other Western governments but rejected by the Islamic movement Hamas: the recognition of Israel, the renunciation of violence and the acceptance of previous Israeli-Arab peace accords.

On those terms, Olmert said, he would invite Abbas “to meet with me immediately in order to conduct a real, open, genuine and serious dialogue” aimed at the creation of “an independent and viable Palestinian state.”

The captured soldier’s safe return to his family, Olmert said, would bring about the release of Palestinian prisoners.

Also, he said, the Palestinian government would get hundreds of millions of dollars in tax revenue that Israel had collected but withheld after Hamas took office in March.

Checkpoints would be lifted, easing travel in the Israeli-occupied West Bank. Industrial zones would be set up with Israeli help.

Both the release of Shalit and the restructuring of the Palestinian government appear to be attainable. Quiet negotiations over an exchange of Palestinian prisoners for Shalit have made progress in recent days under Egyptian mediators, who have reportedly persuaded Hamas to reduce its list of prisoners from 1,400 to a few hundred.

Disagreement remains about whether the Israeli soldier would be freed first.

Palestinian Authority Prime Minister Ismail Haniyeh of Hamas has tentatively agreed to step down in favor of a unity government made up of Hamas and more moderate groups and led by a technocrat not affiliated with any party.

Talks on the makeup of such a government have dragged on for months. But Javier Solana, the European Union’s foreign policy chief, who met recently with Abbas, said Monday that “something is moving” and a new government was “pretty near.”

Whether Israel or the West would accept such a formula is uncertain. The U.S. and other Western governments have cut off aid, crippling the Palestinian economy, to pressure Hamas to recognize Israel and renounce its hostility toward the Jewish state.

Palestinian leaders say a unity government would give Abbas exclusive authority to negotiate with Israel. Such a formula, they say, would make it unnecessary for Hamas to recognize Israel or renounce violence.

Olmert’s critics in Israel worry that Hamas, flush from an arms buildup in the Gaza Strip, would pull the strings of any government that emerged and block any significant concessions to Israel. They say the cease-fire would damage Israel by allowing Hamas to stockpile weapons more freely.

In his speech, Olmert said that leaving the West Bank would be “extremely difficult for us, akin to the parting of the Red Sea,” but that he would agree to a pullout if the Palestinians “stop the terror

“Israel is a powerful state,” he said. “Don’t be fooled by our internal differences, our political rivalries or the gloomy atmosphere which we sometimes project.... Do not put us to another test.”

Yossi Klein Halevi, a senior fellow at the Shalem Center, a research institute in Jerusalem, said Olmert’s overture was driven in part by domestic factors. “The only way he has of regaining some popular legitimacy is going to war or launching a peace offensive,” Klein Halevi said.

“He’s already failed in war,” he said. “And he’s going to fail in peace because there is still no reliable Palestinian partner to deal with.”

Monday’s rocket attack in Gaza followed an Israeli raid on the West Bank town of Kabatiya, where Israeli soldiers killed a 22-year-old Palestinian fighter and a 57-year-old woman during an exchange of gunfire.

Israel said the woman tried to pick up the dead fighter’s gun; Palestinian witnesses said she was trying to help him get medical attention.

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boudreaux@latimes.com

Times special correspondent Maher Abukhater in the West Bank contributed to this report.