Progress Reported on Lebanon Hostages : Diplomacy: A leftist Beirut newspaper says ‘secret contacts’ are under way to resolve the issue. But Americans may not be part of the deal.

The leftist Beirut newspaper As-Safir Thursday said that all Western hostages held in Lebanon, including six Americans, will be freed by the end of the year.

In a front-page report, the pro-Syrian newspaper quoted well-informed diplomatic sources as saying “secret contacts . . . involving the concerned capitals, particularly Tehran,” were under way to resolve the issue.

Most of the captives are believed to be held by Shiite Muslim extremists operating under the umbrella of the Iranian-backed Hezbollah, or Party of God.

However, a senior Shiite Muslim leader on Thursday said he thinks that no American hostage in Lebanon will be released soon because of U.S. military intervention in the Persian Gulf--but that European hostages may be.

“I think there is a demarcation line between American and European hostages,” said Hussein Moussawi, who heads the Islamic Amal wing of Hezbollah.

“I think the American occupation of Saudi Arabia leaves no chance for an early release of the American captives. But there is a chance the case of the European hostages might shortly ease up.”

He said the outlook for the European captives was brighter because France has taken an independent stance from the United States in the gulf crisis.

Moussawi also cited French President Francois Mitterrand’s decision to release Anis Naccache, a Lebanese serving life for trying to assassinate former Iranian Prime Minister Shahpour Bakhtiar in Paris in 1980, as a contributing factor.

“This decision . . . is , I think, highly appreciated by Islamic groups holding the hostages. The Europeans (being held) might benefit from that,” he said.

There are 12 Western hostages being held by extremist Muslim groups in Lebanon, including three Britons and six Americans. Most have been held three years or more. The longest held is Terry Anderson, chief Middle East correspondent for the Associated Press, who was kidnaped March 16, 1985.

There was no immediate comment from U.S. officials.

A British Embassy source would only say that there was “no knowledge of any breakthrough” and that “we cannot confirm the report by As-Safir.”

The As-Safir report quoted the unnamed sources as saying they “expect positive developments in the coming few days related to the fate of the Western hostages held in Lebanon.”

“The issue of the hostages, as a result of the developments in the Gulf region, has been put on a very hot burner,” they said.

The hostage takers have made various demands for the release of prisoners held by Israel in southern Lebanon, as well as convicted terrorists jailed in Kuwait and in Western capitals.

Israel has refused to free hundreds of inmates held on suspicion of involvement in attacks against Israeli troops in southern Lebanon.

Since Iraq’s invasion of Kuwait on Aug. 2, there has been no firm word on the fate of 15 Shiite prisoners whose release had been demanded by the kidnapers in return for American hostages.

Most of the prisoners were serving long jail terms and three were awaiting execution for involvement in a 1983 bombing spree against the U.S. and French embassies and Kuwaiti installations.

As-Safir also said that the release of Swiss Red Cross orthopedic technician, Elio Erriquez, on Sunday was part of the deal being worked out for an end to the issue.