Riot Erupts at Border of Israel, Gaza : Mideast: 2 killed, 118 hurt in worst clash since Palestinian self-rule began. Rioters battle Arab, Israeli police, who reportedly fire on each other.

In the bloodiest clash since the start of Palestinian self-rule in May, thousands of Palestinian workers angered by long delays in crossing into Israel rioted here Sunday, battling both Palestinian police and Israeli troops, who then opened fire on each other.

Two Palestinians were killed and 98 were wounded in the daylong clashes, according to Palestinian Authority spokesmen. Israel said 20 of its soldiers and police officers were wounded, one of them critically.

With gunfire coming from all sides and fires blazing fiercely through the day, the Erez border crossing took on the appearance of a war zone--a frightening image for those Palestinians and Israelis who had seen Palestinian self-government as a major step toward peace.

“This is an extremely sad day both for the Palestinians and for us,” said Mordechai Gur, Israel’s deputy defense minister. “If both sides don’t take immediate steps . . . it might deteriorate into something difficult for anyone to control.”

As news of the riots spread with reports that as many as 10 Palestinians had been killed, demonstrations broke out in the occupied West Bank. Israeli police flooded Jerusalem’s Old City amid fears that the disturbances would spread there as thousands of Jews gathered for a day of prayer commemorating the destruction of Israel’s ancient temples.

The clashes began at the Erez Checkpoint about 4 a.m. Sunday as an estimated 2,000 Palestinian workers, infuriated by slow security procedures holding up 20,000 workers waiting to board buses for their jobs in Israel, broke through Palestinian police lines, overran two Israeli army guard posts, forcing the soldiers to flee, and threatened to charge across the border into Israel.

Palestinian police began firing into the air to subdue the rioters, according to most accounts of the incident, but failed to turn them back. Israeli troops managed to contain the surging mob with tear gas and gunshots over the heads of the rioters, but they were forced back again in a hail of stones and then firebombs.

Rioters burned about 20 Israeli buses, a bus terminal, an Israeli-owned gas station and a firetruck sent to put out the blazes. A cloud of black smoke was visible 15 miles away in Israel.

“It was really a war situation,” gas station owner Felix Cohen said after fleeing across the border into Israel. “Even during the intifada (the Palestinian rebellion against the Israeli occupation), it never got to this point. This was worse than anything we have seen in years.”

After an hour and a half, the fighting intensified, with hundreds of Palestinian youths joining the rioters even as the bulk of the workers fled, according to Israeli officers. Some of the Palestinian police then opened fire on Israeli forces, raising fears of an all-out clash along the Gaza frontier, Israeli sources said.

“The Israelis were the ones who started the shooting, so we had to defend ourselves and we fired back at them,” Palestinian police Lt. Amar Fayad said. “It was not our intention to get into a firefight with the Israelis, but in shooting at the rioters they were also shooting at us.”

Tensions soared as a number of Israeli settlers raced to the checkpoint, firing on the Palestinians, and then drove across the border, their guns still blazing, to take shelter behind the Israeli armored personnel carriers.

As they saw the confrontation with the Palestinian police growing almost by the minute, Israeli commanders pulled back their troops and ordered them to avoid contact with the Palestinian forces and simply defend the border.

Reinforcements were rushed to the area when fighting flared again in the early afternoon, but they were given the same orders.

“If not for the remarkable self-control of the border police and the brigade officers who were present, this would have ended in a much heavier price in blood on both sides,” Lt. Gen. Ehud Barak, the Israeli army chief of staff, said after touring the battle zone. “We expect an investigation of the Palestinian policemen who shot at and wounded our border police.”

Israeli and Palestinian security officials met in the midst of the clashes in an effort to end the fight, but their talks devolved first into an angry argument over who was to blame and then into a shoving match.

Palestinian police also pulled back at one point under orders from Palestine Liberation Organization Chairman Yasser Arafat, who heads the Palestinian Authority, to avoid causing more deaths.

Hisham Abdel Raziq, an official of Arafat’s Fatah organization, said the Palestinian police “did not shoot at the workers. They shot in the air in order to disperse the mass of workers this morning.” He said Israeli troops had, in fact, panicked and opened fire too quickly, not giving the Palestinians time to restore order.

The unrest began, he said, when a worker, caught trying to slip through the citrus groves into Israel without going through the checkpoint, grabbed an automatic rifle from a Palestinian police officer and began firing into the air. Although police overpowered the man, they fired their own weapons--setting off the stampede toward the crossing.

The clashes continued until late afternoon, when Palestinian police finally were able to disperse the rioters, driving them away from the border crossing and declaring it a closed military zone. Israel also closed all exits from the Gaza Strip, saying new arrangements would have to be made to avoid future incidents.

“Some things have to be changed,” Gur said, “and that is mainly the Palestinian procedure in checking for security. It takes too much time. The workers have to get (to Erez) at 2:30 in the morning, and it takes three hours to cross. This is much too much for any worker. They should not have to go through this hell every day.

“The Palestinian police must treat their people as human beings but still ensure Israeli security. . . . It is urgent for Arafat to control the population and ensure a normal life. He has to find his own steps and then coordinate with us.”

But Ariel Sharon, Israel’s hard-line former defense minister and a critic of the autonomy accord, saw in the clash evidence of a fatally flawed pact with the PLO. “What sort of peace is this?” he demanded. “What sort of (security) arrangements? It only shows one thing--the government was mistaken from the beginning in signing an agreement with Arafat.”

Palestinians, however, blamed Israel for the clash and warned of the impact on the overall Arab-Israeli peace process.

“We hold the Israeli side fully responsible for the development of this situation,” the Palestinian Authority said in a formal statement. “We demand the Israeli government take the necessary steps to bring those responsible to account.”

Arafat, in a message to the United Nations and to the United States and Russia as co-sponsors of the peace negotiations, called for the immediate deployment of international observers in the Gaza Strip under terms of the peace agreement signed with Israel last September.

On behalf of the Clinton Administration, Secretary of State Warren Christopher expressed “deep regret” over the incident Sunday.

“The tragedy in Gaza today underscores the need for ongoing coordination, both to deal with the consequences of today’s tragedy as well as to try to prevent the recurrence of similar incidents in the future,” he said en route from Washington for a week of talks in the region.

Times staff writer Robin Wright contributed to this report from Shannon, Ireland.