Palestinian leaders agree on policy deal- officials

GAZA, June 27 (Reuters) Palestinian President Mahmoud Abbas and Prime Minister Ismail Haniyeh have reached agreement on a manifesto at the heart of a power struggle between their rival groups, officials said today.

The political document, penned by Palestinian prisoners in Israeli jails, implicitly recognises Israel. But the phrasing of the Abbas-Haniyeh deal appeared to leave the prime minister's Hamas movement wriggle room on the issue.

''All the obstacles were removed and an agreement was reached on all the points of the prisoners' document,'' Rawhi Fattouh, a senior aide to Abbas, said after factions meeting in Gaza initialled the accord.

Fattouh said Haniyeh and Abbas, a Fatah leader, would formally announce the deal later in the day. A Hamas spokesman confirmed an agreement was reached.

But with Israel and the Palestinians preparing for a possible Israeli offensive in Gaza following the kidnapping of an Israeli soldier, there appeared to be little chance agreement over the document could open a path towards peacemaking soon.

Officials close to the negotiations, which have dragged on for weeks, said Abbas and Haniyeh drafted a platform based on the manifesto, accepting a Palestinian state in the West Bank and Gaza Strip.

Such a two-state solution to the Israeli-Palestinian conflict would be in line with Fatah's recognition of Israel.

But officials, speaking before Fattouh's announcement, said the agreement stipulated that moves towards statehood, including Arab initiatives seeking peace with Israel and international resolutions on the conflict, must serve Palestinian interests.

That could allow Hamas to reject, on those grounds, any accommodation with Israel, or recognition of the Jewish state.

The deal also appeared likely to lead to the cancellation of a July 26 referendum Abbas scheduled over Hamas's objections on the prisoners' document.

UNITY GOVERNMENT Under the accord, Hamas, leading the Palestinian government on its own after an election victory in January, would agree to form a unity administration with Fatah and other factions, officials said before Fattouh made his statement.

Hamas had insisted it would head any governing coalition, but it was not immediately clear if it won the point in the agreement.

Abbas has sought to soften Hamas's hard line towards Israel -- the Islamist group's charter calls for the destruction of the Jewish state -- in hopes of ending a US-led boycott of the cash-strapped Palestinian government by Western donor nations.

Israel has called the manifesto an internal Palestinian affair and has said it would have no dealings with Hamas until the group recognised its existence, renounced violence and accepted past interim peace deals.

Islamic Jihad, another militant group, said it still rejected several points in the prisoners' document, including the concept of a Palestinian state limited to the West Bank and Gaza, land Israel occupied in the 1967 West Asia war.

Jihad Khaled al-Batsh, a senior Islamic Jihad official, said the group would issue a statement later detailing its final position.

Some Palestinian sources said the tense security situation, with Israeli armour massing on Gaza's border, had pushed the factions to intensify their efforts to reach a political agreement.

REUTERS SHB KN1834