Gaza fighting slows as Israel counters Hamas offer

GAZA (Reuters) - Israel said its Gaza offensive could be "in the final act" on Friday and sent envoys to discuss truce terms after Hamas made a ceasefire offer to end three weeks of fighting that has killed more than 1,100 Palestinians.

However, Israel rebuffed at least two elements of the ceasefire terms outlined by the Islamist movement, and fighting continued, albeit less fiercely than on Thursday.

In Doha, Hamas's exiled leader Khaled Meshaal told Arab leaders his group would not accept Israeli ceasefire conditions and would fight on until Israel ended hostilities.

He urged participants at an Arab meeting on Gaza to cut all ties with the Jewish state, a call echoed by Syria and Iran.

Qatar and Mauritania decided to suspend political and economic ties with Israel, Al Jazeera television said.

In another sign of the anger the Gaza onslaught has provoked in the Muslim world, Turkish Prime Minister Tayyip Erdogan said Israel should be barred from United Nations headquarters for ignoring a Security Council ceasefire resolution.

Turkey, a mainly Muslim but secular country, has been trying to help broker a ceasefire between Israel and Hamas.

The inauguration of new U.S. President Barack Obama on Tuesday is seen by some as the time by which Israel will bow to mounting international pressure and call off its attacks.

U.N. Secretary General Ban Ki-moon, touring the region, urged Israel to stop firing immediately. "It is time now to even think about a unilateral ceasefire," he said in Ramallah.

At least 15 rockets and mortar rounds landed in Israel from Gaza, the army said, wounding five civilians. Such attacks have dwindled during the war, which Israel launched on December 27 with the declared aim of crippling Hamas's rocket-firing capacity.

Ten Israeli soldiers and three civilians have been killed in the campaign.

Israeli strikes killed 12 Gazans on Friday. Among them were fighters, including an Islamic Jihad commander in the southern town of Khan Younis, and civilians, including three children.

"FINAL ACT"

"Hopefully we're in the final act," Prime Minister Ehud Olmert's spokesman Mark Regev said, adding that briefings by the envoys working in Washington and Cairo on Friday could be followed by swift decisions by the security cabinet.

Gazans savoured a relative lull a day after intense combat that some saw as a final Israeli push before a ceasefire.

"I imagine that in the very near future Israel will know where this campaign is headed," security cabinet minister Yitzhak Herzog said on Israel's Channel 10 television. "I'd say there's a ceasefire on the horizon, though I would be cautious."

Israeli planes struck 40 targets in Gaza overnight, but then fighting eased, to the relief of Palestinians stunned by seeing Israeli tanks advancing deep inside Gaza city on Thursday.

Medics taking advantage of a "humanitarian pause" said they had recovered 23 bodies on Friday from the previous day's fighting in the worst-affected areas of the city.

Chanting crowds attended the funeral of a top Hamas leader, Saeed Seyyam, killed in an Israeli air strike along with nine other people. Seyyam was the interior minister in Gaza's unrecognised government and leader of 13,000 armed security men.

About 45,000 Gazans fleeing battle zones have taken refuge in U.N.-run schools in the enclave, U.N. officials said.

Israeli Foreign Minister Tzipi Livni, who flew overnight to Washington, was to sign a security pact with U.S. Secretary of State Condoleezza Rice aimed at cutting off Hamas arms supplies.

Under the deal, Israeli officials said, the United States would lead a campaign with its NATO allies to interdict weapons shipments bound for Gaza from Iran and elsewhere. Preventing Hamas from rearming is Israel's main condition for any truce.

Rice called it one "element of trying to help bring in a durable ceasefire." She did not say when a truce might start.

CAIRO TALKS

Senior Israeli official Amos Gilad arrived in Cairo again on Friday, this time accompanied by Shalom Turgeman, Olmert's top diplomatic adviser -- a possible sign a deal may be near.

"When we are briefed by Gilad and Livni, there may be a full security cabinet meeting and decisions will stem from that," Olmert's spokesman Regev said.

Hamas and diplomatic sources said on Thursday that Hamas had offered a one-year, renewable truce on condition that all Israeli forces withdrew within five to seven days and that all the border crossings with Israel and Egypt would be opened.

Israel wants an open-ended truce and the reinstatement of forces loyal to Palestinian President Mahmoud Abbas at crossing points into the Gaza Strip, Israeli and Western sources said.

Hamas negotiators are due to meet the Egyptians on Saturday to discuss the Israeli response.

Except for limited humanitarian supplies, the crossings have been all but closed under an Israeli-led blockade since Hamas seized control of Gaza in 2007 from Abbas's forces. Hamas had won a Palestinian parliamentary election the previous year.

Hamas and Fatah are bitterly at odds, adding to Abbas's many difficulties in negotiating a peace settlement with Israel that would give Palestinians a state in Gaza and the West Bank.

Fearing Gaza protests, Israel imposed extra controls on movement in the occupied West Bank and flooded Jerusalem's Old City with security forces during Muslim weekly prayers.

A Palestinian teenager was killed as Israeli troops in the West Bank city of Hebron confronted protesters.

Israeli forces have killed some 1,141 people and wounded 5,100 during the Gaza war, the Hamas-run Health Ministry said.

(Additional reporting by Adam Entous in Jerusalem; writing by Alistair Lyon; editing by Samia Nakhoul)