By Nidal al-Mughrabi
GAZA (Reuters) - Israel won renewed support from its key ally the United States on Monday when President George W. Bush said a cease-fire in the Gaza Strip depended on Hamas ending its rocket fire on Israeli towns.
As the Palestinian death toll passed 900, including many civilians, troops tightened their grip around urban areas in search of elusive guerrillas and Prime Minister Ehud Olmert said Israel would pursue the 17-day-old war as long as it took.
Troops and tanks, backed by warplanes and helicopters that mounted more than 25 air strikes, probed into guerrilla defences around the city of Gaza, wary of snipers and booby traps. Hamas fighters kept largely out of sight, firing several rockets into Israel and bracing for an all-out assault that may yet come.
As international diplomats worked with Egypt on a truce plan, an Israeli military spokesman said the army had yet to launch a much-heralded "Phase 3" of the war, following the initial air campaign and then ground advance.
But reserve units had moved in, he said, to hold positions and free up regulars for thrusts deeper into the city of Gaza.
Hamas's government leader in Gaza made a rare television and radio broadcast from a secret location, promising that "victory is at hand" and saying the many deaths there would haunt Bush.
The bloodshed has burst open fragile faultlines in the map of Middle East diplomacy, with the Bush administration in its final week standing firm behind Israel, European governments pressing it to call off its attacks and Arab leaders speaking out against the Jewish state.
On Monday, Saudi Arabia, an oil power and one of several Arab governments whose pro-American stance is far from popular with its people, accused Israel of "racist extermination" and said it hoped Bush's successor Barack Obama would work swiftly to resolve the 60-year-old Palestinian issue.
BUSH CALLS ON HAMAS TO CHOOSE
Bush said Hamas Islamists, who won a 2006 parliamentary election and seized control of Gaza 18 months ago, had to act to end the misery of the enclave's 1.5 million people.
"I'm for a sustainable cease-fire, and a definition of sustainable cease-fire is Hamas stops firing rockets into Israel ... I happen to believe the choice is Hamas's to make," he said.
Supporting Israel's view that "Operation Cast Lead" is one of self-defence against rockets that had killed 18 people since 2001, Bush said Israel should be mindful of "innocent folks."
Figures from Palestinian medics indicate at least 909 people have been killed. The health minister in Gaza's Hamas-run government said close to 400 of those were woman and children.
Medics said Israeli forces killed nine Palestinians, including at least five civilians, in Monday's violence. Israel says seven of its soldiers and three civilians have been killed since it launched its offensive on December 27.
Saudi Arabia's cabinet said in a statement: "The extermination Israel is launching upon the Palestinian people in Gaza has denuded Israeli leaders of humanity and places their policies in the ranks of racist extermination."
It hoped Obama, who takes office on January 20 and who has called the civilian deaths "heartbreaking," would work immediately on a "fair resolution of the Palestinian question."
Obama has made no clear policy statement on the fighting.
CAIRO TALKS
International Middle East envoy Tony Blair said after talks with Egyptian President Hosni Mubarak in Egypt on Monday that "the elements of an agreement of the immediate cease-fire are there and are now being worked on very hard in great detail."
Egypt, another Arab government close to Washington but with a strong Islamist opposition, is trying to broker a cease-fire to halt the fighting on its northern border. A senior Western diplomat and a Hamas official called Monday's talks positive.
Israeli leaders, who are also fighting for re-election on February 10, have given few clues on how long they are prepared to continue the offensive, although some officials have cited the inauguration of Obama, a U.N. cease-fire resolution and the election as factors pushing them towards calling off the troops.
Political sources said Foreign Minister Tzipi Livni, head of the ruling Kadima party, and Defence Minister Ehud Barak, head of centre-left Labour, wanted to halt the operation as soon as possible. But, the sources said, Olmert, who resigned as Kadima chief in September over a corruption probe, disagreed.
Israel, backed by its Western allies, says any cease-fire must depend on Hamas halting rocket fire -- 16 landed in Israel on Monday, the army said -- and, crucially, also wants measures to stop Hamas from rearming via the tunnels under the Egypt-Gaza border, in an area known as the Philadelphi corridor.
"We want Hamas to understand there will be no possibility of smuggling arms into Gaza, because any such attempt will be met by the iron fist of the Israeli people," Olmert said. "Nothing more, nothing less. If it takes time, it takes time."
Hamas negotiators returned to Cairo late on Monday after consulting the leadership in exile in Damascus. Hamas's leader in Gaza, Ismail Haniyeh, said on television that it was ready to negotiate a truce but insisted it would do so only if Israel pulled back all its forces and ended a blockade on Gaza.
"After 17 days of this mad war, Gaza will not be broken and Gaza will not collapse," Haniyeh said.
Western and Israeli officials said diplomats were discussing an internationally-assisted technical monitoring system to help Egypt stop weapons smuggling and intercept rocket shipments.
Israeli warplanes have repeatedly bombed the Philadelphi corridor along Gaza's 14-km (nine-mile) border with Egypt, seemingly trying to damage tunnels. Western diplomats have said Israel might also decide to send in ground troops there.
(Additional reporting by Adam Entous, Ori Lewis, Alastair Macdonald, Luke Baker, Alistair Lyon, Jeffrey Heller and Joseph Nasr in Jerusalem, Wafa Amr in Ramallah, Dan Williams in Gaza and Alaa Shahine in Cairo; Writing by Alastair Macdonald)
