HIGHLIGHTS: Israel Says Occupation Troops Will Remain in Palestinian Cities as Long as Necessary||Bush to Press For Arafat Ouster at G8||Annan Says Bush's Call for a New Palestinian Leadership May Backfire||Mideast International Conference Unlikely Before Year End||Ahmed Tibi's Movements Restricted|| STORY: Israel kept Palestinians in seven West Bank cities under the gun and threatened to expand the operation to the Gaza Strip after a policy speech by President Bush dealt another blow to Yasser Arafat.

Meanwhile, the immediate future for Palestinians in Ramallah, Bethlehem, Hebron, Qalqilya, Tulkarm, Nablus and Jenin meant Israeli reoccupation, curfew and searches. (Read photo caption)

Asked how long the army would stay in the cities they entered after bombers killed 26 people in Israel last week, Israeli Defense Minister Binyamin Ben-Eliezer said: "As long as it takes us to fulfill our basic duty to our children."

Echoing a threat by Sharon to launch operations against the militant Islamic group Hamas in the Gaza Strip, Ben-Eliezer said: "If Hamas's activities reach an intolerable level, nothing will help and we will have to go and fight it, too."

Ismail Haniyah, a senior figure in Hamas, said Bush had merely upheld the "Zionist occupation" and vowed continued resistance.

A senior State Department official said in Washington on Tuesday the United States wanted Arafat to lead the reform process but step aside when his task reached completion.

BUSH TO PRESS ARAFAT OUSTER AT G8

US President George W. Bush plans to try to persuade his allies at the G-8 summit opening in Canada today that they, too, should urge the Palestinians to rid themselves of Palestinian Authority Chairman Yasser Arafat and elect new leadership, US officials said Tuesday.

While European leaders said publicly they would not advocate Arafat's ouster, a senior administration official said nevertheless there was "no doubt" Bush would try to persuade his European allies to do so. "Obviously we would want to have our international partners [on board]," the official said.

Secretary of State Colin Powell, one of Arafat's last defenders in the administration, said in an interview: "You saw the bombing start, and saw credit being claimed by organizations that frankly were still in touch with the [Arafat] leadership."

However, Powell said on Tuesday the United States would respect the electoral choice of the Palestinian people. If they choose Arafat, he said, "We will deal with the circumstances as we find them."

United Nations Secretary-General Kofi Annan told reporters Bush's call for Palestinian elections could backfire.

"You could find yourself in a situation that the radicals are the ones that get elected, and it would be the result of a democratic process, and we have to accept that," he said.

Until Monday, Bush had tried to marginalize Arafat by encouraging new leaders to emerge and by refraining from mentioning him by name. But officials, primarily Powell, continued to emphasize that Arafat was the elected leader of the Palestinian people and that the US would continue to work with him and the rest of the PA leadership.

Now the US has shifted its focus away from Arafat and toward the still somewhat vague concept of Palestinian institution building. Though the administration has no plan for democratic reform, one of several prerequisites outlined by Bush for US endorsement of Palestinian statehood, officials said yesterday they believed the US could support a Palestinian state with provisional borders within 18 months.

MIDEAST SUMMIT UNLIKELY BEFORE YEAR END

As was inferable from Bush's speech, the US officials acknowledged yesterday that a regional summertime ministerial summit has been shelved for the moment and will not take place, if at all, at least until the autumn.

Reacting to criticism that Bush's speech took Israel's needs into account more than the Palestinians', the senior US official said: "This is serious. This is the United States giving its imprimatur to statehood relatively early in the process."

Powell, in an interview, stressed Israel's "responsibilities."

"Look at the Israeli responsibilities. It's everything people have been asking for: ease the restrictions [on Palestinian movement]; end the occupation on the basis of land for peace and Resolutions 242 and 338; settlement activity must end... There are a lot of things in there that I think [Palestinians] will respond positively to."

Still, there was no doubt that the speech reflected primarily Prime Minister Ariel Sharon's thinking: that Palestinian terrorism must end before any serious peace negotiations begin, and that Arafat is an unworkable partner for peace.

Internationally, Bush's speech received words of praise, but his call for a change in Palestinian leadership received no endorsement from the European Union, the United Nations, or Russia.

U.S.SEEKS ARAB SUPPORT

The Bush administration meanwhile turned to the Arab world Tuesday for support in its campaign to oust Yasser Arafat and push the Palestinian Authority toward democratic reform and statehood within three years.

Meanwhile, American diplomats opened talks with Arab governments to promote the president's program, and Secretary of State Colin Powell mounted a high-profile campaign.

In an interview with the U.S.-financed Middle East Radio Network, Powell said

he hoped Arab listeners would "take note of the requirements we will have as we move forward" to end Israel's occupation of the West Bank and Gaza, end Jewish settlement activity, return collected revenues to the Palestinian government and make life better for the Palestinian people.

PALESTINIAN ELECTIONS IN JANUARY

Arafat said Tuesday he had approved elections, but did not set a specific date, although he decided on Monday night that legislative and general elections should be held sometime in January and municipal elections in March.

Palestinians said it was almost certain that Arafat would win an election with a comfortable majority, but may not score the 89% of the 1996 election. This time there will be other candidates challenging him, a Palestinian political analyst predicted.

Arafat adviser Bassam Abu Sharif urged the Americans to join forces with Europe to help prepare for democratic Palestinian elections for the Palestinian Legislative Council and the presidency, and to send American observers to make sure the elections will be fair and democratic. But for elections to be held, Israel must withdraw its forces and enable Palestinians to move, he said.

ARAB LAWMAKER'S MOVEMENTS RESTRICTED

Israel's parliament on Tuesday barred an Arab legislator from entering military zones closed to ordinary citizens because of his support for Palestinians in their struggle against Israel.

With most of its 120 members absent, the parliament voted 29-23 to strip Ahmed Tibi of his privilege as a legislator to enter zones placed off-limits by the occupation army. He will also be barred from sensitive sites inside Israel, such as military installations.

Tibi angered many Israelis when he described the Palestinian resistance to the Israeli army's capture of Jenin refugee camp in April as "an act of noble heroism." In the eight-day battle, 23 Israeli occupation soldiers and 56 Palestinian civilians were killed.

PHOTO CAPTION

Israeli occupation soldiers sit around their tanks positioned in El Khadr, near the West Bank town of Bethlehem, June 25, 2002. Israel's occupation army, buoyed by President George W. Bush's call on Palestinians to dump Yasser Arafat as their leader, thrust into another West Bank city, killing four Palestinian policemen. The expansion of Israel's occupation army offensive to Hebron, the seventh Palestinian city to be taken over in the past week, showed both sides remained far from embracing the long-awaited vision for peace that Bush laid out Monday night. (Gil Cohen Magen/Reuter