HIGHLIGHTS: Resistance Groups Spurn Yahya's Call to Switch for Civil Disobedience||Sharon Accepts EU Peace Plan But Insists on Sidelining Arafat||Annan Blasts Expelling Palestinians||UN Envoy Bertini Warns of Palestinian Humanitarian Crisis||Fighting in Lebanon Leaves 3 Dead|| STORY: Israeli Prime Minister Ariel Sharon said on Wednesday a breakthrough to peace with the Palestinians looked feasible for the first time because they were realizing violence would not win them the state they seek.

Sharon said earlier in a newspaper interview that he planned his first high-level talks with Palestinians in months in a bid to reopen dialogue in search of an end to the conflict.

A senior Palestinian official branded Sharon's remark "nonsense," saying any diplomatic revival was being frustrated by Israel's harsh military clampdown on West Bank society in response to Resistance groups who rose up for independence.

In the West Bank city of Ramallah, one of six under regular Israeli army curfew, Palestinian Labour Minister Ghassan al-Khatib called Sharon's TV statement "nonsense."

"This is because all Palestinian leaders denounce terror and belong to the peace camp and believe in the signed Oslo agreements," he said, referring to 1994-95 interim peace accords that set up self-rule Palestinian bodies.

The Oslo accords were negotiated by the center-left government then in power in Israel over the protests of the right, including Sharon, a champion of Jewish settlements in the West Bank and Gaza seen abroad as a key obstacle to peace.

"This statement is only directed to deceive international public opinion and to cover up the state terror that has been inflicted on us by Sharon's government," Khatib told Reuters.

Palestinian leaders have accused Sharon of trying to ruin any basis for Palestinian statehood with overwhelming military force in reaction to suicide bombings and ambush shootings by Resistance groups that have killed scores of Israeli civilians.

By reoccupying West Bank cities and imposing curfews and blockades, the army has crippled the Palestinian Authority set up under the Oslo accords as the foundation for independence

RESISTANCE GROUPS SPURN YAHYA'S CALL TO SWITHCH FOR CIVIL DISOBEDIENCE

Palestinian Interior Minister Abdel-Razzak al-Yahya had urged Palestinians on Monday to switch to civil disobedience in their uprising, saying militant violence against Israelis had proved counter-productive. But Resistance groups spurned his appeal and vowed to press on with attacks in the West Bank and Gaza Strip, both captured by Israel in the 1967 Middle East war, as well as inside the Jewish state.

EU PEACE PLAN

Danish Foreign Minister Per Stig Moeller whose country chairs the EU presidency, met Sharon for 90 minutes and said later the Israeli premier "positively received" the EU idea for a Palestinian state by 2005.

A senior Israeli official said Sharon did welcome the EU initiative, but not its readiness to deal with Arafat, whom Israel and guardian ally the United States have ostracized over alleged support for violent resistance to occupation. 

"...With Arafat it won't work. Every time you visit Arafat, it delays any kind of reforms you want to see carried out (to Palestinian institutions)," he said, citing a key Israeli condition for resuscitating talks on Palestinian statehood.

ANNAN BLASTS EXPELLING PALESTINIANS

In New York, U.N. Secretary-General Kofi Annan accused Israel on Wednesday of violating international law by expelling two Palestinians from the West Bank to Gaza for aiding so-called terrorist suspects

He also deplored the Israeli army's killing of Palestinian civilians, including children, during a period of "relative calm" while international efforts are under way to improve security cooperation and try to end the nearly two-year conflict.

The strongly worded statement from Annan's spokesman was issued hours after Israel expelled the brother and sister of an explosives expert who had dispatched two suicide bombers to Tel Aviv from their West Bank home to the Gaza Strip.

"The secretary-general is ... gravely concerned about the Israel Supreme Court's decisions authorizing the transfer of two relatives of a Palestinian accused of organizing attacks against Israel," U.N. spokesman Fred Eckhard said.

ENVOY WARNS OF PALESTINIAN CRISIS

Also in New York, a U.N. envoy warned in a report Wednesday that Israel must significantly ease its closure of Palestinian-controlled areas to keep humanitarian problems from spiraling "out of control."

Catherine Bertini, the former head of the U.N. World Food Program who visited the West Bank and Gaza from Aug. 12-19, said "the Palestinian economy has by and large collapsed."

"The (Israeli) closures and curfews have severely inhibited the movement of people, goods and services within the West Bank and Gaza, and between the West Bank and Gaza and Israel, Egypt and Jordan," she said in a report to the Security Council.

FIGHTING IN LEBANON LEAVES 3 DEAD

Supporters of the late Palestinian guerrilla leader Abu Nidal fought in Baalabek in Lebanon with troops Wednesday, leaving three men dead and provoking a military clampdown on a Palestinian refugee camp.

The clash broke out when troops entered the Jalil refugee camp outside Baalbek in search of a wanted man, a security officer said on condition of anonymity. Two Palestinians and an army corporal were killed in the fighting, and 11 other people were wounded.

The soldiers pulled down the wall of an arms depot belonging to Fatah Revolutionary Council, the group founded by Abu Nidal, the guerrilla leader whose mysterious death in Iraq was announced two weeks ago, the security officer said. Inside they found two truckloads of weapons.

Lebanese security forces rarely enter Palestinian refugee camps, which are run by armed factions and considered beyond government authority.

Lebanese security officials later said camp officials promised to hand over the person who opened fire on the Lebanese soldier when captured. Four Palestinians wounded in the clash were arrested and are expected to be tried in a Lebanese military court.

PHOTO CAPTION

(Top: L) Palestinian leader Yasser Arafat addresses a news conference with Danish Foreign Minister Per Stig Moeller at his office in the West Bank town of Ramallah Wednesday Sep. 4 , 2002. Denmark holds the rotating presidency of the European Union, and the foreign minister is on a tour of Israel and the Palestinian areas to try to win acceptance of a peace plan that envisions Palestinian statehood by 2005. (AP Photo Nasser Nasser)
- Sep 04 11:14 AM ET

(Bottom: L) Israeli police officers provide security as a van, which according to police officers at the scene was carrying one or both Palestinian deportees, arrives at the Erez border crossing Wednesday Sept. 4, 2002.. (AP Photo/Lefteris Pitarakis)

(Top: R ) Israeli Prime Minister Ariel Sharon speaks to Israeli police during a ceremony in their honor in Latrum, some 30 kilometers (19 miles) west of Jerusalem Tuesday, Sept. 3, 2002. (AP Photo/Zoom 77)
- Sep 03 5:11 PM ET

(Bottom: R) Supporters of late Palestinian guerrilla leader Abu Nidal burn tires and block the main street to Baalbek City at the entrance of the Jalil camp for Palestinian refugees in Baalbek, eastern Lebanon, Wednesday, Sept. 4, 2002, after clashes between the Lebanese troops and Abu Nidal supporters in the camp. (AP Photo/Morshid Danda