HIGHLIGHTSLeaders Tell Powell They Supported Arafat & Demanded Progress on Palestinian Statehood Issue||Washington Insists Ending Violence Take Precedence over All Other Goals||A U.S.-led Task Force to Go to the Region in Two Weeks to Install New Security Mechanisms in the Territories||Quartet Expresses Concern over Humanitarian Conditions in Palestinian Areas Under Occupation||Israeli, Palestinian Killed in Firefight Near Emmanuel|| STORY: U.N., European and Russian diplomats split sharply with the Bush administration Tuesday over Yasser Arafat's leadership role, insisting over U.S. objections that he legitimately heads the Palestinians' statehood movement.(Read photo caption)

In a two-hour meeting that made some headway on Palestinian reform and assistance, the leaders told Secretary of State Colin Powell they support Arafat and they demanded swift progress toward setting up a Palestinian state.

Powell stood firm on Bush's insistence that ending violence must take precedence over other goals, including Palestinian statehood.

A senior U.S. official said later that the CIA was developing security arrangements that could involve training Palestinians in curbing violence. Americans may be involved, probably in administrative jobs, said the official, speaking on condition of anonymity.

Javier Solana, the senior European Union diplomat, said a U.S.-led task force would go to the region in about two weeks to install new security mechanisms. He said Egyptian, Jordan, and Saudi officials also would participate.

Even though the Bush administration is shunning Arafat, Powell told reporters "there's a way to work with the Palestinians and Israelis" and that Palestinian officials he declined to identify were cooperating.

Foreign ministers Ahmed Maher of Egypt and Marwan Muasher of Jordan offered their governments' support after meeting with Powell and U.N. Secretary-General Kofi Annan at Annan's residence alongside the East River.

Maher said it should now be clear to Israel that even by occupying Palestinian areas, there is no way force can end violence and that agreeing to two states was the only possible solution.

A meeting of an international task force was set for August to take up financial accountability, elections and judicial and administrative reform, the officials said in a statement.

The four officials expressed their "increasing concern about the mounting humanitarian crisis in Palestinian areas and their determination to address urgent Palestinian needs," an official statement said.

They urged Israel to relax its curbs on Palestinian travel, withdraw its forces from Palestinian-held areas as security improves and turn over to the Palestinian Authority about 600 million U.S. dollars in tax revenue

ISRAELI, PALESTINIAN KILLED IN FIREFIGHT NEAR EMMANUEL

A Palestinian likely involved in a deadly ambush on a bus carrying Jewish settlers in the West Bank was killed in a gun battle with pursuing Israeli troops early on Wednesday, Israeli military sources said.

The sources said an Israeli was also killed and at least three others were injured in the area of the exchange of fire in the Kana valley near the settlement of Emmanuel, where Palestinians ambushed the bus Tuesday afternoon. Seven Jewish settlers were killed in that ambush.

PHOTO CAPTION

Secretary of State Colin Powell talks to the media, while standing next to Russian Federation Foreign Minister Igor Ivanov at New York's Waldorf Astoria hotel, Tuesday, July 16, 2002. Powell met with Ivanov, United Nations Secretary General Kofi Annan, European Union diplomat Javier Solana and Danish Foreign Minister Per Stig Moeller hoping to work out a plan that will lead to peace in the Middle East. Denmark currently holds the presidency of the European Union.(AP Photo/Suzanne Plunket)