HIGHLIGHTS: Palestinians Demand Withdrawal from West Bank Cities & Release of Withheld Tax Money|| Palestinians Say Success from Meetings would be contingent on Israel's withdrawal from Reoccupied Palestinian Cities & Towns||Occupation Soldiers Arrest 25 Palestinians over the Weekend||U.S. State Department Report Finds No Conclusive Evidence Arafat Backed Terror|| STORY: An explosion went off beneath the locomotive of a commuter train Sunday morning near the southern town of Yavneh, south of Tel Aviv, moderately wounding the engineer, train and rescue officials said.

The blast damaged the engine car of the train and injured the engineer inside, train officials said. The engineer was trapped in the car as a result of the blast and was apparently injured in the stomach by the force of the explosion.

The train was not derailed by the blast, the train officials said.

Israel and the Palestinians have meanwhile resumed high-level talks that had been called off after bombings last week.

Israeli Foreign Minister Shimon Peres met with a Palestinian delegation headed by Palestinian Cabinet Minister Saeb Erekat for more than three hours, said Yaffa Ben-Ari, a Foreign Ministry spokesman.

The Palestinians urged the Israelis to end their occupation of Palestinian cities and towns in the West Bank, saying they couldn't prevent terror attacks if the Israelis were in control, Israel Radio said. In addition, Palestinians demanded that Israel release tax money it has withheld, the report said.

The Palestinian economy has been shattered by nearly 22 months of fighting - and more recently by Israel's month-long occupation of West Bank cities.

Two weeks ago, Israeli Cabinet members approved some measures to ease the situation, including increasing the number of permits for Palestinians to work in Israel from 2,000 to 7,000, a security official said.

After two attacks last week killed 12 Israeli residents, Defense Minister Binyamin Ben-Eliezer froze implementation of the decisions.

On Saturday, Peres told the Palestinians the 7,000 work permits would be issued in the coming days - provided there were no attacks, Israel Army Radio said.

In addition, Israel said it was willing to extend the permitted fishing zone off the Gaza coast and to keep open Gaza's Karni crossing point for longer periods to allow more merchandise to pass through.

Peres said Israel was willing to do more - and wanted to pull out from the West Bank - if the attacks end, the radio reports said.

Ben-Ari said the talks would continue in the coming days.

Peres and Palestinian Cabinet ministers re-launched high-level meetings in early July, resuming a dialogue that had been stalled for months. But they were canceled after two attacks last week: a West Bank bus ambush and a double Resistance bombing in Tel Aviv.

An aide to Palestinian leader Yasser Arafat, Nabil Abu Rdeneh, said success from the meetings would be contingent on Israel's withdrawal from the seven West Bank towns and cities it occupied a month ago after a string of attacks.

"I believe if Israel is really serious in the resumption of the political process, they have first to immediately withdraw from the Palestinian territories," he told reporters in Ramallah after Arafat met with Russian envoy Andre Vdovin.

OCCUPATION ARMY ARRESTS 25 PALESTINIANS

Occupation soldiers meanwhile arrested 25 Palestinians over the weekend. (Read photo caption)

Over the weekend occupation troops arrested 18 Palestinians in the West Bank suspected of being involved in Resistance activities. Seven Palestinians were arrested in Brukhin south of Kalkilya, one east of Zaida, one Palestinian in a village east of Kalkilya, three in Hebron, and four in Burka north of Nablus. Two Palestinian activists were arrested in Hebron.

In the Gaza Strip, occupation forces arrested seven Palestinians at the Gush Katif Junction.


U.S. STATE DEPARTMENT REPORT FINDS NO CONCLUSIVE EVIDENCE ARAFAT BACKED TERROR

In Washington and less than a month after US President George W. Bush pronounced the Palestinian leadership "compromised by terror," a semi-annual State Department report evaluating Palestinian compliance with Israeli-Palestinian accords found there was "no conclusive evidence" that Palestinian Authority Chairman Yasser Arafat or other senior Palestinian officials planned or approved specific acts of violence against Israelis..


The latest so-called PLOCCA report issued in accordance with the PLO Commitments Compliance Act of 1989 expresses serious concerns about the Palestinian leadership's record in fighting terror. But the report intentionally makes no specific determination of whether the PLO has complied with its commitments during the report's covered period December 16, 2001 to June 15, 2002.

PHOTO CAPTION

Israeli occupation soldiers arrest a Palestinian man at the Kalandia checkpoint in Ramallah, July 20, 2002. The man, who tried to enter the town, was later released. REUTERS/Mahfouz Abu Turk
- Jul 20 10:05 AM ET