Israeli police said they had thwarted a massive car bomb attack in northern Israel on Thursday, but several Israelis were injured in the Gaza Strip by a shooting attack and a mine explosion. The incidents took place after Israeli Prime Minister Ariel Sharon said on Wednesday a peace breakthrough looked feasible for the first time, because Palestinians were realizing that violence would not win them a state. Firebrand Palestinian leader Marwan Barghouthi appeared in an Israeli court on Thursday on charges of masterminding deadly attacks on Israelis.

He was expected to refuse to enter a plea, on the grounds that the court has no authority to hear the case. His supporters call the proceedings a show trial.

In central Gaza near the Maghazi refugee camp, Israeli military sources said a tank rolled over an explosive device. There were no further details.

Witnesses said flames engulfed the tank. Helicopters were hovering overhead and other tanks and soldiers arrived at the scene.

A caller who said he was from the Popular Resistance Committee, a group of activists from different Palestinian factions, told Reuters by telephone the group was responsible for the attack.

The Israeli military sources said a Palestinian activist opened fire at a school near the Jewish settlement of Nisanit in Gaza, wounding at least two Israelis.

"The terrorist opened fire and at least two Israelis have been wounded. It isn't clear what happened to him (the gunman) yet," an Israeli military source said of the shooting.

POLICE THWART CAR BOMB

Israeli police said they thwarted an attempt to smuggle a 1,300-pound car bomb from the West Bank into Israel.

A spokesman said a border patrol unit had given chase to a van and a car which fled an occupation army checkpoint near the town of Pardes Hanna, and found the vehicles abandoned a short distance away.

Bomb disposal teams carried out a controlled explosion.

An official in Prime Minister Ariel Sharon's office condemned the incident as "the Palestinian terrorists' way of ringing in the Jewish new year which begins tomorrow."

The occupation army said two mortars were fired overnight at the Gush Katif settlement bloc in Gaza and a Qassam rocket was fired into the northern part of the strip, but there were no injuries.

Israel occupied six Palestinian cities in the West Bank in June after a wave of resistance bombings inside Israel. Palestinians call the curfews and checkpoints collective punishment.

U.N. envoy Catherine Bertini said in a formal report to the Security Council on Wednesday Israel needed to do more to ease closures to arrest sharply declining living standards, or the humanitarian situation would "quickly spiral out of control."

At least 1,533 Palestinians and 589 Israelis have been killed since the uprising erupted in September 2000 after talks on a final peace deal envisaging Palestinian statehood stalled.

BARGHOUTHI REJECTS ISRAELI JUSTICE

In an open letter made public on Wednesday, Barghouthi said he did not recognize Israel's right to try him and said Palestinians had the right to resist occupation.

"We will not give up or abandon this right regardless of the difficulties," he wrote.

"Today, I am paying a price for my position of supporting peace between the two peoples based on ending occupation and settlements and our right to establish our independent state with Jerusalem as its capital."

Barghouthi said the "shortest path to end the suffering and to end the vicious circle of bloodshed" was for Israel to end its occupation of the West Bank and Gaza.

Sharon was asked in an interview to mark the Jewish New Year whether there was any hope of reviving peace talks after almost two years of violence that has killed more than 2,000 people.

"Now, for the first time, I see the possibility of a breakthrough for a political arrangement. It won't be a simple thing or an easy thing, but there is a possibility," he said.

Asked whom Israel could negotiate with after it had accused Arafat of sponsoring a activist campaign of resistance bombings, which he denies, and declared him "irrelevant," Sharon said: "With Palestinians who have reached the conclusion that with terror they can't achieve anything." Palestinian Labor Minister Ghassan al-Khatib called Sharon's statement "nonsense" since "all Palestinian leaders denounce terror and belong to the peace camp."

Palestinian activists rejected a recent call by Palestinian Interior Minister Abdel-Razzak al-Yahya for civil disobedience and vowed to press on with attacks in Israel, and in the West Bank and Gaza which Israel captured in the 1967 Middle East war.

PHOTO CAPTION

Smoke rises into the air after an Israeli tank (R) rolled over an explosive device in central Gaza near the Maghazi refugee camp September 5, 2002. A caller who said he was from the Popular Resistance Committee, a group of activists from different Palestinian factions, told Reuters by telephone on Thursday the group was responsible for the attack. (Suhaib Salem/Reuters)