JERUSALEM (JPS) — A senior Israeli security official met secretly with Palestinian Authority Council member Hattem Abdel Khader Tuesday in an effort to work out a compromise over Khader's Jerusalem office, which the government wants closed.

The issue is at the heart of a dispute between the government of Benjamin Netanyahu and the Palestinian Authority over whether the authority should run an office in Jerusalem. Netanyahu opposes such a presence as a de-facto recognition that Israel would share Jerusalem rule with the Palestinians.

Israel Radio reported Tuesday night that a compromise had been worked out whereby Khader would continue operating the office in the suburb of Bet Hanina if he submitted written assurances that he was not representing the Palestinian Authority.

On Monday, Khader received an Israeli order to close the office because it violates the Oslo Accords.

Khader says he receives Palestinian residents at his home in order to help them solve disputes with Israeli and Palestinian authorities.

Meanwhile, the Palestinian Authority moved this week to take over a well-known Arab school in eastern Jerusalem long run by the Jordanian government, in apparent defiance of the government's attempt to enforce a ban on its activity in the city.

Netanyahu, Levy feuding yet again

JERUSALEM (JPS) — Bad blood between Prime Minister Benjamin Netanyahu and Foreign Minister David Levy flowed again this week over who should handle the peace process.

Netanyahu told Israel TV's Channel 2: "Israel has only one prime minister."

Meanwhile, there were unconfirmed reports Tuesday that for the third time in two months, Levy was considering resigning.

Levy reportedly was also angry that he was not included in the Israeli team that went to Jordan this past week.

Meanwhile, sources said Levy is barely functioning as foreign minister. He is avoiding diplomatic meetings and instead generally closets himself with a party crony during the few hours a day that he decides to visit his office, they said.

Arafat never banned Hamas or radicals

JERUSALEM (JPS) — Palestinian Authority president Yasser Arafat's announcement in March that he was outlawing the military wings of Hamas and Islamic Jihad was never implemented, according to a report by the rightist watchdog group Peace Watch.

The 103-page report this week says the Palestinian Authority's anti-terror efforts during its first two years of existence were cursory and largely failed to fulfill its obligations under the Oslo Accords.

Peace Watch said Arafat's declaration that certain terrorist groups would be outlawed, issued on March 3 in response to a wave of suicide bombings, never materialized.

"Numerous requests for a text of the presidential decree or law formally banning Hamas and Islamic Jihad have gone unanswered," the report said.

No such decree was ever published in the Palestinian Authority-controlled press, the report added.

Hamas: Syria holds soldier's murderer

JERUSALEM (JPS) — Syrian security forces last week arrested one of the killers of Israeli soldier Ilan Sa'adon, whose remains were located last week south of Tel Aviv.

That's according to a source in the Jordan offices of the radical Islamic group Hamas, which Israel holds responsible for Sa'adon's murder.

The suspected remains of Sa'adon were dug up from under a new coastal road south near Palmahim last week after the Palestinian Authority tipped Israel off.

Sa'adon disappeared in 1989 and was last seen hitchhiking to an army post with two men wearing yarmulkes. Army officials later discovered Sa'adon missing, but the suspected killers had fled.

The Hamas official said one of Sa'adon's killers fled to Egypt, then made his way to Syria.

According to the source, the Syrians arrested a total of five Hamas and Islamic Jihad men who were planning to infiltrate into Israel through Jordan.

Israel Aircraft wins upgrade contract

JERUSALEM (JPS) — Israel Aircraft Industries has won part of a major contract to upgrade U.S. Air Force T-38 trainers. The deal could be worth $425 million.

IAI, teaming up with McDonnell Douglas, beat out five others who submitted bids, including Northrop Grumman, the original manufacturer of the 1950s-vintage supersonic trainer.

The upgrade is expected to extend the life of the T-38, a derivative of the F-5, for at least 15 to 20 years.

The deal marks the first time IAI has cooperated with a major American firm to upgrade an aircraft.