JERUSALEM — It was one of those contradictions so typical of Israel's conflict with the Palestinians.

Just as Israelis were mourning the death of three of their soldiers — appeared to have been mistakenly shot by other Israeli troop members while they were chasing a Hamas terrorist — Israeli security sources made a point of praising the Palestinian Authority for its determined action against Hamas.

During last Saturday night's raid on a West Bank village to capture Mahmoud Abu Hanoud, a militant Hamas leader on Israel's most-wanted list, the trio of soldiers in an elite Israeli army unit were killed by what officials are calling "friendly fire."

Meanwhile, Abu Hanoud, who was slightly wounded, managed to escape the siege on his home north of Nablus. He later turned himself in to Palestinian police and received medical treatment at a hospital before being transferred to a nearby prison.

Abu Hanoud is suspected of being responsible, among other operations, for planning the 1997 suicide bombings of Jerusalem's Mahane Yehuda market and Ben Yehuda pedestrian mall in which 21 Israelis were killed and several hundred wounded.

Some Israeli policymakers, like cabinet minister Amnon Lipkin Shahak, said Israel should demand Abu Hanoud's extradition unless the Palestinian Authority puts him on trial. However, despite Israeli commendation for the Palestinians' performance against terrorists, Israel refrained from asking for his extradition.

Reports say Abu Hanoud is to be tried by a special military tribunal in the next few days.

One reason why the Israelis did not want to push the extradition with the Palestinians is due to the current, sensitive stage of peace negotiations. Another is that cooperation between the two sides' security services has never been better.

Last week, both services uncovered a terrorist ring of 23 Islamic activists, reportedly linked to arch-terrorist Osama bin Laden. In July, another operation resulted in the seizure of an alleged Hamas armory in Nablus, the largest stores of weapons and bomb-making equipment seized in years.

But the Palestinians have their red line — they will not turn their people over to the Israelis. They have rarely done so in the past, despite a specific clause in the Oslo peace accords that terrorists on the wanted list should be extradited after an initial period of detention.

For the time being, the Israelis and the Palestinians have a common goal: Keep the area calm until negotiations play out in the next few weeks. At the same time, Palestinian Authority President Yasser Arafat has no interest in antagonizing Hamas just before a possible breakthrough in the negotiations.

Arafat and Hamas have a love-hate relationship. Arafat would like to be rid of the Muslim fundamentalist opposition led by Sheik Ahmed Yassin, but cannot afford confronting Hamas. He can use the implicit threat of fundamentalist terrorist attacks as a tool against Israel in negotiations.

Yassin, too, needs Arafat's consent for the continued political activities of Hamas in the territories, although he told the New York Times this week that Arafat's intelligence apparatus had voided 175 attacks against Israeli targets in recent years.

Between 1994 to 1996, Hamas was responsible for a number of terrorist attacks inside Israel that killed dozens of Israelis. Arafat was unable — or unwilling — to stop Hamas.

Only after former Prime Minister Benjamin Netanyahu came to power in 1996 — partially as a result of voter reaction to those attacks — did Palestinian security services take action against Hamas. Under Arafat's orders, Yassin spent 10 weeks under house arrest in Gaza in 1998.

Hamas has repeatedly threatened to renew attacks. But the security services of the Palestinian Authority have indeed taken measures against Hamas and Israelis have learned how to cope better with the terrorist threat. In fact, last weekend's operation was part of those efforts.

Arafat refrained from clashing head-on with Hamas because of popular feelings, as Hamas was quick to turn the Israeli mishap into a Hamas victory, mostly because in the past few years, the group has seen a number of failures.

In the past, Yassin had hinted that his organization would consider a "truce" with Israel if it returned to the 1967 borders and released all Palestinian prisoners. However, in the recent interview, he said the offer was now void because Israel had rejected it.