Hours after two Hamas terrorists infiltrated the northern Gaza Strip settlement of Alei Sinai, murdering a young Israeli couple and wounding 15 civilians and soldiers, the Israel Defense Force retaliated early Wednesday morning. Six Palestinians were killed and six wounded by IDF fire as soldiers and armored vehicles seized a stretch of Palestinian-controlled land outside the settlement.

Liron Harpaz, 18, of Alei Sinai — considered to be one of the more benign settlements — and her boyfriend, Assaf Yitzhaki, 20, of Lod, were killed in the settlement raid.

One of the Hamas terrorists was identified as Ibrahim Rayan and spoke in a videotape prepared prior to the attack of his intentions to “kill Jewish terrorists.”

Peres declared Wednesday night that Israel would ultimately defeat the terrorists.

“We will fight and we will win,” he said.

Peres also met with U.S. Ambassador Dan Kurtzer in Tel Aviv to discuss the situation, telling him that the Palestinian Authority must take strong action to prevent terrorist attacks if there is any chance for further talks.

Defense Minister Benjamin Ben-Eliezer, visiting the wounded from the settlement attack, said Wednesday there will be no return to discussions with the Palestinians without Arafat first implementing the conditions of the cease-fire plan and ordering his forces to crack down on terror.

“What happened [at Alei Sinai] proves once again that Yasser Arafat is trying to hold a dual policy,” Ben-Eliezer said. “On the one hand he speaks of a cease-fire, and on the other hand he allows others to operate. There are situations where a state says ‘enough!'”

Defense officials said that all planned steps to further ease restrictions on the Palestinians have been frozen, and nothing would be done until steps were taken to foil terror.

“There will be no return to talks without Arafat meeting the one and only condition of ensuring that he has control over terror,” Ben-Eliezer said. “This means taking actions to foiling attacks and carrying out arrests. There are lists upon lists in his hands and not one person has been arrested. If he doesn’t do this, there is no chance in the world that we will get rid of terror.

“One more thing: We have given him all the opportunities to foil terror, and if he does not then we will use our basic rights to defend our residents and fight terror in all ways,” Ben-Eliezer continued.

He later visited Alei Sinai, where residents blasted him with complaints that the defense establishment ignored earlier pleas for electrocuted fencing.

Ben-Eliezer repeated his condition for Israel returning to talks with the Palestinians.

Under the third stage of the Peres-Arafat plan, which was due to begin Wednesday, Israel was to continue lifting blockades around “quiet” Palestinian areas and allow Palestinian security personnel to travel between the territories.

Now, said Tzipi Livni, the Knesset minister in charge of the government’s information effort, Israel will hold further implementation of the plan until the Palestinians carry out their obligations of the previous two stages: arrest terrorists, stop all types of violence and put an end to the incitement.

“We froze the process,” Livni said. “We are not going to roll back what we already implemented, but we are not going further until the Palestinians carry out their obligations.”

Under the cease-fire made just before Yom Kippur, the IDF opened up the crossing at Rafah, lifted the blockade around Jericho, and redeployed some of its tanks and armed personnel carriers.

The next stage of the agreement obligated Palestinians to “continue” arresting terrorists, and to take action to close down mortar and bomb factories and storehouses.

Peres and Arafat were scheduled to meet again, but one Foreign Ministry official said that no meeting is currently in the offing, nor will one likely take place until the Palestinians fulfill their side.

Meanwhile, the Israeli security cabinet, following a pre-dawn meeting Wednesday, issued a statement saying the IDF “will take all necessary measures to protect Israel and Israeli citizens.”

This was a clear indication that the restraints the IDF placed on itself as a result of the Arafat-Peres meeting have been removed, and the army is empowered to take actions it feels necessary in Palestinian Authority-run regions, including targeted killings.

The cabinet also said that it holds “the Palestinian Authority and its chairman responsible for preventing attacks perpetrated by terrorists operating out of, and leaving from, P.A. territory.”

In addition, the communiqué stated that “the government calls on the U.S. and the international community to declare Hamas, Islamic Jihad, and Hezbollah terrorist organizations against which immediate action must be taken.”

Despite the freezing of the Arafat-Peres plan, Danny Ayalon, Prime Minister Ariel Sharon’s foreign policy adviser, said that Israel “remains committed” to former Sen. George Mitchell’s cease-fire recommendation to bring about regional stability.

Ayalon said Israel has heard Arafat’s condemnations of the attacks, and now is waiting to see the words “translated into action on the ground. We have had words, but they were only followed by a renewed wave of terror. The test is in the results — an end to fire and to terror.”

A U.S. diplomatic official urged “both sides to continue to purse effort to get to the Mitchell recommendations, including stopping violence on the Palestinian side, and taking measures to ease conditions for the Palestinians by Israel.”

Palestinian officials also said they are waiting for the Americans to intervene. Secretary of State Colin Powell has called Arafat and Sharon to put an end to the crisis and renew security and political talks.

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