* No agreement reached on Jerusalem, right of return issues during Abbas-Olmert meeting

* Egypt draws up plan to end internal Palestinian crisis

* Livni wins Kadima party race to succeed Olmert, 5th round of indirect Syrian-Israeli talks postponed

Israeli Prime Minister Ehud Olmert promised Palestinian President Mahmoud Abbas to make several more goodwill gestures by the end of this month, including the release of some prisoners, Palestinian sources said.

The promises were given during a meeting between the two men in Jerusalem, added the sources who are close to the meeting.

According to the sources, Abbas asked Olmert to offer more facilities to the Palestinian residents of West Bank, especially those who go to pray in the al-Aqsa Mosque in Jerusalem during the Muslim's holy fasting month of Ramadan.

Abbas also urged Olmert to order the lifting of some checkpoints in the West Bank to ease the movement of the residents between the villages and cities of the territory. Olmert reportedly promised to take steps in this regard.

The sources revealed that Abbas insisted that Israel should free prominent Palestinian leaders, like Marwan al-Barghouti, a senior leader of Abbas' Fatah movement, in any goodwill gesture. Olmert promised to do so by the end of this month.

Olmert is resigning as a prime minister due to corruption indictment. However, he will stay in office until a new cabinet is formed.

Since the U.S. succeeded to resume peace talks between Israel and the Palestinians in November, Abbas and Olmert have been meeting on biweekly basis.

Israeli and Palestinian negotiation teams have also held tens of meetings, hoping to reach a peace deal before the end of this year to create a Palestinian statehood alongside Israel.

But the continuation of the Israeli settlement activities in the West Bank, which will be part of the future statehood, and the violence blocked the progress of the negotiations.

Meanwhile, the sources said that Olmert has warned Abbas that Israel will withdraw from the peace talks if Abbas made reconciliation with Islamic Hamas movement which now controls the Gaza Strip.

Egypt works to strike a reconciliation deal between Hamas and Abbas' Fatah movement to end the political split between the Gaza Strip and the West Bank. Last year, Hamas took over the Gaza Strip after routing pro-Abbas forces.

Olmert said that Israel will tighten the blockade on the Gaza Strip if Abbas agreed to reconcile with Hamas and will withdraw from an Egyptian-brokered ceasefire in the strip.

The ceasefire, took effect in June, calls on Israel to ease the blockade of the Gaza Strip in exchange for calmness. Hamas is committed to the deal and Israel gradually - but slowly- eases the embargo.

Head of the PLO Negotiations Department, Saeb Erakat, said that President Mahmoud Abbas and the Israeli Prime Minister Ehud Olmert reviewed in their meeting the peace process.

In a press conference, Erakat noted that President Abbas referred to the Annapolis document, which specifies the objectives of the negotiations, covering Jerusalem, the borders for an independent state, the Palestinian refugees and their right of return, and the Palestinian prisoners. President Abbas reiterated the Palestinian position, mainly that an agreement should be founded on all issues, and that a partial solution is unacceptable.

Erakat added that President Abbas was disappointed over Israel’s failure in implementing the first phase of the Road Map, which includes dismantling settlement outposts and freezing settlement activities in the West Bank, re-opening institutes in Jerusalem that were shut down, ending the siege of Gaza and the West Bank, allowing refugees to return, and freeing Palestinian prisoners.

According to Erakat, Olmert stated that, while aware of his imminent resignation, he remains committed to achieving an agreement.

Erakat also stated that some Israelis accuse the Palestinians of delaying the negotiations and wasting opportunities; "that is not true," he explained, "because reaching an agreement would mean the end of occupation and suffering, and would provide the Palestinians with independence and freedom in a Palestinian state."

Saudi Arabia, on behalf of the UN Arab group, has asked for a special session by the United Nations Security Council to be held at the level of foreign ministers to look into the issue of Israeli settlement activities inside the occupied Palestinian territories, Arab League Secretary General Amr Moussa said.

The league chief warned that the Israeli settlement activities are jeopardizing the option of setting up a Palestinian state.

Moussa, told a press conference ahead of his departure to New York on Thursday morning to explain Arab drives at the 63rd session of the UN General Assembly, this topic should also be raised in the assembly as it does not only change the demographical and geographical structure of the occupied lands, but it also makes the establishment of a Palestinian state impossible.

"Settlements not only change the demographic and geographic composition of the occupied territories but make ... the establishment of a Palestinian state impossible," Moussa said.

He said Saudi Foreign Minister Prince Saud al-Faisal had already contacted the Burkina Faso president of the Security Council, Michel Kafando, with a view to the council holding an extraordinary ministerial meeting.

Prince Saud called on September 8 for the Security Council to hold a meeting on Israeli settlements.

Israel is "undermining the conditions of the peace process by intensifying the construction of settlements to change the situation on the ground," Saud said, adding that Palestinian President Mahmoud Abbas backs the request.

Settlements activity will be discussed at a meeting of Arab foreign ministers in New York on September 24 and when the Quartet and the UN’s Arab group meet at around the same time.

"Settlement activity can eliminate all the conditions necessary for the foundation of a Palestinian state and will necessarily lead to the abandoning of the choice of founding a state," Moussa said.

About the Palestinian-Palestinian conflict and where the AL stands, Moussa stressed that the league is not taking the side of Hamas or Fatah and is not against either of the two rival movements.

"We're only concerned with the Palestinian problem," Moussa said.

"They're all guilty, they're all wrong," the AL chief added.

It is "disgusting" to see Palestinians killing one another, Moussa said, stressing that inter-Palestinian fighting is "unacceptable by us all."

The AL supports Egypt's mediation efforts to unite all the Palestinian factions, so as not to start a new conflict to run parallel to the Palestinian-Israeli conflict, Moussa told reporters.

The Egyptian mediation, Moussa urged, has to take on an aggressive approach.

Meanwhile, Egyptian Minister Omar Suleiman in Cairo conferred with a visiting delegation of the Palestinian Arab Front under Jamil Shehattah on the latest developments in the Palestinian arena, with a special focus on ways to end inter-Palestinian division.

Shehattah said he posted the minister on the complicated situation inside the Palestinian territories, underlining that it is "dialogue and not the use of force" that is the only solution to all problems among the Palestinians.

The Palestinian figure hailed efforts exerted by Egypt to lift the siege imposed on the Palestinian people, to end political and geographical division between Gaza Strip and the West Bank and rally ranks.

Shehattah said the Palestinian Arab Front suggests that all damaging media campaigns stop, the Hamas-Fatah rhetoric change and that all political detainees be released for the dialogue to be a success.

"We at PAF believe that Palestinian factions should first be talking about the formation of a national reconciliation government that is not affiliated to any party," the PAF official said.

This government-to-be should work to unite the Palestinian people, heal the tough economic conditions and hold early presidential and legislative elections, he added.

Shehattah is optimistic the dialogue in Egypt can work, despite regional and foreign interference.

"We're all at crossroads here, even Fatah and Hamas," he said, noting that all the factions agree on the importance of this dialogue.

Minister Omar Soliman will meet on Saturday with a delegation representing the Palestinian Liberation Front under Wasel abu Youssef for talks on the latest Palestinian developments.

The meeting will be part of a series of bilateral meetings held with Palestinian factions to pave the way for a comprehensive meeting in October which will deal with how to end inter-Palestinian division.

During Saturday's meeting the delegation will underline the need to respond to Egypt's ongoing efforts to render the coming Palestinian national dialogue successful and end the Palestinian rift.

A front official said coming out of this crisis should be based on results of Cairo meetings held in 2005, the national accord document in 2006, the Yemeni initiative which was adopted by Damascus Arab summit and an agreement on forming a transitional government that prepare for presidential and parliamentary elections.

Egypt has invited Hamas to come and meet with Minister Omar Soliman in the last week of September, but the movement asked to postpone the visit till October 7 as some of its members are to perform the Lesser Pilgrimage in Saudi Arabia, a well-established Egyptian source said.

Hamas delegation led by Dr Moussa Abu Marzouk will meet Soliman on October 8 within the context of a series of meetings held by Egypt with Palestinian factions to prepare for a comprehensive dialogue among them in October which is mainly meant to discuss ways to end inter-Palestinian division.

The Palestinian faction of Hamas said it received an official invitation from Egypt to attend Cairo dialogue after the Muslim Eid El-Fitr (Lesser Bairam) holidays to pave the way for re-launching comprehensive Palestinian reconciliation talks.

Hamas welcomes and accepts the invitation, the group's spokesman Sami Abu Zahri said.

A Hamas delegation will travel to Cairo on October 7 to meet with Egyptian officials the next day to prepare for the dialogue, he said.

The names of the delegation members will be released later, he said noting that they will include prominent Hamas figures from inside and outside the Palestinian territories.

Hamas is keen on rendering the dialogue successful, he asserted.

He said that the group informed the Egyptian officials of its general stand on the dialogue and of the way it sees it best to realize reconciliation.

Hamas will be going to Cairo with a complete detailed vision of how to resolve the Palestinian-Palestinian problem and end the Palestinian rift, he said.

Egypt has drawn up a plan to end the internal Palestinian crisis and will put it forward after obtaining acceptance from the rival Palestinian factions Fatah and Hamas, sources said.

Egypt came up with the plan after rounds of bilateral talks with representatives of the different Palestinian factions. Later this month, the Egyptian officials will meet with the leaders of Hamas and Fatah separately to get their acceptance.

The Palestinian crisis escalated in June last year when Hamas routed security forces loyal to President Mahmoud Abbas, ousted his Fatah movement and took over control of the Gaza Strip, effectively separating it from the West Bank where Abbas has consolidated his rule.

According to the sources, the Egyptian plan's main point is to form a transitional technocrat government which doesn't include members from either of the factions in order to overcome the Israeli blockade on the Gaza Strip, imposed after Hamas took control.

The transitional government would prepare for the holding of early elections and aim to rebuild the security services on a professional rather than a factional basis.

Fatah said its talks with Egyptian officials on launching an inter-Palestinian dialogue would take place on September 22. Hamas said Egypt will invite its leaders to Cairo at the end of September.

The sources closed to Hamas movement said Egypt has asked Hamas leaders to leave the restrictions imposed on the movement of Fatah leaders in Gaza.

The sources said that senior Egyptian officials asked Hamas leaders to let Fatah senior leader Zakareya el-Agha to leave Gaza to Egypt and release the governor of Khan Younis Osama el-Farra who is currently in Hamas jails.

El-Agha and el-Farra were named as members of Fatah delegation that would head to Egypt on Sept. 22 for bilateral talks with Egyptian security officials to prepare for a comprehensive dialogue in Cairo next month. Hamas, which has been ruling the Gaza Strip since mid-June last year, has imposed traveling restrictions on el-Agha and warned him from leaving Gaza. El-Farra has been in a Hamas prison for about two months.

Hamas rounded up senior Fatah leaders in the Gaza Strip, including governors, as well as activists and members following a bombing attack near Gaza beach that killed five Hamas militants two months ago.

Nabil Shaath, senior Fatah leader and head of Fatah delegation to Cairo said that three members of Fatah delegation are from Gaza, adding "this is to show that Fatah is very much interested to succeed the dialogue with Hamas."

Egypt has been holding bilateral talks separately with each Palestinian faction and political group, including rival Fatah and Hamas to examine their views over holding a comprehensive dialogue that ends the current Palestinian split.

Egyptian security officials had already held talks with representatives of eight political groups. They will hold talks with Fatah delegation on Sept. 22, and with Hamas delegation on Oct. 8.

Last year, following weeks of fighting between Fatah and Hamas, the latter took control of the Gaza Strip and routed President Mahmoud Abbas security forces.

Egypt and other Arab countries have been exerting efforts to end the status split between Gaza Strip, which is ruled by Hamas and the West Bank ruled by Abbas and Fatah movement.

Eight Palestinians were injured in the West Bank village of Asira al-Kabiliya near Nablus when Israelis from the nearby colony, Yitzhar, stormed the streets of the village firing guns, flipping over a car and painting stars of David on houses. No arrests have been made in the case, despite the fact that the incident was documented on video by human rights organizations.

Police sources in the West Bank state that, they have requested for the footage captured by the human rights organization B'Tselem, which presumably shows the colonizers attacking the village of Asira al-Kabiliya. A police source said officers were prevented from accessing the village by Israeli Occupational Forces.

Prior to the rampage, a 9-year-old boy was lightly wounded when he was stabbed in the hand by a man, who then apparently fled to the village. The eight injured Palestinians have not been connected to the stabbing of the 9 year old resident of the colony Yitzhar.

Israeli Prime Minister Ehud Olmert condemned what he called a 'retaliatory campaign' against the Palestinians, including the use of live fire.

"The phenomenon of [settlers] taking the law into their own hands and lashing out with violence and brutality is unforgivable and will be dealt with by the law-enforcement authorities," Olmert says. A rabbinical Committee however praised the attack of the colonizers, calling it "heroism" and in accordance with halakha, the Jewish law.

Meanwhile, Israeli Foreign Minister Tzipi Livni narrowly won a Kadima party leadership vote, officials said, putting her on track to succeed scandal-plagued Prime Minister Ehud Olmert as head of the government.

After a race that became ever-tighter as the count continued, Livni finally got 43.1% of the vote against Transport Minister Shaul Mofaz's 42%, winning by just 431 votes, the central electoral commission said.

Olmert had congratulated Livni and promised his full cooperation after exit polls showed her winning about 48% of the vote, well above the 40% she needed to avoid a run-off against Mofaz, who then trailed by at least 10 points.

Livni's lead diminished as the vote count continued into the night, and members of Mofaz's campaign said he would call for a recount if the gap turned out to be extremely narrow.

Livni, who has been leading U.S.-backed negotiations with the Palestinians, would have 42 days to form a government if she hopes to avert snap elections that opinion polls say would bring the right-wing Likud party to power.

"You have fought like lions. The best have won," the former Mossad spy told jubilant supporters in Tel Aviv after the exit polls were released.

"I will do my utmost not to disappoint you. I want to do what's best for the country," added the 50-year-old Livni.

The vote has cemented her position as the most powerful woman in Israel and could now see her follow in the footsteps of Golda Meir, the country's first woman prime minister.

Olmert called Livni "and congratulated her on her victory in the primary elections," his office said in a statement.

"The prime minister said that Livni will enjoy his full cooperation," it said.

Polls ahead of the election had shown Livni as the frontrunner, followed by Mofaz, a hawkish former army chief and defense minister, and two other ministers who trailed far behind.

The election looks unlikely to end the political turmoil brought on by graft accusations against Olmert, as it remains uncertain whether Livni will be able to form a government and take over the premiership.

The political turbulence further dims chances of reaching a Middle East peace deal by the end of the year, a goal Olmert and Palestinian president Mahmud Abbas had set at a U.S. conference that restarted talks last November.

"Livni will continue with the peace process. The peace process is part of Livni's platform and is one of the main reasons she was elected," said MP Yitzhak Ben Yisrael.

But opinion polls say Likud leader and former Prime Minister Benjamin Netanyahu, a reputed hard-liner on the peace process, is likely to become premier if the country goes to the polls.

Palestinian negotiator Saeb Erakat said that Wednesday's vote was an "internal Israeli affair" but that he hoped it would lead to a return of stability.

"We hope there will be comprehensive and serious negotiations and that the Israeli voter will choose the removal of the settlements and the wall and strong cooperation with a Palestinian partner," he said.

Olmert, who announced on July 30 that he would step down once his Kadima party has picked a new leader, has faced public uproar over corruption investigations that could lead to criminal charges against him.

But he is likely to wait until after the Jewish New Year celebrations and formally resign early next month, according to Israeli media.

The next Kadima leader will have to assemble a majority in the 120-member Knesset, or parliament, during which time Olmert - who first took office in January 2006 - may head an interim government.

"The next step will be to form a coalition government similar to the current coalition. I believe she will be able to form one," said Ben Yisrael, one of Livni's top electoral aides.

"After that, she will invite all other parties to take part in a wall-to-wall coalition," he said, suggesting Livni would also reach out to her former party, Likud.

Kadima said about 50% of its 74,000 members turned out to vote. But the election drew little excitement among Israelis, with editorialists generally unenthusiastic about the candidates.

"It is not an easy choice. Choosing between Tzipi Livni and Shaul Mofaz is like choosing between two shades of gray," the top-selling Yediot Aharonot said ahead of the vote.

Like Olmert, both candidates had left Likud to join Kadima under the leadership of the party's founder Ariel Sharon in late 2005, but they ran on sharply contrasting platforms.

Livni, a former lawyer, advocates withdrawing from most of the occupied West Bank in order to reach a two-state solution with the Palestinians.

In Damascus, Syrian Foreign Minister Walied al-Moallem announced the postponement of the 5th round of indirect talks between Syria and Israel under Turkish mediation.

A fifth round of Turkish-brokered peace talks between Syria and Israel has been postponed.

A statement issued by Turkish Prime Minister Recep Tayyip Erdogan said the negotiations had been postponed for technical reasons dealing with internal conditions in Israel and the resignation of Israeli negotiator Yoram Turbowicz.

The statement said that Turkey would continue contacts with the Syrian and Israeli sides to set a new date for negotiations.

Syrian Foreign Minister Walid Muallem told a press conference with visiting Spanish counterpart Miguel Angel Moratinos that negotiations with Israel were postponed at the request of the Israeli side.

The next round of talks was due to be held on Thursday.

"When Israel is ready to resume the talks, we will be too because we want to build a solid base that will allow the launch of direct negotiations whatever the outcome of the Kadima party election in Israel," Muallem added.

He was referring to the party of Prime Minister Ehud Olmert, which was voting for a new leader after the premier announced he was stepping down to fight corruption and influence-peddling allegations.

Syrian President Bashar al-Assad's talks with Spanish Foreign Minister, Miguel Angel Moratinos dealt with the growing relations of friendship and cooperation between Syria and Spain and with the expected visit of Spanish Prime Minister, Jose Rodriguez Zapatero to Syria.

President al-Assad and Moratinos expressed satisfaction over the distinguished relations between Syria and Spain and the incessant efforts which are being exerted to strengthen and expand these relations in all fields.

During the meeting the issue of the indirect peace talks between Syria and Israel through the Turkish mediation was discussed, and Moratinos expressed Spain's support to these negotiations, praising Syria's seriousness in this regard and to her commitment to everything that may lead to peace and stability in the Middle East.

In this regard, president al-Assad underlined the importance of Madrid reference and commitment to international resolutions as far as peace talks are concerned. The results of the Syrian-Lebanese Summit, and of the Quartet Summit which held recently in Damascus, were also discussed. The two sides welcomed the start of the dialogue among the Lebanese parties, expressing hope that the sessions would lead to an agreement that would preserve security and stability in Lebanon.

Moratinos praised Syria's constructive role in building strong relations with Lebanon. During the meeting, the necessity for attaining the unity of the Palestinian ranks, and for the restoration of the Palestinian legitimate rights, was stressed. The president welcomed the growing European role in the region. The talks also dealt with the project "Union for the Mediterranean, and with the necessity for such a project to initiate cooperation between the two banks of the Mediterranean in all fields.

Minister al-Maollem held a separate meeting with Moratinos, followed by a joint press conference.

During the Press conference, Moratinos underlined the importance of bilateral relations between Syria and Spain in all fields.

"Relations between Syria and Spain were always excellent in the political, economic and cultural domains" we want these relations to be crowned by the visit of Spanish Prime Minister to Damascus expected before the end of this year," Moratinos said.

He added his talks with President al-Assad dealt with bilateral ties between the two countries, the peace process and the Euro-Med partnership.

He praised the constructive role played by Syria in facilitating dialogue and achieving consensus among the Lebanese and the recommendations presented to Spain, Italy and France to help in this domain, saying "we can now aspire for Lebanon's future with great optimism."