Two Palestinian militants killed near Gaza border

GAZA CITY, Gaza Strip -- Israeli soldiers on Saturday shot and killed two Palestinian militants staking out an army position with binoculars along the fortified fence between Gaza and Israel.

Members of the Al Aqsa Martyrs' Brigades, a violent extremist offshoot of Palestinian leader Yasser Arafat's Fatah movement, said the two men were on an "exploratory mission" to gather intelligence for a future attack.

Meanwhile, Israel announced it will release more than 400 Arab prisoners in exchange for an Israeli businessman and the bodies of three Israeli soldiers held by the Lebanese guerrilla group Hezbollah.

The prisoner release, which is expected within days, could give a popularity boost to Palestinian Prime Minister Ahmed Qureia, even though he was not involved in the negotiations. Qureia has been weakened by his unsuccessful attempts to win concessions from Israel.

Also Saturday, Arafat warned in an interview with a British newspaper that "time is running out for the two-state solution" to the conflict with Israel.

Arafat was quoted as telling The Guardian that Israeli settlement expansion in the West Bank, together with Israel's construction of a massive barrier that cuts into West Bank land, will make it impossible to establish a separate, independent Palestinian state.

Israel says it needs the 450-mile barrier of fences, walls and trenches to keep out suicide bombers and other attackers. The Palestinians say the barrier, which dips deep into the West Bank to wrap around some Jewish settlements, amounts to a land grab that aims to divide up Palestinian lands and destroy any chance for a viable state.

A decade of peace talks between Israelis and Palestinians in the 1990s was based on the concept of two states: Israel, alongside a future Palestinian state in the West Bank and Gaza -- territories Israel captured in the 1967 Mideast war.

The latest peace plan, the stalled, U.S.-backed "road map," also aims to create a Palestinian state by 2005.

Arafat's remarks echoed similar comments by his prime minister, Ahmed Qureia.

Earlier this month, Qureia told The Associated Press in an interview that Palestinians could give up the goal of an independent state and instead push for a single binational state with Israel.

Some Israeli analysts have voiced concern at what they warn could be a brewing strategy among Palestinian leaders to use a higher birthrate -- and its eventual demographic impact -- to solve the continuing diplomatic impasse with Israel.

They argue that a single state including Gaza, the West Bank and Israel could spell disaster for Israel's Jewish character because that entity would soon have an Arab majority.

In the Gaza Strip, Palestinian sources said two men killed by Israeli troops were members of the Al Aqsa Martyrs' Brigades. Soldiers shot the men as they neared the fence.

Several hours later, at the start of their funeral, other members of the group speaking through loudspeakers said the two men were dispatched on an "exploratory mission" to gather intelligence near an army position in the military zone along Gaza's edge with Israel.

The men were identified as Ashraf al-Imbayed, 25, who had been wearing a military-style jacket, and a distant relative from the same family clan, Samir al-Imbayed, 23.

The men were unarmed but carrying binoculars and cell phones, possible signs that they were planning an attack, the army said.

The military said it had received warnings that militants were planning an attack in the area, and soldiers were continuing searches in the area near the Israeli village of Nahal Oz.

The area near the barrier is off-limits to Palestinians and has been a frequent site of violence.

The army said militant groups have recently tried to plant explosives or infiltrate into Israel near Nahal Oz. Palestinians say farmers wandering into the area have also been targeted. Hundreds of Palestinians, some of them carrying weapons, joined the men's funeral procession through Gaza City later Saturday. The men's bodies were wrapped in Palestinian flags. One mourner addressed the crowd outside a mosque, promising to avenge their deaths.

Elsewhere in Gaza, the military said Palestinians attacked an army force with automatic rifle fire and fired seven anti-tank missiles. Soldiers returned fire. But, no injuries were reported in the shooting along Gaza's border with Egypt.