Investigation of Israeli PM Ariel Sharon on bribery and corruption charges could result in indictment in coming weeks; if indicted, PM may be forced to resign. Sharon repeated his plan to unilaterally disengage from parts of West Bank and Gaza if no progress made toward peace in coming months. Palestinian PM Ahmed Qurei called for international pressure on Israel to halt construction of controversial security fence; said Sharon plan to withdraw behind fence would destroy chances of 2-state solution. 100,000 Israelis, including many settlers, demonstrated against Sharon in Tel Aviv 11 January, protesting plan to dismantle some settlements as part of withdrawal. Prisoner exchange between Israel and Hezbollah completed 29 January (see Lebanon section below). Violence continued: suicide bus bombing in Jerusalem left 10 dead 29 January; 8 Palestinans killed in Israeli raid in Gaza 28 January; female Hamas suicide bomber killed 4 Israelis in Gaza 14 January.

Relations with Israel deteriorated over security fence. Amman says fence will make viable Palestinian state impossible, and could lead Palestinians to move to Jordan, where they already make up majority of population.

Following years of negotiation, German-mediated prisoner exchange between Israel and Hezbollah took place 29 January. Deal saw Israel release 23 Lebanese, 400 Palestinian, and 12 other Arab prisoners in exchange for Israeli businessman and bodies of 3 soldiers. Agreement reached despite violence along Lebanese border and tensions between Israel and Syria, Hizbollah’s main backer. On 19 January Hizbollah guerrillas fired anti-tank missile at IDF bulldozer which had crossed several meters into Lebanese territory, killing Israeli soldier. Israeli warplanes struck Hizbollah positions in southern Lebanon following day.

American and British inspectors returned to Libya to prepare for dismantling of WMD programs. Extent of Libyan nuclear advances and sophistication of international black market for WMD technology surprised Western officials, deepened proliferation concerns. Some Arab countries reportedly complaining behind scenes that Libyan renunciation of WMD weakens prospects of getting Israel to do same. Israeli officials, meanwhile, said secret talks with Libya on improving ties held in Paris; Libya denied talks took place.

Former Islamist mayor released on bail 20 January after being detained for 2 weeks following return from exile in Belgium. President Taya accused Islamists of seeking to destabilise government.

Signs of modest improvement in bleak human rights situation. King pardoned 33 political prisoners 7 January, weeks after announcement that Justice and Reconciliation Commission will be created to investigate past abuses.

Crown Prince Abdullah announced launching of reform process in cautious televised speech. New satellite news channel began broadcasting; opening bulletin delivered by female presenter. Six killed in capture of suspected terrorist in Riyadh 29 January, including 5 members of Saudi security forces.

President Assad dismissed Israeli President Moshe Katsav’s invitation to Jerusalem for peace talks, but both sides agreed to Turkish mediation offer. David Kay, head of U.S. group searching for Iraq WMD, said some weapons and documents may have been hidden in Syria, adding to already strong U.S. pressure on Damascus for cooperation in war on terror.

UN Security Council followed UN Secretary-General Kofi Annan’s recommendation to extend UN mission in area (MINURSO) 3 months to allow Morocco more time to consider peace plan. Plan, which calls for referendum on status of Western Sahara, already accepted by independence-seeking POLISARIO front.

Website posted statement purportedly from Yemeni branch of al Qaeda threatening to strike U.S. interests in retaliation for 2002 killing of militant leader by CIA drone plane. Despite threat, government making progress in efforts to improve security situation.