Israeli PM Ariel Sharon said in major speech that country will sever links with Palestinians if no progress made toward peace in coming months, suggesting political shift. Bush Administration responded with warning against taking unilateral steps which harm Roadmap. Palestinian leaders failed to agree to full ceasefire with Israel in Cairo talks; failure seen as setback for Palestinian PM Ahmed Qurei. UN General Assembly asked International Court of Justice in The Hague for opinion on controversial security fence through West Bank; Court to hold hearings in February. “Geneva Initiative”, offering full blueprint for peace settlement, launched 1 December with widespread support from world leaders. Suicide bombing in Tel Aviv 25 December first in over 2 months; attack killed 4, shortly after Israeli helicopter strike in Gaza killed 6, including militant leader.

Three Iraqi nationals charged with plotting to attack U.S. and Israeli targets in Jordan.

Israeli troops shot and killed 2 Lebanese men carrying hunting rifles along border with Israel 9 December. Lebanese security forces arrested 2 citizens suspected of planning to bomb U.S. embassy in Beirut.

In surprise announcement, Libyan leader Muammar Qaddafi said country would end pursuit of WMD and allow unconditional inspections. Declaration followed months of secret negotiations with U.S. and Britain and visits by American and British inspectors to Libyan sites. Nuclear program reportedly more developed than previously thought; includes advanced uranium enrichment capabilities. Move paves way for possible lifting of U.S. sanctions, in place for almost two decades.

Opposition leader Mohamed Haidalla convicted of treason charges, but given 5 year suspended sentence and fine, and released from jail.

On visit to Rabat, U.S. Sec. State Powell praised Morocco for anti-terror cooperation but voiced concerns over policies adopted at expense of human rights.

U.S. issued terror alerts and reduced diplomatic staff, saying it continued to receive indications of planned attacks against Western targets.

Syrian President Bashar al-Assad urged U.S. to help restart talks over Golan Heights, captured by Israel in 1967 war. Israel reacted sceptically to peace overtures and in late Dec- ember announced plan to double number of settlers in Golan Heights. Elsewhere, Syrian authorities arrested 6 men believed to be al Qaeda couriers and confiscated US$23.5 million.

Alvaro de Soto, UN Secretary- General’s Special Representative for Western Sahara, and UNHCR officials visited Algeria and Morocco for talks on new confidence building measures aimed at helping Western Sahara’s refugees living in desert camps in Algeria. This followed successful meeting in Geneva earlier in month with Frent POLISARIO officials.

Security forces reportedly foiled plot to blow up UK embassy in capital, Sanaa. Government walking fine line between cooperating with U.S. in war on terror and appeasing populace strongly opposed to U.S. policies in region.