http://online.wsj.com/articles/israel-pulls-forces-from-gaza-as-cease-fire-begins-1407231543

Israel, Hamas Set Out Demands on Gaza

Territory is Calm as Cease-Fire Takes Hold

By Nicholas Casey in Gaza City, Jay Solomon in Washington and Joshua Mitnick in Tel Aviv

Aug. 6, 2014

A 72-hour cease-fire in Gaza continued to hold Wednesday as talks are expected to begin in Cairo to negotiate a lasting peace between Israel and Islamist group Hamas.

For a second day, Gazans ventured into the streets in search of food, household goods and medical supplies, taking advantage of the pause in Israeli shelling and airstrikes. Others returned from shelters to begin rebuilding their shattered homes, some of which have been littered with bullets and leftovers from the monthlong conflict. The cease-fire began at 8 a.m. local time on Tuesday.

Security arrangements and access to the Gaza strip are expected to be issues at the core of talks between Israel and Hamas. Both parties have already made clear demands before the negotiations, which will be mediated by Egyptian and U.S. diplomats.

Israel aims to ensure Hamas cannot rebuild its rocket arsenal and military capabilities, while Hamas wants the Israeli blockade of goods and people into Gaza lifted.

At the center of these deliberations, according to U.S., Israeli and Arab diplomats, is a push to place the Palestinian Authority led by Mahmoud Abbas and Egypt at the heart of efforts to disarm Hamas and open Gaza to economic development.

These diplomats said the Palestinian Authority might be given the task of manning Gaza's border crossings with both Egypt and Israel, which will be needed to smooth the flow of humanitarian aid.

Ending a seven-year Israeli and Egyptian blockade of Gaza is one of Hamas's central demands for any deal. But it is not clear whether Hamas would resist the push to give Mr. Abbas a larger role in Gaza.

For Israel, the military operation that pushed into the seaside enclave brought some tangible gains. After its initial shock at the extent of Hamas's network of tunnels into southern Israel, the military said it destroyed more than 30 of them and averted infiltrations by Palestinian fighters. It said its Iron Dome air defense system prevented all but 3% of Palestinian rocket fire from getting through.

Separately, Israel said in a court document released Tuesday that it arrested last month a Hamas member, Hussam Qawasmeh, who Israeli security authorities allege served as the "command echelon" in the June 12 kidnapping and murder of three Israeli teens hitchhiking in the West Bank. The kidnapping of the teens set off an escalation in tensions with Hamas that led to the Israeli military's 3 1/2 week offensive in Gaza. Details of the investigation are under a court gag order.

Hamas inflicted 64 fatalities on the military and caused major disruptions to daily life in Israel--including a brief halt of foreign airline flights into the country. By the Israeli military's count, Hamas still has 3,000 rockets, about one-third of its arsenal before the conflict.

While Hamas can claim it has stood up to the Israeli military, though, Gaza paid a high price for the third attempt in six years to force Israel to end its economic blockade.

Palestinian civilians suffered heavy casualties, as well as massive damage to their homes and livelihoods. Entire towns and blocks are rubble. The war has uprooted 465,000 people, according to the U.N. Relief and Works Agency, warning that the territory is on the "verge of a humanitarian crisis."

As of Tuesday, 1,875 Gazans, 426 of them children, have been killed in the violence, according to the health ministry in Gaza. Most of the dead were civilians, according to Palestinian and U.N. officials.

A thorough survey by the U.N. and other international aid organizations hasn't been carried out, but Palestinian authorities said 37 mosques have been destroyed in the fighting, and 167 schools and six universities have been damaged. The officials said the war has destroyed around 10,000 homes in Gaza.

The streets of Gaza filled Tuesday with cars, horse-drawn carts and bicycles. As people gathered supplies and returned to homes they fled, politicians on both sides began to stake out positions for the coming negotiations.

The challenge is to reconcile what each side sees as its essential demands. Israel wants militants in Gaza disarmed and Hamas demands the lifting of the embargo. What is evident is that neither Israel nor Hamas wants a return to the status quo that followed their major military encounters in the winter of 2008-2009 and again in 2012.

A former senior Israeli military official familiar with the military's thinking said the Cairo talks must ensure that Hamas won't be able to rebuild its rocket arsenal and that transfers of cement and other construction materials into Gaza will be closely monitored.

All reconstruction of schools, mosques, house and health-care facilities in the Gaza Strip also would have to be approved by Israel so it could monitor how the building materials were used. Turkish, Egyptian and U.N. officials could be enlisted as guarantors, he said.

Israeli Prime Minister Benjamin Netanyahu must yield something to Hamas, said Gadi Shamni, a general in the reserves who formerly commanded the Israeli military's Gaza division.

"At the end of the day you need to reach an agreement to allow Gazans to develop Gaza, and give them something to lose," he said.

Oded Eran, a former Israeli diplomat, said it is inevitable that Hamas would benefit from humanitarian aid and a loosening of economic sanctions.

"'How do you reconstruct Gaza?' is to some extent is a euphemism for how do you meet the demands of Hamas. How can you square that circle?" Mr. Eran said. "If you don't want to pay the price of removal of Hamas militarily, you have to live with the consequences."

Mr. Abbas is being positioned to play an expanded role in administering Gaza, according to the U.S., Israeli and Arab diplomats. That would include serving as the financial conduit to the territory's civil service, whose members haven't received salaries in months because of Hamas's deteriorating finances.

Mr. Abbas's aides are leading the Palestinian delegation in Cairo, which will include representatives of both Hamas and Palestinian Islamic Jihad, a second Gaza-based militant group.

The Obama administration "has long supported an effort to strengthen President Abbas and to work with other parties in the region to do just that, and that will continue," State Department spokeswoman Jen Psaki said Tuesday, referring to the Cairo talks.

A senior Israeli official said the government also supports a strong role for Mr. Abbas in Gaza as a means to weaken Hamas and potentially reinvigorate the Mideast peace process.

"If you have the right mix of Hamas being disarmed, Abbas going in there, then things could tip against Hamas," the official said. "Then you might have something."

Hamas couldn't be reached for comment Wednesday. In the past, the group has said it would not allow its military wing to be disarmed.

U.S. Arab and Israeli officials are trying to find out if Hamas's position has shifted due it deteriorating financial position and Israel's military onslaught that destroyed much of Gaza's infrastructure.

Hamas leadership joined in a unity government with Mr. Abbas's secular Fatah party in June on terms that were seen as unfavorable to the Islamist movement and already foresaw a much bigger role in Gaza for the Palestinian Authority.

U.S. officials acknowledged that Mr. Abbas's standing has been weakened by the current war and failure of the peace process with Israel. But they believe the Palestinian Authority has to play a central role in the rehabilitation of Gaza because there are no other options.

Still, Hamas leaders in Gaza have continued to speak disparagingly about Mr. Abbas.

"He has no relation to Palestinian affairs," said Mahmoud Zahar, a top Hamas official, in a recent interview.

Despite his frequent insistence that Israel's attack on Gaza was an assault on all Palestinians, Mr. Abbas has been widely dismissed during the fighting by Palestinians. They accuse him of siding too closely to Israel.

Top aides to Mr. Abbas said the leader and the Palestinian Authority won't be willing to play a major role in rehabilitating Gaza unless they receive assurances that Mr. Netanyahu's government is committed to developing an independent Palestinian state, a process that broke down in April.

"If the Israelis want to use us for something that is helpful to them, but give nothing to us in return, this isn't going to happen," said a senior Palestinian official.

Politically, the war offered Hamas a chance to burnish its anti-Israel credentials and bolster its flagging stature among Gazans and Muslims elsewhere in the Arab world, said Ghassan Al Khatib, a West Bank politician. Iran and Hamas also moved to repair strained relations, motivated in part by the conflict.

But that logic may have backfired, Mr. Khatib said. The support from Arab countries was tepid at best and Hamas "didn't imagine the scale of the Israeli action."

Among the 1.8 million people of Gaza, it was far too early Tuesday to gauge public opinion about Hamas' challenge to Israel. However, few Gazans were prepared yet to blame Hamas for their woes.

A goal of past Israeli clashes with Hamas--to drive a wedge between Gazans and their leaders--appeared undermined by the high civilian death toll in the eyes of residents such as Walid Rok, 24.

"We believe Hamas is the resistance," said Mr. Rok, invoking the group's preferred self-description as he stood in the ruins his house on a leveled street in the southern village of Khuza'a. Israeli military operations, he said, were aimed at ousting his family from the town and proved that armed factions such as Hamas were necessary for protection.

--Rory Jones in Jerusalem contributed to this article.

Write to Nicholas Casey at nicholas.casey@wsj.com and Jay Solomon at jay.solomon@wsj.com