AL QUDS, May 12: Israeli Prime Minister Ariel Sharon retreated from a planned Gaza Strip offensive but faced a key policy battle on late Sunday within his Likud party over the question of Palestinian statehood.

Scrapping the plan, which was undermined by diplomatic pressure and dissent from generals, pushed the focus of the Israeli-Palestinian conflict back into the political arena for the time being.

But Defence Minister Binyamin Ben-Eliezer said Israel’s decision to shelve the assault should not be interpreted as surrender to “terrorism.”

“We reserve the right to respond when we want and how we want,” Ben-Eliezer said, touring the site near Tel Aviv of a Palestinian suicide bombing that killed 15 Israelis on Tuesday and triggered plans for the Gaza sweep. On another front, Sharon faced a policy battle within his own party over the question of a Palestinian state at a heated Likud convention in Tel Aviv late Sunday.

Supporters of former prime minister Benjamin Netanyahu in the Likud party said they would push a resolution through the central committee declaring the party would never support the creation of such a state.

Sharon has said he envisages a Palestinian state at the end of a long peacemaking process.

Likud officials raced to hammer out a compromise.

If the resolution is passed at the forum, it could tie Sharon’s hands in future peace efforts and weaken his standing in Likud as Netanyahu gears up for an expected leadership challenge ahead of next year’s general election.

SHOT DEAD: In the Gaza Strip, a Palestinian labourer shot dead his Israeli employer near a checkpoint leading to the Jewish settlement of Rafiah Yam, an army spokesman said.

Loudspeakers in the Gaza city of Rafah broadcast a claim of responsibility by the al-Aqsa Martyrs Brigades militant group for the attack.

In the West Bank, Israeli troops raided the city of Tulkarm and arrested two militants.

The incidents followed an easing of tensions on the Israel-Gaza border, where militants in the densely populated Strip had been preparing for a fight.

Israeli correspondents had reported that some generals had opposed a Gaza operation, warning of heavy Israeli army and Palestinian civilian casualties. Political sources said the offensive was aborted because details of the battle plan were leaked to the media.

David Magen, chairman of parliament’s foreign affairs and defence committee, said the real reason was Israeli fear of diplomatic fallout so soon after a sweep through the West Bank.

“I think the delay is due to political and other public reasons,” he told Israel Radio.

Israel has been urged by the US and other foreign leaders to eschew another military thrust to avoid burying new diplomacy, including a US initiative for a conference on peacemaking.—Reuters