ARABS-ISRAEL - Dec 5 - Israel And Egypt Exchange Prisoners As Relations Improve.

An Israeli Arab textile worker Azzam Azzam is released in exchange for six Egyptian students arrested in Israel earlier this year. He was convicted of espionage and held for eight years in an Egyptian jail. He was alleged in 1997 to have passed messages to Israeli security services written in invisible ink on women's underwear. The Egyptian students were arrested near the desert border between the two countries in August and accused of planning to hijack an Israeli army tank and kill its crew. The exchange marks a significant thaw in relations between Israel and Egypt, which have been under strain since the outbreak of the second Palestinian intifada or uprising more than four years ago. Egypt's Pres Hosni Mubarak, has persistently blamed Israel for the escalation of violence in the Palestinian territories. However, in a marked change of tone in his public comments, Mubarak suggested to reporters in Cairo Israel's PM Ariel Sharon, now represented the Palestinians' best chance for a peaceful settlement. His comments followed a visit to Israel last week by Egypt's FM Ahmad Aboul Gheit, and its intelligence chief Omar Suleiman. The two are reported to have consolidated security arrangements for Israel's planned unilateral withdrawal from Gaza. Israeli government officials said they were also considering the release of Palestinian prisoners. A Middle East diplomat said this was part of the deal negotiated by the Egyptians, which would boost the chances of Mahmoud Abbas succeeding Yassir Arafat.