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Stepping up pressure on Yasser Arafat, Israeli Prime Minister Ariel Sharon said in an interview published Friday that he will ask U.S. President George W. Bush to cut off contacts with the Palestinian leader.

Israel has pushed in the past for Arafat's diplomatic isolation, but this marked the first time the Israeli prime minister publicly proposed the United States stop dealing with Arafat, Sharon advisers said.

Sharon is to hold talks with Bush at the White House next week, their fourth meeting in a year. Bush has yet to invite Arafat, reflecting the continuing U.S. policy tilt in Israel's favor.

Sharon has charged that Arafat is responsible for terror strikes against Israelis by encouraging militants. Palestinians say the Israeli roadblocks around Palestinian towns and the isolation of Arafat prevent their security forces from stopping attacks on Israel, despite Arafat's cease-fire orders.

In recent weeks, the Bush administration has intensified its calls on Arafat to take steps to stop violence, while openly backing Israeli measures against Arafat.

Bush said Friday, in remarks apparently directed at the Palestinians, that ``what derails peace is terror and the more quickly we eliminate terror, the more likely it is we'll have a peaceful solution in the region.''

Israel has confined Arafat to his compound in the West Bank town of Ramallah, and Sharon said Israel might take more steps against Arafat.

``I don't think we have exhausted all the pressure,'' Sharon said in an interview published Friday in the Yediot Ahronot daily.

``We promised not to harm Arafat physically. I also did not make it our objective to expel him from here,'' Sharon said. ``But I plan to tell President Bush next week, `I advise you to ignore Arafat. Boycott him. Don't have any contact with him and don't send him delegations.'''

Palestinian Cabinet minister Ziad Abu Zayyad called on the United States to reject Sharon's recommendations. ``The outcome will show us whether American policy decisions are drafted in Tel Aviv or in Washington,'' he said.

In an interview with the Maariv daily, Sharon was asked whether he regretted not having killed Arafat while the Palestinian leader was under Israeli siege in Beirut in 1982. ``Absolutely,'' Sharon said. ``But we made a commitment not to do that.''

Explaining his regrets, Sharon said that ``there is no doubt that he (Arafat) caused us great losses and very heavy damage.''

In an excerpt of the interview published Thursday, Maariv had quoted Sharon as saying: ``In Lebanon, there was an agreement not to liquidate Yasser Arafat. In principle, I'm sorry that we didn't liquidate him.'' However, the newspaper later clarified that this was a paraphrase, not a quote.

Sharon told Maariv that a Palestinian state will be created, and that he is prepared for territorial concessions in exchange for real peace. In past years, Sharon opposed giving up territory, positioning Israeli settlements in the West Bank to deprive the Palestinans territorial contiguity.

``This would be a long process, but in the end there will be a Palestinian state,'' he told Maariv. ``It will be a demilitarized state that would have a police force for maintaining public order. It would have to give up the weapons it holds, but a Palestinian state will be created in the end.''

Also Friday, former Israeli Prime Minister Benjamin Netanyahu wrote in a front-page commentary in Maariv that ``Arafat's regime must be toppled, and it must be done immediately.''

Netanyahu said Bush's tough stance on terrorism allows Israel to make a strong case for refusing to deal with Arafat. ``We have the opportunity to prove, in light of President Bush's statements and actions, that no negotiations with Arafat will lead to a situation of real peace,'' wrote Netanyahu, who is widely expected to challenge Sharon in the next race for prime minister. ^pvs-kl