GAZA (Reuters) - Palestinian Prime Minister Ismail Haniyeh on Friday demanded Israel halt a Gaza offensive if it wanted to free a captured soldier and said the Hamas-led government would not give way to force.
Israeli warplanes pounded Gaza, setting ablaze the Interior Ministry offices, on the third day of a military operation aimed at bringing home the army corporal who was seized in a cross-border raid on Sunday.
The crisis has sent Israeli-Palestinian relations to new lows and piled more pressure on the Hamas Islamist government, already straining under a U.S.-led aid embargo to get it to renounce violence and drop its vow to destroy Israel.
Haniyeh, addressing the public for the first time since the abduction of Corporal Gilad Shalit, said at prayers in a Gaza mosque that Hamas would not be pressured by raids or the detention or killing of its leaders.
"The aggression must stop in order not to make the situation more complicated," he said, while adding that he was working with Egyptian mediators and Palestinian President Mahmoud Abbas to end the hostage crisis.
Egyptian President Hosni Mubarak said in a newspaper interview Hamas had given "conditional approval" for Shalit's release, without specifying the terms. Mohammed Dahlan, an aide to Abbas, said he hoped an agreement would be reached in days.
European Union envoy Marc Otte said after a meeting with Abbas that they hoped "developments over the next few hours and days will allow for the lifting of the (Israeli) siege."
Israeli officials have said the Jewish state would not bargain for the release of Shalit. Militants from the Palestinian Resistance Committees, who claimed the abduction, have refused to say whether the 19-year-old gunner was alive.
"Make no mistake, we are not going to negotiate on the release of our soldier," said cabinet minister Meir Sheetrit.
Israel has also rejected a demand by militants to free Palestinian prisoners for information on Shalit's fate.
ISRAEL STANDS DOWN NORTHERN GAZA OFFENSIVE
Troops raided a part of south Gaza earlier in the week and have massed near northern Gaza ahead of an expected raid. Diplomatic sources have said Israel had stood down an offensive into the territory to allow for mediation efforts to continue.
"We are encouraged by the fact that the Israelis are standing down in Gaza and that Hamas is talking openly about repatriating the soldier," White House spokesman Tony Snow said.
Israel is under international pressure to avoid civilian casualties that could result from a larger assault into densely populated Gaza, home to 1.4 million Palestinians. Attacks against gunmen in early June killed more than a dozen civilians.
Israeli air strikes in Gaza on Friday killed two Palestinian militants, attacks that marked the first casualties since troops pushed into the southern part of the territory in their first raid into Gaza since Israel pulled out of it last year.
But missile attacks earlier in the week knocked out bridges, water systems and a power substation, causing blackouts. Palestinian officials say a shortage in supplies and food may worsen conditions in already-impoverished Gaza.
A senior Israeli security source said the Jewish state, which supplies electricity to Gaza, had increased the flow of power into remaining lines and that Israel may open a border crossing next week to allow for supplies to be brought in.
Hamas cabinet ministers have been keeping under cover after Israeli threats of assassination. Hamas's armed wing was among the groups that grabbed Shalit, although the government said it had no foreknowledge of the raid.
A day after seizing dozens of Hamas cabinet members and officials in the West Bank, Israel revoked the Jerusalem residency of four lawmakers linked to the group. The Interior Ministry said that was not connected to the offensive.
(Additional reporting by Jerusalem, Geneva, Washington and United Nations bureaus)