Israel backed off Monday from threats to kill Yasser Arafat, while the incoming Palestinian prime minister ceded control over many Cabinet appointments to Arafat's Fatah party despite Israeli demands that the veteran Palestinian leader be stripped of authority.

As Israeli leaders insisted they still intend to "remove" Arafat, the U.N. Security Council considered a Palestinian request to intervene. The involvement of the United Nations underscored the extent to which violence and tension have paralyzed peacemaking efforts.

The Palestinian ambassador stalked out of the council chamber when the Israeli ambassador began to speak.

The chief U.N. envoy to the Middle East, Terje Roed-Larsen, told the Security Council the peace process has broken down and that he fears even worse bloodshed lies ahead. He accused both Israelis and Palestinians of failing to "seriously and actively" address each other's concerns, and stressed that Arafat is the democratically elected leader who "embodies Palestinian identity and national aspirations."

In Gaza late Monday, several Israeli tanks and bulldozers moved into the Rafah refugee camp on the Egyptian border and destroyed some abandoned buildings, Palestinians said. Such operations have become routine as Israel tries to stop arms smuggling.

Early Tuesday, Arafat's national security adviser, Brig. Gen. Jibril Rajoub, told Israel Radio the Palestinian leader wants to reach a truce with Israel, but Israeli officials said they would reject the offer.

Rajoub said the Palestinians would halt all acts of violence in return for an Israeli agreement to end its military operations, including lifting blockades on Palestinian towns and villages.

"We are ready to sit and we are ready to declare a general ceasefire, but there needs to be something mutual because without mutuality nothing will be achieved," Rajoub said. He did not say how the Palestinian Authority would reach a new ceasefire deal with Hamas and Islamic Jihad.

An Israeli government official, speaking on condition of anonymity, said several truces had not ended the fighting. The official quoted a security cabinet decision from last Thursday in which says Israel will not agree to anymore ceasefires.

Facing widespread international opposition to harsh action against Arafat, Israeli Foreign Minister Silvan Shalom on Monday sought to play down comments by Israeli leaders that killing Arafat is an option.

"It is not the official policy of the Israeli government," Shalom told reporters. "We don't speak about any killing. We didn't speak about it before, and we don't speak about it today."

A day earlier, Vice Prime Minister Ehud Olmert said killing Arafat is a possibility, along with expelling him or further isolating him inside the West Bank compound where Arafat has remained for nearly two years, repeatedly besieged by Israeli troops.

While various countries sought to pressure Israel to soften its stance, Palestinian Prime Minister-designate Ahmed Qureia asked the Fatah party to choose candidates for up to 16 of his 24 Cabinet posts — a decision that gives Arafat significant control over the composition of the new Cabinet.

Israeli leaders have said they will not deal with any new government that is effectively under Arafat's control, and that any Palestinian government must act against militant groups — as required by the U.S.-backed "road map" peace plan — and unite all security forces under a single person other than Arafat or his lieutenants.

Israeli leaders accuse Arafat of sabotaging peace efforts and blocking a crackdown on the militants, whose suicide bombings and shootings have killed hundreds of Israelis over the past three years. The Palestinians say the Israelis have tied their hands by carrying out their own raids against militants, frequently killing them and sometimes civilians as well, angering the Palestinian public.

Outgoing Palestinian Prime Minister Mahmoud Abbas, who was backed by Israel and the United States, resigned Sept. 6 after four months in office marked by frequent disagreement with Arafat over the control of security forces and Cabinet appointments. Qureia has told confidants he has no intention of challenging Arafat, who selected him for the job last week.

Leaders of the Fatah party met Monday to come up with candidates for Cabinet posts. One prominent member, Hani al-Hassan, said the list would be chosen in consultation with Arafat. It was unclear whether Fatah would present Qureia with a pool of candidates from which he would fill 16 Cabinet posts, or whether he would simply accept a list of 16 names.

Raanan Gissin, a spokesman for Israeli Prime Minister Ariel Sharon (news - web sites), said the Palestinians face a choice between sticking with Arafat or establishing a Palestinian state. "The two won't go together. They won't have a state and Arafat — not when Arafat is in control of the process," Gissin said.

Last week, Israeli leaders decided in principle to "remove" Arafat, but did not say what action would be taken, or when. The Israeli decision, which came in response to two suicide bombings that killed 15 people last week, has boosted Arafat's flagging popularity and set off daily demonstrations in the West Bank and Gaza Strip.

The Palestinians were urging the Security Council to demand that Israel ensure Arafat's safety and not act to oust him. Council members held a meeting on the matter Monday in New York.

Israel's ambassador to the United Nations, Dan Gillerman, accused the Security Council of "hypocrisy" for considering the Palestinian resolution while not having convened to discuss Palestinian suicide bombings and shootings.

Governments around the world have condemned Israel's threats against Arafat and have urged both sides to move forward with obligations under the "road map" — a blueprint for ending the violence and establishing a Palestinian state by 2005.

On Monday, the Arab League condemned Israel's decision to "remove" Arafat and warned Israel against harming him.

The U.S. government has said Arafat should be sidelined but not sent into exile. Given the Israeli threats, EU foreign policy chief Javier Solana said "there is no possibility in the current atmosphere" to set up a Palestinian government.

At his West Bank compound in Ramallah, Arafat emerged from his office again Monday and flashed victory signs to about 200 Palestinian demonstrators who gathered — as they have since Israel announced its decision — to show their support.

Arafat pledged to seek peace and chanted with the crowd, "To Jerusalem, to Jerusalem." Both the Israelis and the Palestinians want the city as a capital.

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