Two Palestinians killed in Hebron fighting

Israeli soldiers killed two Palestinians in gun battles in the flashpoint West Bank city of Hebron on Sunday, creating a violent backdrop for efforts to arrange talks aimed at ending nearly a year of bloodshed.

In South Africa, Middle East politics dominated a U.N. conference on racism where Israel weighed on Sunday pulling out its delegation unless a compromise is reached on wording condemning Israeli policies against Palestinians as racist.

Both the violence on the ground and the diplomatic offensive overshadowed efforts to bring together Israeli Foreign Minister Shimon Peres and Palestinian President Yasser Arafat to try and end bloodshed in which more than 700 people have died.

An Israeli political source said Prime Minister Ariel Sharon and Peres would decide later on Sunday whether to bring back its 12-member team at the conference in Durban, in coordination with the United States.

The U.S. and Israel sent low-level delegations to the conference to protest wording in a draft resolution accusing Israel of "apartheid" and "crimes against humanity."

U.S. Congressman Tom Lantos said on Sunday Norway had proposed to the conference a compromise resolution acceptable to Washington, without elaborating.

A parallel global meeting of non-governmental organisations (NGOs) branded Israel a "racist apartheid" state on Sunday for its treatment of Palestinians in the occupied territories. Peres accused the NGOs of promoting hatred and anti-Semitism.

Intensifying the diplomatic peace effort, European Union foreign policy chief Javier Solana was due in the region to help lay the groundwork for a Peres-Arafat meeting, which might be held in Italy at the end of the week.

"We don't want to exaggerate or heighten expectations, on the other hand we don't want to produce another disappointment so we are preparing it as carefully as possible," Peres told reporters during a visit to a Tel Aviv school.

"We are looking for the right time and the right venue".

Previous rounds of talks between Peres and Arafat have done little to curb the violence amid a Palestinian revolt that began several months after peace talks stalled.