JERUSALEM (AP) _ Israel rejected demands Wednesday from visiting U.N. Secretary-General Kofi Annan that it immediately lift its sea and air blockade of Lebanon and withdraw its forces once 5,000 international troops are deployed.
Prime Minister Ehud Olmert indicated Israel would only lift the blockade and withdraw its soldiers from Lebanon after the full implementation of a U.N.-brokered cease-fire.
Annan and Israeli officials said they hoped that truce would lead to a full peace accord between Israel and Lebanon.
However, Lebanese Prime Minister Fuad Saniora said in Beirut that Lebanon ``will be the last Arab country that could sign a peace agreement with Israel.''
And a Hezbollah minister in the Lebanese Cabinet said that the guerrilla group will not unconditionally release two Israeli soldiers whose capture set off the conflict, saying they would only be freed in a prisoner exchange.
``There will be no unconditional release. This is not possible,'' Minister of Energy and Hydraulic Resources Mohammed Fneish said in Beirut. ``There should be an exchange through indirect negotiations. This is the principle to which Hezbollah and the resistance are adhering.''
Under the U.N.-brokered truce that ended 34 days of fighting between Israel and Lebanon's Hezbollah guerrillas, 15,000 Lebanese soldiers and up to 15,000 international troops are to be deployed and enforce an arms embargo on Hezbollah. The 2,500 U.N. observers currently monitoring the Israel-Lebanon border have a very limited mandate.
Israel has said it would not lift its blockade unless international forces, along with Lebanese troops, are deployed on the Israel-Lebanon border and Lebanon's frontier with Syria to prevent the flow of weapons to Hezbollah.
Syria has said it would consider the presence of international troops on its border a hostile act and Lebanon has said it would deploy its own forces there, but bar international troops. Annan has backed Lebanon in the dispute.
The U.N. chief said that Lebanese authorities assured him they were serious about enforcing the arms embargo on Hezbollah, and that Israel's security concerns could be addressed in this way.
``We need to be flexible, because I don't think there's ever only one way of solving a problem. We shouldn't insist that the only way to do it is by deploying international forces,'' he said.
The lifting of the blockade is necessary for Lebanon's economy to recover from the war and for Lebanon's government to strengthen.
``I do believe the blockade should be lifted,'' Annan said at a news conference with Olmert.
Asked whether Israel would lift the blockade, Olmert was evasive, saying only that Israel wanted a full implementation of the cease-fire.
Annan said he was working to increase the size of the international force in Lebanon ``as rapidly as possible'' and to double the current number to 5,000 quickly.
``We hope that as we do that, the Israeli withdrawal (from Lebanon) will continue and by the time we are at that level, Israel will have fully withdrawn,'' Annan said.
Olmert said Israel hoped to pull out from Lebanon ``as soon as possible,'' but he also did not to embrace Annan's proposal to pull out all Israeli troops once 5,000 international peacekeepers were in place.
``It isn't on one day the 5,000 come in and on one day all the Israelis depart,'' Israeli government spokeswoman Miri Eisin explained later. ``It's something in between, and it's something that has to be ironed out, and it is being ironed out.''
Olmert, Annan and Israeli Foreign Minister Tzipi Livni nonetheless all expressed hope the cease-fire deal would evolve into a full-fledged peace accord.
The deal could be ``a cornerstone to build a new reality between Israel and Lebanon,'' Olmert said in his news conference with Annan.
Israel has long sought a peace deal with Lebanon, but Lebanon has hesitated reaching a separate agreement with Israel as long as Israel's conflicts with the Palestinians and Syria are not resolved.
Olmert said that the cease-fire could be ``a cornerstone to build a new reality between Israel and Lebanon,'' he said.
``I would like to emphasize that Israel has no conflict with the people or government of Lebanon,'' he said. ``I would certainly hope that conditions would change rapidly in order to allow direct contact between the government of Israel and the government of Lebanon in order to hopefully soon reach an agreement between the two countries.''
But Saniora reiterated his country's position.
``Let it be clear, we are not seeking any agreement until there is just and comprehensive peace based on the Arab initiative,'' the Lebanese prime minister said.
The Arab initiative calls for an Israeli withdrawal from all territories captured in the 1967 Mideast war and the establishment of a Palestinian state with east Jerusalem as its capital _ demands Israel rejects.
In Damascus, Syria, firebrand Venezuelan President Hugo Chavez also demanded that Israel withdraw what he called its ``aggressor forces'' from Lebanon and lift the blockade. Chavez, who met with President Bashar Assad, has compared Israel's airstrikes in Lebanon to the Holocaust, and earlier this month withdrew his country's top diplomat from Israel to protest those attacks.
Both Annan and Olmert demanded the unconditional release of two Israeli soldiers captured by Hezbollah on July 12, the incident that triggered the war. A third Israeli soldier was seized by Palestinian Hamas militants in late June and is being held in the Gaza Strip. His capture touched off a two-month-old Israeli military incursion into Gaza.
Annan said he would do all he could to win the release of the three soldiers. He said that during his visit to Lebanon, before coming to Israel, he discussed the soldiers' fate. ``I did not get the impression that they are not alive. I believe they are alive,'' he said.
In a meeting later with Palestinian President Mahmoud Abbas, Annan said Israel also must lift its closure of the Gaza Strip and open crossing points there. He called for an end to the bloodshed that has led to the deaths of more than 200 Palestinians since the end of June.
Israel is the second stop on Annan's 11-day Mideast tour intended to shore up the truce.
An international donors conference begins Thursday in Sweden, with organizers aiming to raise $500 million to help Lebanon. The European Union said it would pledge $54 million for early reconstruction projects.