Senior military and intelligence sources told reporters 36 CD-Roms with instructions for making bombs and on how to carry out other guerrilla techniques were found on the ship, as well as rocket fuses and remote detonator devices.

The Abu Hassan, a 50-foot fishing boat, was intercepted in international waters and towed back to the port of Haifa on Wednesday, the sources said.

Mohammad Salem Abu Amar, an alleged member of the Lebanon-based fundamentalist Shiite militia Hezbollah was arrested aboard the ship with the seven crew members, the sources added.

"As part of the Israeli defence forces' ongoing war on terror emanating from the seas, special navy forces conducted a search on a vessel moving suspiciously in the waters west of Haifa," an army statement said.

Military sources said it was the first time they had evidence Hezbollah was sending its members to the territories rather than having Palestinian militants go to Lebanon for training.

"This is a change in strategy, they are trying to take people from Lebanon and penetrate them into Palestinian Authority territory. It's the first time we have caught a Hezbollah member coming in," a senior naval officer told reporters.

The materiel found on the boat appeared to be negligible in quantity and the military sources stressed that "the whole operation was aimed at bringing Abu Amar" to the Gaza Strip.

The man's nationality was not immediately known but the officials said he was a resident of Lebanon and planned to enter the Gaza Strip from Egypt through smuggling tunnels dug under the Israeli-controlled border.

The officials also said that among the seven fishermen, one of them had links with senior officials from the Palestinian naval police.

Hezbollah issued a terse statement in Beirut saying it had no knowledge of the ship and denied one of its members had been arrested on board.

"We have no knowledge of the story being circulated by Israeli sources and guarantee that no member of Hezbollah has been arrested in the past several days," it said.

Israeli Foreign Minister Silvan Shalom accused Palestinian leader Yasser Arafat of being involved in the smuggling attempt.

"This is a new attempt to smuggle weapons and instructions for terror attacks, and there is no doubt Arafat was involved as he was in previous cases," Shalom told Israeli public television.

"After the Karine A affair, he became irrelevant for the Americans. I hope that after today's seizure he will become irrelevant for the Europeans," he added.

Top Arafat adviser Nabil Abu Rudeina lashed out at Israel over the accusations, telling AFP they "were part of Israel's campaign against Arafat and aimed at covering up the fact that Israel is rejecting the roadmap," referring to an internationally backed peace plan.

On January 3, 2002, Israel intercepted in the Red Sea a 50-tonne shipment of Iranian weapons aboard the Karine A destined for the Palestinians.

Arafat admitted responsibility for the smuggling attempt, and the affair seriously eroded his standing with Washington.

Arafat's financier, who was accused of helping plan the smuggling, was imprisoned in the West Bank town of Jericho under joint US and British supervision in a deal to lift an Israeli siege of the Palestinian leader's base in the West Bank city of Ramallah.

On May 7, 2001, the Israeli navy also intercepted the Santorini near Rosh Hanikra along the Israeli-Lebanese border. It was carrying arms to Palestinians in the Gaza Strip.

Israel said that shipment was sent by Ahmad Jibril's Damascus-based PLO offshoot, the Popular Front for the Liberation of Palestine General Command.

The ship, which came from Lebanon, was packed with 40 tonnes of anti-aircraft missiles, Katyusha rockets, SA-7 missiles, anti-tank grenades, mortar shells and automatic weapons.

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