The current stage of the Israeli campaign against Palestinian militants is over, Israeli Prime Minister Ariel Sharon said Sunday after Israel scaled back its West Bank offensive and international rescue teams sifted through rubble at the site of the worst fighting in the three-week conflict.

"I believe we have achieved very notable accomplishments,'' Sharon told Israel Radio. "However, the war against terrorism continues and will continue. But now it will employ a different method."

It was a significant cooling-down of Israel's military offensive and possibly of Mideast tensions, with Israeli tanks pulling out of the West Bank city of Nablus and most of Ramallah early Sunday.

Sharon did not give details, but has spoken previously about creating a buffer zone that would make it more difficult for Palestinians in the West Bank to reach Israeli cities and towns. Israel already has an extensive network of checkpoints that keeps out most Palestinians.

Secretary of State Colin Powell, who returned Thursday from 10 days in the Middle East, said he expects to return to the region soon and welcomed the pullouts.

"I'm pleased that this withdrawal seems to be well under way," he said. 

But Israeli forces continued to lay siege to Yasser Arafat's battered headquarters in Ramallah, where the Palestinian leader is confined, and they remained in Bethlehem, where they still surrounded alleged militants holed up in the Church of the Nativity. The army said its forces also remained in several villages near Jenin, scene of the fiercest violence of the military campaign.

The withdrawal from Nablus, largely completed before dawn Sunday, was in line with the timetable Prime Minister Ariel Sharon gave President Bush last week.

The army said that troops would remain in the outskirts of the cities, and suggested that they might return again if Palestinian militants again attacked Israelis.

Palestinians returning to their homes in Nablus were less than pleased with the Israelis.

In Ramallah, tanks and armored personnel carriers were seen heading out of some neighborhoods late Saturday. They left buildings and roads heavily damaged, street lighting knocked out, stores in ruins and cars crushed on the roadside.

Tayseer Al-Juba, 30, exploring the devastated scene, said he felt lucky "to be getting out of this terrible situation alive."

"Now we can make sure our relatives and our beloved are fine," he said. "God have mercy on the martyrs and help their families be patient."

Asked if he thought a peace with Israel was now possible, the embittered library owner said it was unlikely.

"We have rivers of blood running between us," he said. 

Outside Ramallah, the Israeli military arrested a leader of the Tanzim militia and 12 other Palestinians after a brief gunbattle in the Qalandiya refugee camp. The camp falls within an area Israel was not required to leave.

Army authorities said Nasser Abu Hunaid, 31, was responsible for training fighters of Tanzim, the military wing of Arafat's Fatah movement, and was the right-hand man for Marwan Barghouti, the Tanzim leader who was arrested April 16. Hunaid was involved in several shootings and bombings against Israelis, the army said.

As for Bethlehem, Israel has said it won't leave that city completely until a standoff that began April 2 between soldiers and armed Palestinians hiding in the Church of the Nativity ends. Israel said withdrawing forces from other parts of the biblical city would expose the troops surrounding the church, where some 200 Palestinian gunmen are holed up.

By not moving troops from Bethlehem, Israel is not abiding by the timetable promised Washington.

Inside the church, a Franciscan priest said food had run out, electricity was intermittent and there was no running water. More than 250 people, including clerics, are in the compound.

"There is no food left in the church now for the Palestinians or the monks and nuns," said the Rev. Ibrahim Faltas.

Palestinians inside the church, one of Christianity's holiest sites, said Israeli soldiers propped ladders against the back wall of the compound Saturday and threw in plastic bottles containing leaflets urging surrender.

"Think well and decide about your life," the leaflets said, according to men inside the church. "About 20 days after you've stormed the church, we know that you are without food, and you must surrender."

The leaflets, written in Arabic and signed the leadership of the Israeli Defense Forces, said anyone unrelated to deadly attacks on Israel would be freed, "but the murderers who are involved in killing civilians will be judged by the law."

Israeli forces pulled to the outskirts of the Jenin refugee camp on Friday. The camp death toll isn't clear, with 43 bodies thus far recovered. Palestinians claim hundreds died and remain beneath the rubble. Israel says it worked hard to avoid civilian casualties and estimates dozens, mostly fighters, were killed.

Although fighting ended more than a week ago in the camp, 11 people have been wounded in the past two days by stepping on unexploded ordnance or stumbling into booby traps Palestinian gunmen intended for Israeli troops, the Jenin hospital said.

U.S. Mideast envoy William Burns, who visited the camp Saturday, said it was a "terrible human tragedy" and called for urgent humanitarian assistance

"What happened in Jenin camp has caused enormous suffering of innocent Palestinian civilians," he said.

Since beginning its West Bank military offensive March 29, Israel has captured or killed at least 15 of its most-wanted Palestinians, according to AP findings. More than 4,000 Palestinians have been detained and 1,800 of them remain in custody, Israel Radio reported Sunday.

The Associated Press contributed to this report.