Israel's defense minister said Tuesday the government had no intention of releasing a jailed Palestinian uprising leader, but that progress was being made toward a prisoner swap with Lebanese guerrillas (search).

Freeing Marwan Barghouti (search), considered a potential successor to Palestinian leader Yasser Arafat (search), could help get the stalled U.S.-backed "road map (search)" peace plan back on track.

Early Wednesday, a 15-year-old Palestinian boy was killed and 14 other Palestinians wounded when militants clashed with Israeli forces clashed in the southern Gaza Strip, Palestinian hospital officials and witnesses said.

Witnesses said the clash occurred when 20 Israeli tanks and bulldozers entered the Rafah refugee camp adjacent to the Egyptian border shortly after midnight. Hospital officials identified the dead boy as Mohammed Hamdan, a resident of the camp.

Israeli military officials said the clash took place during routine searches for tunnels used to smuggle weapons from Egypt. They said Israeli forces had opened fire only in response to heavy fire from Palestinians. There were no Israeli casualties.

A Palestinian source close to the talks said Monday the emerging deal would include Barghouti, who is on trial in Israel for his alleged role in terror attacks that killed 26 Israelis. The idea of his release would trigger tough resistance from hard-liners in the Israeli government.

Defense Minister Shaul Mofaz said Barghouti was not likely to be part of a deal to exchange Arab prisoners, including Palestinians, for Israeli businessman Elhanan Tannenbaum and the bodies of three Israeli soldiers kidnapped by Hezbollah in 2000.

"We have no intention of releasing Barghouti," Mofaz said, adding that the numbers and names being mentioned are not correct. Palestinian and Hezbollah officials say Israel would free about 400 Arab prisoners, including at least 200 Palestinians.

Mofaz, the most senior Israeli official to comment on the emerging swap, said "it appears ... that there is progress" in the talks.

Among those to be freed under the emerging deal were Lebanese guerrilla leaders Mustafa Dirani and Sheik Abdel Karim Obeid, who were kidnapped by Israel more than a decade ago to be used as bargaining chips in a swap for Israeli airman Ron Arad, captured in 1986. There has been no sign of him for 15 years.

Also Tuesday, the Haaretz daily reported the Israeli government spends at least $560 million a year on subsidies, infrastructure, education and other items for 220,000 Jewish settlers in the West Bank and Gaza. The figure does not include military expenditures in those areas.

Successive Israeli governments have refused to disclose how much goes to the settlements. Haaretz said it compiled the figure after three months of research.

Since capturing the West Bank and Gaza Strip in 1967, Israel has spent at least $10.1 billion on settlements, Haaretz said.

Israel's Central Bureau of Statistics said in its annual report Tuesday that the population in the settlements rose by 5.7 percent this year, to 220,000, more than double the growth rate in any area of Israel.

Settlement growth is a key sticking point in Israeli-Palestinian talks. The "road map" plan for Palestinian statehood by 2005 requires Israel to halt all construction in the settlements, but contacts over the plan have been stalled by new outbreaks of violence.

The possibility of a prisoner exchange including prominent Palestinian militants might rekindle efforts to move forward with the plan.

The German-brokered talks between Israel and Hezbollah on a prisoner swap have been going on for months. An apparent breakthrough came when Israel dropped its objection to the release of Palestinians.

The Israeli representative in the negotiations, senior Defense Ministry official Ilan Biran, was in Germany this week for what Israeli media described as the decisive round of talks. An Israeli military source, speaking on condition of anonymity, confirmed that negotiations had reached "an advanced stage."

Two weeks ago, a German mediator visited Dirani and Obeid in prison in Israel, according to their lawyer, Zvi Rish. The mediator told the two that "the utmost efforts are being made to complete the deal," but that difficulties remain, Rish told Associated Press Television News on Tuesday. The mediator took with him letters by Obeid and Dirani with the promise to forward them to their families, Rish said.

The Palestinian source said any deal would have to be approved by Israel's 11-member security Cabinet, dominated by hard-liners.

Hawkish Israeli Cabinet member Uzi Landau said Israel faced a difficult dilemma.

"There is no one in Israel, I think, who doesn't want to see all our boys come home," Landau said, adding that Israel must not be seen as rewarding kidnappers.

Barghouti's lawyer, Khader Shkirat, said Barghouti tops Hezbollah's list of prisoners it wants released. Barghouti, captured by Israel last year, is the West Bank leader of Arafat's Fatah movement and is considered a possible successor.

Israel's minister of internal security, Tzachi Hanegbi, said it was unlikely Barghouti would be freed. "I don't think there is anyone in the Israeli government who would think of halting the legal process," Hanegbi told Army Radio.

Freeing Barghouti could be easier legally than releasing convicted prisoners, said Menachem Hofnung, an expert on politics and law at the Hebrew University in Jerusalem.

"Obviously they can find a way to do it and easily," he said. "According to Israeli law ... the attorney general can intervene during a trial and put an end to it." After a conviction, Israel's president would have to give him a pardon.

Hezbollah fought Israeli troops in the 1980s and 1990s in south Lebanon. Since Israel's withdrawal from Lebanon in 2000, Hezbollah has occasionally shelled Israel and attacked Israeli troops because of a remaining border dispute.

The group is trying to free Palestinians who might not win release in negotiations between Israel and the Palestinian Authority, including prisoners with life sentences and those convicted of killing Israelis, a Palestinian source close to the talks said.

Israel holds about 7,700 Palestinians, most for alleged involvement in anti-Israeli violence in the last three years.