Exuding confidence that he will return to power, former Prime Minister Benjamin Netanyahu said Monday that Israel must remove Yasser Arafat and destroy the Palestinian Authority -- perhaps via military assault -- before peace talks can resume.

In an interview with The Associated Press, Netanyahu said he has no qualms about challenging Ariel Sharon, a sitting prime minister from his own Likud Party, and that he was gratified by polls showing Israelis -- who sent him packing in a 1999 election -- now give him widespread support.

Netanyahu, 52, has been speaking throughout the United States and Israel, and has criticized Sharon for stopping short of what Netanyahu believes is the only way to end terror attacks against Israelis -- the removal of Arafat.

"The goal is to defeat the terror regime, to effectively bring it down," he said at his well-appointed office in a modern high-tech complex in Jerusalem. "And that goal is easily attainable."

Netanyahu said he wasn't suggesting Israel physically harm Arafat. But instead of restricting Arafat to his compound in the West Bank town of Ramallah as Sharon has done, the Palestinian leader should be allowed to leave -- but not to return.

"He keeps wanting to go abroad -- I think we should not hinder him from doing so," Netanyahu said. "I would very much like to see him have a happy retirement with his friends from Tripoli ... with his friends from Baghdad."

Israel also should eliminate the terrorist infrastructure that has been established in the West Bank and Gaza, which would be "a very simple thing to do, not very complicated and not very costly," Netanyahu said.

He was evasive about the exact steps he would take, but hinted strongly at a large-scale military operation: "Israel has not used a fraction of a fraction of the means that it has available, as you can imagine."

Netanyahu said deterrence would no longer work with the Palestinian leadership, because "at this point Arafat is already in 'Never-Never-Land."'

Netanyahu opposed the 1993 interim agreements with Arafat's PLO. As prime minister from 1996 to 1999, he put the brakes on the land-for-peace process and had mostly acrimonious relations with the Palestinians. Still, he did negotiate two interim peace deals and handed over most of the West Bank town of Hebron.

He also developed a reputation for adventurism that dogged him throughout his tenure and contributed to his landslide defeat. But in light of almost 17 months of fighting, Netanyahu's hard-line ideas are again in vogue and he clearly feels vindicated and combative.

The Palestinian Authority is "truly a corrupt, backward, primitive regime that oppresses the Palestinians, that kneecaps anyone who dares to disagree with Arafat ... that controls the media, sucks all the money, leaves the Palestinians in an impoverished state," he maintained.

He said that as prime minister he would only resume peace talks once terrorism was wiped out, and then offer much less than his successor Ehud Barak did a year ago -- a Palestinian state in almost all of the West Bank and Gaza with a foothold in east Jerusalem.

That this "wild" offer was rejected by Arafat proves the Palestinian leader's true intention remains to destroy the Jewish state, Netanyahu said.

Sharon has said a Palestinian state is inevitable eventually -- but Netanyahu disagreed. A state, Netanyahu said, would mean Palestinian control of borders and airspace -- with the potential of bringing in weapons and making military pacts with Israel's enemies -- and that this Israel could not allow.

At the same time Netanyahu said he strongly opposed expelling masses of Palestinians, once a fringe idea that is drawing increasing support.

On the wall of Netanyahu's conference room hung a large map of Israel, the West Bank and Gaza, and an etching of the Second Jewish Temple in Jerusalem. Behind him was a floor plan of the terminal at Uganda's Entebbe Airport -- where Netanyahu's brother Yonathan was killed while leading a 1976 rescue operation of Israeli hostages; Netanyahu's acceptance in the West as a counterterrorism expert dates to that raid.

Netanyahu stunned the world when he edged out Nobel Peace laureate Shimon Peres in a 1996 election. His years in power were marked by bitter divisions within the public and between Netanyahu and Israel's security, academic and business elites.

However, polls show that he would stand a good chance of being elected today.

In a survey of right-wing voters published in the Maariv newspaper last weekend, 48 percent said they preferred Netanyahu to lead Likud into the next election; in the survey of 509 people, which had a 4.5 percent error margin, only 33 percent said they backed Sharon.

All current polls show the right wing winning an election today. The next general election must be held by November 2003, and many expect it sooner.

"I'm very gratified by the fact that both in the general public and in my own party there's widespread support for me," said the stocky, gray-haired Netanyahu, adding that he saw nothing wrong with challenging Sharon because "we do not have a dynastic ruler."

Looking back on his tumultuous years in power, Netanyahu acknowledged making "quite a few mistakes" but insisted these were primarily in the realm of management.

"The policies were sound, and many Israelis have had the chance to think about that again."