A U.S. envoy ended a Mideast mission Monday without a formal truce agreement, while Israeli Prime Minister Ariel Sharon branded Yasser Arafat a "bitter enemy" over a large weapons shipment the Palestinian leader allegedly tried to smuggle into the West Bank and Gaza Strip.

Arafat's Palestinian Authority has denied ties to the multimillion-dollar shipment of 50 tons of rockets, anti-tank missiles and mortars, most of them made in Iran. The weapons were seized on a cargo ship that Israel commandeered last week in the Red Sea.

The dispute has overshadowed the four-day mission by U.S. envoy Anthony Zinni, who has been prodding both sides to carry out a U.S.-drafted truce agreement.

On Sunday, Zinni chaired a meeting of Israeli and Palestinian security officials, to discuss the next steps toward calming the situation. Zinni gave both sides some "homework" to be completed before his expected return Jan. 18, participants said. In Zinni's absence, security meetings are to continue, Palestinian officials said.

"It is clear that while serious challenges remain, there are real opportunities for progress," the U.S. Embassy in Tel Aviv said in a statement.

On Monday, the European Union's foreign policy chief, Javier Solana, held separate talks with Sharon and Palestinian Parliament Speaker Ahmed Qureia to keep the momentum toward a cease-fire going.

Under the truce deal, Israel is expected to lift restrictions on Palestinians, while the Palestinians are to clamp down on suspected Islamic militants who have carried out dozens of deadly attacks on Israeli civilians.

Both sides have taken steps in that direction.

On Sunday, about 200 Palestinian police swept into the West Bank refugee camp of Jenin on Sunday and arrested six members of the militant Islamic Jihad. The Palestinians have said they have rounded up dozens of suspects, but Israel has complained that many leading militants are still walking free.

Israel has lifted blockades of several West Bank towns and opened some roads in recent days. Israeli Foreign Ministry official Arye Mekel said Monday that Israel would continue easing restrictions, "unless there are very serious security problems."

However, Israel appeared to be sending conflicting messages to the Palestinian Authority. While Israeli security officials met with their Palestinian counterparts, and agreed to hold more talks in coming days, Sharon branded the Palestinian Authority a "major player in the network of international terrorism."

Calling Arafat a "bitter enemy" and a "liar," Sharon said the Palestinian leader was behind the weapons shipment. "When Arafat gave the instruction to purchase the firearms discovered on the ship, he made a strategic choice -- to bring about regional deterioration which would lead to war," Sharon said Sunday at a naval base in the Israeli Red Sea port of Eilat where weapons were being displayed.

In a statement Sunday, the Palestinian leadership said it "condemns this operation and condemns the Israeli attempt to accuse the Palestinian Authority of being involved in this."