Massive explosion and fire at Bethlehem church

An explosion lights up the area around the Church of the Nativity early Thursday.

BETHLEHEM, West Bank (CNN) -- A massive explosion rocked Manger Square and a fire broke out near the Church of the Nativity after a firefight between Israeli troops and Palestinians inside.

The church has been the site of a standoff between Israeli forces ringing the church and Palestinians holed up inside. Israeli forces said they were fired upon by Palestinians inside the church and responded with gunfire.

Palestinian negotiator Saeb Erakat said he had spoken with Palestinians inside the church, who said the fighting and fire broke out when Israeli forces tried to storm the church.

Dore Gold, a top adviser to Israeli Prime Minister Ariel Sharon, denied Erakat's claim.

"The fire broke out as a result of an intentional act of arson by Tanzim fighters, the terrorists who have been in the Church of the Nativity," Gold told CNN. "Israel respects the holy sites of Christendom and has demonstrated that respect all along in this crisis."

The church is built on the site where tradition says Jesus was born.

Alon Pinkas, Israel's consul general in New York, said on CNN's Crossfire Wednesday night that "in fact we have not changed our policy of not initiating, I repeat, not initiating any military activity, any direct or indirect military activity, any direct or indirect military operation near or in the immediate vicinity of the church for fear that one stone will be scathed in that holy compound."

An Israeli Army spokesman, Lt. Col. Olivier Rafowicz, said the Palestinians inside the church complex ignited fires in three places. He said Israel had proposed that Palestinian firemen be sent to put out the blaze, but that Palestinians inside refused, and were apparently then able to extinguish the blaze themselves.

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Rafowicz said Palestinians in the church then opened fire on the nearby "peace center," where negotiations to end the standoff have been under way for several days. Israeli forces then fired into the air, but not at the church, Rafowicz said.

The flames were extinguished fairly quickly and church bells rang out. The gunfire virtually ceased around the same time, about an hour-and-a-half after it began.

There were no immediate reports of casualties on either side.

Negotiations, protests and shooting

Negotiations have been under way for several days to end a standoff at the church.

Wednesday morning, a group of women marched into Manger Square near the church to protest the standoff which began April 3 after Israeli troops and tanks rolled into Bethlehem and the Palestinians took refuge in the church.

Earlier in the day, an Israel Defense Forces sniper shot and critically wounded a Palestinian gunman near the Church of the Nativity, the IDF said in a statement.

"Our troops spotted a gunman in the courtyard of the Latin compound and fired in his direction," the IDF said. "He suffered a shoulder wound from bullet fragments. He and another man ... then surrendered."

Rafowicz said between 180 and 200 Palestinians were still inside the Church of the Nativity, including armed men and up to 40 "senior terrorists" on Israel's most-wanted list.

On Tuesday, 26 Palestinians came out of the church. Rafowicz said, to his knowledge, none was wanted by Israel and, if that proved to be the case, they would be freed.

Other actions

Elsewhere in the West Bank, cheering crowds greeted Palestinian Authority Chairman Yasser Arafat early Thursday at his compound after Israeli tanks had withdrawn, ending a siege which had lasted since March 29.

The withdrawal followed the transfer Wednesday night of six Palestinians wanted by Israel were transferred to prison in Jericho under the terms of an internationally-brokered agreement to end the standoff, Arafat's aides said. (Full Story)

The United Nations announced Wednesday evening that it is disbanding its investigative team formed to look into the Israeli military operation in the West Bank town of Jenin.

U.N. Secretary-General Kofi Annan made that decision one day after the Israeli Cabinet decided not to cooperate with the probe because of the team's makeup and mandate. ( Full Story)