By Kathryn Westcott BBC News Online

On Thursday, about 400 Palestinian and dozens of other Arab detainees will be traded for a kidnapped Israeli businessman and the bodies of three captured Israeli soldiers.

Obeid (left) and Durani were viewed as 'bargaining chips'

The deal is the result of three years of complicated negotiations between the Israeli government and the Lebanese Shia movement Hezbollah, and mediated by Germany's intelligence services.

It was reportedly clinched with the assistance of Iran, which, along with Syria, backs Hezbollah. Israel, however, says it was not involved in dealings with Iran. Those were said to have been handled through the co-ordinator of Germany's intelligence agency Ernst Uhrlau.

Most of those being exchanged are are Palestinian prisoners, making it the largest such group to be released since Prime Minister Ariel Sharon took office.

The non-Palestinians, who are being flown to Germany, include Lebanese, Syrians, Moroccans, Sudanese and a Libyan detainee.

Key hostages

The detainees will be traded for Israeli businessman Elhanan Tennenbaum, captured by Hezbollah in October 2000, as well as the remains of Israeli soldiers Adi Avitan, Beni Avraham and Umar Suwayd.

PREVIOUS SWAPS 1998: Israel hands over the corpses of 40 Hezbollah guerrillas and 60 prisoners in exchange for remains of two Israeli soldiers 1996: 123 Hezbollah guerrillas and 46 Lebanese hostages swapped for remains of two Israeli soldiers 1985: Israel frees more than 1,000 Palestinian prisoners in exchange for three Israeli soldiers

Two of the Lebanese are Hezbollah leaders Sheikh Abdel Karim Obeid and Mustafa Dirani. The men were important hostages for Israel and have long been described as bargaining chips for information concerning the whereabouts of Ron Arad, the Israeli airman captured in Lebanon in 1986. Sheikh Obeid was seized in Lebanon in 1989 and Mr Dirani in 1994.

The fact they are being released now has raised hopes that positive information about the missing airman will be forthcoming soon.

The situation of Mr Arad has been a long-running drama in Israel. Officials believe he was captured by Iranian-backed Lebanese guerrillas and then taken to Iran, although Tehran has denied this.

German role

Germany has long played a leading part in discreet diplomatic moves concerning Middle East prisoners and hostages. Back as 1995, it was reported that a secret summit of Israeli and Iranian diplomats took place in Bonn, with a key German intelligence service official mediating on an exchange of information about Ron Arad.

A year later, the former head of Germany's powerful intelligence agency, BND, Bernd Schmidbauer, successfully arranged a body and prisoner swap between Hezbollah and Israel.

This week, Germany offered to free three prisoners, one Lebanese and two Iranians, in exchange for information on Mr Arad. Mr Uhrlau has also said that information about the airman could surface in the next two to three months.

This has led to speculation that there is likely to be a second phase of negotiations, in which Israel will receive concrete information about Mr Arad.

In return Israel is expected to be required to hand over a Lebanese prisoner not included in this week's release. The man, Samir Qantar, was sentenced to life in prison for an attack in 1979 that killed an Israeli civilian and his four-year-old daughter.

(Left to right) Sgt Umar Suwayd, Sgt Adi Avitan and First Sgt Beni Avraham

This phase could also see Israel try to provide information on five Iranian diplomats who disappeared in 1982 as the Israeli army was poised to invade Beirut.

Udo Steinbach, director of the German Institute for Middle East studies, says Germany holds a unique position in Middle East diplomacy.

Engagement

"It has good relations with the direct players, Israel, the Palestinians, the Lebanese and the indirect players, such as Iran," he told BBC News Online.

"Against the backdrop of the Nazi period, we have always had a special relationship with Israel. We have never doubted its right to exist and has engaged with the government as no other European country has. Despite this special relationship, Arab countries also believe Germany is a friend. Historically, it has had no colonial interests."

In terms of Iran, Germany has also taken a leadership role with regards to a policy of dialogue with the Islamic Republic.

"Since the 1980s, Germany has insisted on engagement with Iran. In 1987, German foreign minister Hans-Dietrich Genscher was the one of the first international politicians to say publicly that Iraq had started the Iran-Iraq war," Mr Steinbach said.

"This contributed to Tehran's sense of trust in Germany. It is Iran that has insisted that Germany be involved in Middle East prisoner negotiations."