After weeks of impasse, Dr Rice forced a compromise, by what observers described as “hardball” diplomacy, in her hotel suite overlooking the Old City in Jerusalem, where both sides were repeatedly pressed to amend drafts on a laptop until they reached consent.

The agreement was a significant achievement for Dr Rice, who delayed her departure from the Middle East and had staked considerable personal credibility on it. Smiling after the agreement was completed after dawn, she revealed that it had been hard going and she had managed only two hours’ sleep. “Everybody recognises that if the Palestinian people can move more freely, if they can export agricultural products, if they can work, Gaza is going to be a much better place, and it is going to be a place where democracy can take hold,” she said.

The deal provides for Rafah’s passenger crossing into Egypt — largely closed by Israel since September — to open by November 25, overseen by EU monitors. It will be the first time that Palestinians have controlled their borders. To alleviate Israel’s security concerns, television cameras will feed live pictures to a control centre staffed jointly by Israeli, Palestinian and EU monitors.

Israel is also to increase the number of trucks allowed through Karni, the only goods crossing out of Gaza, to 150 a day by the end of 2005 and 400 by the end of 2006. The movement of Palestinians from the West Bank to Gaza — at present none is allowed — will also be eased, with Israeli- escorted passenger bus convoys to begin on December 15 and goods trucks a month later.

The deal dilutes Israel’s demand for a veto over who enters and leaves Gaza and its insistence that the Palestinians use a new Israeli-built terminal at nearby Kerem Shalom for passengers and goods. Instead, passengers will use the Egyptian/Palestinian gate at Rafah, a former Israeli terminal where Palestinian workers have been frantically painting over the blue and white Israeli livery and installing X-ray machines shifted from the nearby Gaza international airport, which remains closed.

There was pressure on the parties to reach a deal because in two months Palestinian elections are due. Hamas, the Islamist organisation, will challenge the secular Fatah faction of President Mahmoud Abbas. Palestinian officials said that if President Abbas’s strategy of negotiating with Israel was seen to fail, it would drive Gaza Palestinians into the arms of extremists such as Hamas.

Mohammed Dahlan, the Palestinian Minister of Civil Affairs, last night hailed the agreement as “an important step”. Mark Regev, an Israeli Foreign Ministry spokesman, said: “We got what we wanted: real-time intelligence coming out of Gaza and the Palestinians don’t feel that there is a camera there with an Israeli eye on the end. The camera will be viewed simultaneously by all the parties involved.”

TIMETABLE

Immediate: Gaza seaport construction can begin. Israel undertakes not to interfere

November 25 Target date to reopen the Rafah passenger crossing between Gaza and Egypt. “As soon as it is ready to operate at an international standard” is the rider

December 15 Israeli-escorted passenger bus convoys start between Gaza and the West Bank

December 31 Israel to allow 150 trucks from Gaza daily and 400 by the end of 2006. Winter harvest to be allowed through on an “urgent” basis

December 31 Work to be completed on plan to minimise movement restrictions on West Bank Palestinians “consistent with Israeli security needs”

January 15 Goods convoys from Gaza to the West Bank to begin

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