Jerusalem ? Israel decided Sunday to draw tanks back from Yasser Arafat’s compound but continue restricting him to the West Bank city of Ramallah  a halfway measure that led angry Palestinians to cancel planned cease-fire talks with Israeli security officials.

That anger increased when Israeli troops fired at Palestinian parliament speaker Ahmed Qureia’s car as it approached a roadblock between Ramallah and Jerusalem, a Palestinian source close to Qureia said.

Qureia, who was on his way to his home on the outskirts of Jerusalem after a meeting with Arafat in Ramallah, was uninjured, but seven bullets hit his BMW car, the source said, adding that he had coordinated his journey in advance with the Israelis.

An army statement said Qureia’s vehicle approached the checkpoint at speed and the soldiers, fearing it was about to hit them, fired warning shots in the air. Israeli Foreign Minister Shimon Peres called Qureia to express regret for the incident and pledged a thorough investigation, ministry spokeswoman Yaffa Ben-Ari said.

While the Palestinians had hoped that last week’s arrests of three top suspects in the October killing of Israeli Cabinet minister Rehavam Zeevi might end Arafat’s almost three-month confinement, Israel on Sunday demanded again that they be handed over and that other suspects be arrested as well.

But an Israeli official, speaking on condition of anonymity, suggested Sunday’s was only a preliminary decision, and also that Israel expected the cease-fire talks to be delayed by only one day and held today. The Defense Ministry, meanwhile, said the army would exercise restraint in hopes of enabling a truce.

Arafat has been restricted to Ramallah since early December, shortly after a wave of suicide bombings in Israel, and tanks moved steadily closer to his compound, eventually surrounding it.

Israel’s Security Cabinet, made up of senior ministers, said in a statement Sunday that such pressure caused last week’s arrest in the West Bank city of Nablus of the three members of the Popular Front for the Liberation of Palestine, which claimed responsibility for Zeevi’s killing in October, retribution for Israel’s killing of the PFLP leader several weeks earlier.