Israeli fatality identified as Saed Fashafshe, 36, an Israeli-Arab Defense Ministry contractor from Haifa • Two, possibly three Palestinian terrorists killed in ensuing gun battle • Barak: disturbing deterioration in Egyptian control of Sinai • IDF kills two more Palestinian terrorists in northern Gaza.

An Israeli civilian was killed and another wounded Monday morning when a terrorist cell from Sinai infiltrated southern Israel in the area of Kadesh Barnea and opened fire on the Israelis´ vehicles. Two of the Palestinian infiltrators were killed in the ensuing gun battle with Israeli troops in the area, while the third terrorist was either killed or escaped back into Sinai. Later on Monday, the Israeli air force killed two Palestinians traveling on a motorbike in the northern Gaza Strip. The Israel Defense Forces spokesperson said the two Palestinians were part of a terrorist sniper cell from Beit Hanoun and were not connected to the earlier attack along the border. Palestinian sources said the men were members of the Islamic Jihad military wing.

The Israeli fatality in the infiltration attack was identified as Saed Fashafshe, 36, an Israeli-Arab Defense Ministry contractor from Haifa and father of four. Although a civilian, Fashatshe will be recognized as a victim of enemy action and his family will be granted all the benefits accorded as such.

The attack, on Route 10 some 30 km south of the Gaza Strip, began at around 6 a.m. when a three-man cell infiltrated Israel through an incomplete section of the fence. Fashatshe was on his way to work constructing the fence along the Egyptian border when his vehicle was hit by the anti-tank rocket. The terrorists then also opened fire with machine guns and detonated a roadside bomb by remote control.

Fashafshe suffered wounds to the head and died at the scene. The IDF said there was no prior intelligence regarding a possible attack against fence construction workers in the area.

IDF forces from the Golani Brigade 13th Battalion patrolling the area engaged the terrorists within minutes of the attack. The army confirmed that two terrorists were killed in the initial firefight and that they were heavily armed with explosives, grenades and light weapons. Later Monday morning, the IDF said that two terrorists were killed when the explosives one of the terrorists was wearing on his body blew up in the firefight with the IDF troops. Soldiers could not immediately tell if there were two or three bodies of the terrorists at the scene because their body parts were strewn across a wide area, but the army later ruled out that a third terrorist was inside Israeli territory, saying that he may have escaped back into Egyptian territory. Earlier it was feared the terrorists would lay low until the IDF left the area and would then try to infiltrate an Israeli community.

The incident underscores the Egyptian government´s increasing loss of control over the Sinai, where political turmoil, weak policing and difficult terrain have encouraged Islamic terrorist activity. Israel had been bracing for possible attacks from the area after rockets believed fired from Sinai struck southern Israel over the weekend. Defense Minister Ehud Barak in a statement Monday that the terrorist infiltration, as well as the rocket fire from Sinai, represented a "disturbing deterioration of Egyptian control in the Sinai."

"We are waiting for the results of the election [in Egypt]," Barak said. "Whoever wins, we expect them to take responsibility for all of Egypt´s international commitments, including the peace treaty with Israel and the security arrangements in the Sinai; swiftly putting an end to these attacks."

As the attack developed, Israeli communities in the Egypt border area were ordered into lock down, and schools were closed. Routes 10 and 12 were closed to public traffic and authorities were not allowing motorists to travel to the area. Ramat Negev Regional Council Mayor Shmulik Rifman described the incident to Army Radio on Monday morning. He said two vehicles left one of the communities in the morning to continue work on the fence between Israel and Egypt. A roadside bomb was detonated against one of the vehicles, Rifman said, adding that there were concerns that two or more terrorists were still inside Israeli territory. "As soon as we were informed of the incident we stopped all school buses, and those that had already left were diverted to one of the communities," Rifman said. The mayor added that he could see IDF soldiers patrolling the area, but that the Israeli soldiers were not entering Egyptian territory. "On the other side I see Egyptian troops strolling around as if nothing had happened," Rifman told Army Radio.

Residents of Beer Milka were ordered into bomb shelters in the morning, and residents of the Ramat Negev Regional Council area were not allowed to travel on the roads to work, as the entire area along the border was closed to civilian traffic. By early afternoon the alert was lifted, roads 10 and 12 were reopened, and residents were allowed out of bunkers.

IDF Spokesman Brig. Gen. Yoav (Poly) Mordechai said that the IDF had recently bolstered its forces along the Egyptian border with troops from the Givati, Golani and Paratroopers brigades, as well as increased intelligence-gathering measures.

Israel Radio quoted a defense official as saying that Monday´s border incident was the result of growing pressure on groups of smugglers, terrorists, and crime syndicates as a result of the increased pace of the construction of the border fence. Monday´s attack on fence´s construction workers was aimed at slowing down the pace of construction, the source told Israel Radio. More than 100 companies are contracted to build the fence along Israel´s border with Egypt, with some 1,500 workers employed on the project.

Bezalel Traiber, the head of the Defense Ministry´s Assets and Operations Department, who is responsible for the border fence project, said that 180 km of the 242-km border fence have already been completed. Speaking to Israel Radio, Traiber said there are two incomplete mountainous areas where the work will take longer because of the topographical challenges there, as well as a 17-km stretch near Eilat that still need to be constructed. "One-hundred and eighty kilometers of the 242 kilometers between Taba and Kerem Shalom are complete. This shows the other side that this business is serious and that is causing pressure on the other side. By the end of July we should be close to 200 kilometers complete," Traiber said.

Last August, gunmen from Sinai crossed into Israel and ambushed vehicles on a desert highway, killing eight Israelis. Six Egyptians were killed in Israel´s subsequent hunt for the terrorists, causing a diplomatic crisis that ended with an Israeli apology.

Defense Ministry Diplomatic-Security Bureau head Amos Gilad said Monday that Israel has faith in Egypt´s ability to assert control over the Sinai. " Sinai is a huge territory. There are weapons smuggling routes from Iran and from Libya. Extremist terrorist groups are setting up base there to destabilize Egypt as well as destabilize the Egypt-Israel peace treaty by launching attacks against Israel," Gilad told Israel Radio.

"The Egyptians are sovereign in the Sinai, we have faith in their ability to assert control there, and to assert its sovereignty in Sinai. We believe they can do it. Israel expects Egypt to adhere to the peace accords with Israel, which is in both sides´ interests. If terror plots emanate from Gaza, that´s one thing, if they emanate from within Sinai, which is in Egypt´s territory, it is the responsibility of the Egyptians to stop them. The Egyptians have all the reasons in the world to maintain the peace treaty with Israel, including U.S. and international assistance," Gilad said.

Meanwhile, the Israel Air Force struck two targets in the Gaza Strip overnight Sunday. According to the IDF, warplanes struck a weapons manufacturing lab in the southern Gaza Strip, as well as another terror-related target in the central part of Gaza. Palestinian sources reported five wounded in an attack on a factory near Rafah in the southern Gaza Strip.