LONDON Ñ The Bush administration has given an ultimatum to Palestinian leader Yasser Arafat.

Diplomatic sources said the White House has informed Arafat that he has one "last chance" to prove he can end attacks against Israel.during an unspecified brief period. They said this would include a crackdown on Palestinian insurgency groups, according to a report in the Sunday editions of the authoritative London-based Al Hayat daily.

The sources said that as part of the administration's agreement, Israeli Prime Minister Ariel Sharon met Palestinian officials in Jerusalem late last week. The meeting Ñ which included Arafat's leading advisers Ñ was approved by the PA chairman.

The diplomatic sources said the U.S. administration has been under heavy pressure from Arab and European countries to maintain relations with the PA. Bush has been considering a proposal to sever links with Arafat and declare his Fatah movement as a terrorist organization, Middle East Newsline reported.

After high-level consultations, President George Bush agreed to provide Arafat with a final opportunity to explain his link to the purchase of the Karine-A freighter. U.S. officials said the freighter was loaded with Iranian weapons bound for the PA.

Arafat has repeatedly denied any connection to the Karine-A. The ship, captured on Jan. 3, was said to have contained about $20 million worth of weapons.

Israeli officials termed the Sharon meeting with Palestinians as a tactical move meant to prepare for the prime minister's visit to Washington later this week. Sharon will meet Bush and urge him to boycott Arafat.

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