(Adds German minister, paragraphs 3-5; Israeli official, 9-10)

By Wael al-Ahmed

JENIN, West Bank, June 2 (Reuters) - Israel began on Monday to allow its Arab citizens into the West Bank city of Jenin to visit relatives and shop for the first time since the start of a Palestinian uprising in 2000, Palestinian officials said.

The move follows the deployment of Palestinian security forces in the city in a campaign that Washington sees as a chance for Palestinian security forces to show they can rein in militants -- an Israeli demand for Palestinian statehood. The move could also provide a badly needed economic boost to Jenin.

German Foreign Minister Frank-Walter Steinmeier, who met Palestinian Prime Minister Salam Fayyad in Jenin on Monday, described the city's improved state as "miraculous".

"It is something that resembles a miracle ... Two years ago it was impossible for a European envoy to meet with the Palestinian prime minister in Jenin. The situation is very different today than it used to be two years ago," he said.

While presenting new German-made vehicles for the Palestinian police who now patrol the city as part of Abbas's law and order initiative, Steinmeier added that it was a "clear sign of positive developments".

About 200 Arab Israelis entered Jenin through the Israeli-controlled Jalameh terminal at the entrance to the city, long considered by Israel to be a hotbed for militants.

"It's a new policy," an Israeli army spokeswoman said.

Under the new rules, the Israeli army barred those younger than 18 from entering Jenin and said all the travellers must return to the terminal before nightfall, where they will be subjected to security questioning, according to a flier given to those who crossed.

TOUGHER SECURITY

The crossing will be open to an estimated 100 Arab Israelis per day, Sunday to Thursday, Palestinian officials said. An Israeli Defence Ministry official said the plan was to increase the number and over time to allow more travellers to enter.

Jenin, long seen as a militant bastion, remains off-limits to Israeli Jews, who once frequented the city's inexpensive workshops, clothing stalls and garages, the Israeli official said. Most of the travellers entered for commerce, he added.

Ata Abu Rmeila, a senior official in Palestinian President Mahmoud Abbas's Fatah faction, said there would be heightened security in Jenin and that local merchants have been told not to jack up prices for the visitors.

"Everything is prepared for our neighbours inside Israel to visit us here," he said.

Jenin is close to many Arab-Israeli villages as well as major cities like Afula and Nazareth.

Israel's Arab citizens make up about 20 percent of its population. Palestinians in the occupied West Bank, territory that Israel captured in the 1967 Middle East war, are not Israeli citizens and strive to establish a state of their own.

A major Palestinian agricultural centre, Jenin's economy has been devastated by Israeli restrictions and its West Bank barrier, preventing tens of thousands of residents from crossing to work in Israel. (Additional reporting by Adam Entous; Writing by Adam Entous; Editing by Charles Dick)

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