By Nidal al-Mughrabi

GAZA, Dec 26 (Reuters) - Hamas will not release a captured Israeli soldier unless Israel meets its demand to free nearly 1,400 Palestinian prisoners, including 350 with life sentences, a leader of the Islamist group in Gaza said on Wednesday.

Similar demands were rejected months ago by Israel, highlighting the gaps that remain between the two sides in trying to reach a swap deal for Sergeant Gilad Shalit, captured by Gaza militants in a cross-border raid in June 2006.

Hamas leader Osama al-Muzaini, one of the top officials with knowledge of the negotiations, said the list of names in any deal would contain prisoners serving life sentences, including Fatah leader Marwan al-Barghouthi, who is seen as a possible successor to Palestinian President Mahmoud Abbas of Fatah.

Previous efforts to reach a deal, spearheaded by Egyptian mediators, stalled after Hamas Islamists routed Fatah forces loyal to Abbas and seized control of the Gaza Strip in June. Egypt responded by withdrawing its diplomatic mission in Gaza.

Israeli Defence Minister Ehud Barak met with Egyptian President Hosni Mubarak in Sharm el-Sheikh, Egypt, on Wednesday to discuss a deal with Hamas on Shalit.

Muzaini told Reuters in an interview that diplomats from three European countries had made contact with Hamas leaders in Gaza to try to mediate Shalit's release. He did not identify the European countries.

Muzaini said Hamas would not budge on its demand for 1,400 prisoners. "In March we closed discussions on this issue and we have no intention of reopening them. The ball is in Israel's court," he said.

Israeli Prime Minister Ehud Olmert's office in April referred to the Hamas offer as disappointing, and Olmert previously vowed not to release prisoners with "blood on their hands", a reference to attacks against Israelis.

But Israeli ministers met this week to discuss easing criteria for freeing Palestinian prisoners as part of efforts to gain Shalit's release.

Israeli cabinet minister Shaul Mofaz told Army Radio on Wednesday that Israel needs to "take every step" to secure the release of Shalit and two other Israeli soldiers captured by Hezbollah guerrillas last year.

"Ultimately, we will have to approve a list (of prisoners). It doesn't matter what title these people are given. What's important is to return the boys home," Mofaz said.

Muzaini said phase one of Hamas's proposal calls for Shalit to be handed over to Egypt in exchange for Israel releasing 350 prisoners serving life sentences, including jailed leaders from Hamas and other factions. At the same time, Israel would release half the number of women and minors held in Israeli jails, a number Muzaini estimated at 400.

Shalit would be returned to his family 10 days later and Israel would simultaneously release another 100 long-serving prisoners and the rest of women and minors, Muzaini said.

In the second phase of the deal two months later, Hamas wants Israel to free an additional 550 prisoners. Hamas is seeking Egyptian and other international guarantees that the subsequent release would be carried out. (Additional reporting by Brenda Gazzar in Jerusalem, Editing by Giles Elgood)

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