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Israel decided Sunday to maintain its nearly three-month siege of Yasser Arafat at his West Bank office, although it will slightly ease some travel restrictions on the Palestinian leader - a decision angrily condemned by Palestinian officials. In a separate incident likely to further exacerbate tensions, Israeli soldiers shot at the car of a top Palestinian negotiator Sunday evening as he approached an Israeli military checkpoint in the West Bank. The decision to continue Arafat's confinement was supported by an overwhelming majority of Prime Minister Ariel Sharon's Security Cabinet. The Cabinet voted to allow Arafat to move around Ramallah, a statement said, but the Palestinian leader will not be allowed to leave the town. Palestinian leaders immediately canceled joint security talks in protest at the decision. Palestinian witnesses said Arafat has recently been traveling within the city without Israeli interference anyway, visiting a hospital last week to comfort wounded Palestinians and praying in a mosque on Friday. "It is a shameless and unacceptable decision," said Palestinian Cabinet minister Saeb Erekat. "This reflects the fact that this government has no political program whatsoever and is determined to pursue the path of destruction." The decision followed the arrests by Palestinian security of three militants suspected in the assassination of Israeli Cabinet minister Rehavam Zeevi on Oct. 17 - a key Israeli demand for lifting the blockade. "The closure around Arafat's headquarters in Ramallah will be removed. His departure from Ramallah will require a decision" by a government body, the Cabinet statement said. It said Israel continues to demand extradition of the assassins, a demand the Palestinians have rejected. Instead, the Palestinians prefer to put suspects on trial in accordance with interim peace accords. SURROUNDED FOR THREE MONTHS Israeli tanks surrounded Arafat's Ramallah headquarters in early December, preventing him from leaving, after Israel demanded that Palestinian police arrest the assassins, planners and leaders of the Popular Front for the Liberation of Palestine. The PFLP claimed responsibility for the killing and said it was retribution for Israel's killing of one of its leaders in August. With the arrest of the three main suspects, some Israelis said it was time to lift the blockade against Arafat. Cabinet minister Dalia Itzik of the moderate Labor party told Israel Radio on Sunday that the quarantine "has been ineffective" anyway in countering violence. Other Israeli commentators said the decision was a first step by Sharon toward meeting international calls to let Arafat go, while avoiding any immediate crisis in Israel's coalition government. "It seems balanced to me," Labor Cabinet minister Matan Vilnai. On the other hand, Avigdor Lieberman, from the ultranationalist National Union bloc, said he would pull his party out of the coalition government if the restrictions were canceled. The Security Cabinet convened after signs at the weekend that Israel and the Palestinian Authority were seeking to put behind them a week of bloody violence and ease tension. In a surge of blood-letting over the past week alone, 42 Palestinians - including three suicide bombers - and 11 Israelis were killed. But Israeli and Palestinian security chiefs had been scheduled to meet on Sunday to discuss ways of reducing violence. The meeting would have been a follow-up to talks on Thursday. However, Mohammed Dahlan, head of the Palestinian preventive security service in the Gaza Strip, said the Palestinians had canceled the session in protest of the decision to keep Arafat confined to Ramallah. "There won't be any meetings with the Israelis for the time being, whether it's on the security level or the political level," said Nabil Abu Rdainah, a senior Arafat aide. ISRAEL DEMANDS CRACKDOWN Before Israeli tanks surrounded his West Bank compound, Arafat frequently traveled around the world, explaining the Palestinian case to diplomats and reporters. Israel said it was confining Arafat to his home territory to try to force him to crack down on Palestinian militants responsible for attacking Israelis. However, Palestinians charged that the Israeli siege was part of a campaign against the Palestinian people and an attempt to bring about the collapse of Arafat's regime. Arafat has said repeatedly he is making "100 percent effort" to stop attacks. A week after the siege began, he made a televised speech to his people, calling for an end to violence against Israelis. ISRAELIS SHOOT AT PALESTINIAN OFFICIAL Compounding already strained relations, Israeli troops fired at the armored car carrying Palestinian parliament speaker Ahmed Qureia as it approached a roadblock between Ramallah and Jerusalem on Sunday evening. Israeli Foreign Minister Shimon Peres telephoned Qureia to apologize for the incident in which Qureia's aides said eight bullets were fired at the vehicle. The Israeli army said an initial investigation showed the car had been speeding toward the checkpoint, and the soldiers feared the vehicle was going to hit them. An army statement said they fired warning shots into the air. No injuries were reported.