Palestinians stand near a workshop damaged after an Israeli air strike in Jabalya in the northern Gaza Strip February 14, 2009. REUTERS/Ismail Zaydah

JERUSALEM (Reuters) - Israel said on Saturday it would not agree to a ceasefire with the Hamas rulers of the Gaza Strip unless an Israeli soldier held by the Islamists was freed.

Prime Minister Ehud Olmert’s office said in a statement: “The prime minister’s position is that Israel will not reach understandings on a truce before the release of Gilad Shalit.”

Israel wants to tie any ceasefire deal with Hamas in Gaza to the release of soldier Shalit, held captive in the Palestinian enclave since 2006 when he was kidnapped in a cross-border raid.

Egypt is mediating a long-term ceasefire between Israel and Hamas. Israeli media reported significant headway had been achieved in the indirect talks.

Hamas spokesman in Gaza Fawzi Barhoum told Reuters that the Egyptian-mediated talks were stalled by disagreement on the duration of the ceasefire. Israel wants a permanent ceasefire while Hamas favors an 18-month truce that could be extended.

“Once this obstacle is overcome an announcement would be made,” Barhoum said.

Hamas has rejected Israeli demands to include the fate of Shalit in the ceasefire agreement. The Islamist group wants Israel to open all border crossings with the Gaza Strip as a condition for talks on the release of Shalit.

Hamas has demanded the release of hundreds of Palestinians held in Israeli jails in exchange for Shalit.