Foreign Minister Tzipi Livni told foreign diplomats Wedesday that Israel's 2005 withdrawal from Gaza could have created hope for Arab residents of the region, but that Hamas terrorists have capitalized on a Jew-free Gaza to build military capabilities to attack Israeli civilians and IDF troops.

Speaking on a ministry-sponsored tour of the area, Livni told diplomats not to underestimate the strength of Hamas' military power, and charged the international community with responsibility to help put a stop to daily rocket and missile attacks on Jewish towns in the western Negev region.

"Israel pulled out of Gaza. We offered hope to the Palestinians, (but) the current situation there is one of terrorism. Hamas is getting stronger. The international community supported our decision to pull IDF troops off the Philadelphi patrol route, and Hamas has used the opportunity to build a small, but powerful, army in Gaza. Israeli and foreign decision makers must deal with this," she said.

Livni also said Israel would continue to differentiate between "extremist" and "moderate" forces in the Palestinian Authority, but admitted that negotiations with PA terrorist groups would not lead to a solution for besieged residents of Sderot and surrounding communities.

"We will continue negotiating but we must be realistic," she said. "Negotiations alone will not create a magic solution for the problems created from Gaza, certainly not in the short term. The opposite is actually true. The situation in Gaza has an impact on our ablity to implement the results of these negotiations."

Livni also said November's international summit in Annapolis, Md. produced "agreement" that Israel-Arab negotiations would be subject to the Arab side meeting the demands of the US-sponsored Road Map, which calls for "an immediate and unconditional ceasefire to end armed activity and all acts of violence against Israelis anywhere," and demands that "official Palestinian institutions end incitement against Israel."

"There are three things we will never agree to: A terror state, a radical-Islamist state on our border, or a weak country doomed to failure… I believe this is in the interest of both sides.

"The content of the negotiations must provide answers for the negative experience of Gaza. Therefore, any future agreement must include security assurances for Israel. Any future agreement will be subordinate to the facts on the ground. Gaza is ruled by Hamas and absolutely has a direct influence on the Palestinian future.

The diplomats' agenda also included an address by Brigadier General Moshe Tamir, commander of the IDF Gaza Division, who presented the group with an overall summary of the Hamas threat, and remarks by Colonel Nir Peres, who presented evidence that terror groups are using buildings owned by international organizations to fire Kassam rockets at Israeli civilians. Peres also presented an overview of the uses of international aid to Gaza.