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Kidnappers released two West German hostages Friday but said the life of a third was in danger and demanded the release of an unidentified prisoner in Cyprus and a light sentence for a Shiite terrorist on trial in West Germany, Palestinian sources said.

The two West Germans - a doctor and a nurse working for the relief agency ASME Humanitas - arrived by taxi at the gate of the agency's office in the southern port city of Sidon at 4:30 a.m. Friday.They were identified as Heinrich Struebig, 48, and Petra Schnitzler, 26, who were kidnapped Thursday. The identity of their abductors was not immediately known.

Two hours after their release, Abu Ali Wajeeh, commander of the PLO Fatah's military police in Sidon, said a third West German kidnapped with the two still was being held.

A photograph of the hostage carried by Moslem militiamen searching for him at checkpoints around Sidon identified him as Markus Quint. Officials at ASME Humanitas headquarters in Marburg, West Germany, confirmed his first name was Markus, but they refused to fully identify him.

The agency said, however, a man named Markus Quint was part of the team in Lebanon.

Wajeeh said Palestinian gunmen were placed on full alert to try to locate the captive, but he said he did not believe the man would remain in captivity for long. He did not elaborate.

A Palestinian source said the abductors, in a message carried by the two freed relief workers, told the Palestinian command, "The life of the German hostage was in danger.

"They are demanding the release of a prisoner detained in Cyprus," the source said.

He later said the captives also demanded that West Germany give a reduced sentence to Shiite Moslem hijacker Mohammed Ali Hamadi, now standing trial in Frankfurt. A prosecutor said last week he would seek a life term for Hamadi.

Hamadi is accused of participating in the 1985 hijacking of a TWA airliner to Beirut and the murder of an American passenger. His trial is scheduled to resume later this month.

Hamadi's brother, Abdul Hadi, is a senior official in the pro-Iranian Shiite extremist group Hezbollah and reportedly was behind the earlier abduction of two West Germans. The two were freed after Syrian and Iranian mediation.