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Serious efforts by Syria, including negotiations with Iran, to win the release of 12 Western hostages held by Islamic fundamentalists in Lebanon were part of conditions Washington placed on Damascus to "preserve its role in the new regional order," diplomatic sources said Saturday.

The sources, who requested anonymity, said Washington informed the Lebanese government that Damascus and Tehran were engaged in serious negotiations to end the plight of the hostages. They said the information was included in a secret report disclosed recently to several officials in the Lebanese capital.The U.S. State Department has declined comment on reports of Syrian-Iranian negotiations on the hostages.

But the diplomatic sources said John Kelly, assistant secretary of state for Middle Eastern and North African affairs told Lebanon's ambassador in Washington, Nassib Lahoud, of the negotiations.

The sources did not say when the meeting took place, but said it focused on Lebanon's future following the gulf crisis and touched on the hostage issue.

Kelly revealed that Washington put three conditions on Syria "to preserve its role in the new regional order" after it sent some 30,000 troops to join the U.S.-led forces aligned against Iraq, the diplomatic sources said.

The conditions outlined by the sources dictated that Syria distance itself from terrorism, fight drug trafficking in Lebanon and help free all Western hostages. The sources said Damascus had fulfilled the first two conditions.

The Syrian authorities have expelled a number of Palestinian figures linked to terrorism, including the head of the Fatah Revolutionary Council, Sabry Al Banna, better-known as Abu Nidal. Reports have indicated that Abu Nidal moved to Baghdad.

Syria also embarked on an anti-drug campaign in eastern Lebanon, a region well known for its cultivation of hashish and opium. Early this week, Syrian troops in Lebanon stormed factories in various villages of the Bekaa Valley and confiscated 40 tons of drugs.

Diplomatic sources said Syria has to meet the third condition to secure good relations with Washington and a role in the new regional order. They said Damascus and Tehran have been recently engaged in talks to coordinate efforts and stands regarding the future of the region.

Both countries have influence over Islamic fundamentalist groups believed responsible for hostage taking in Lebanon. The sources said the Syrian-Iranian talks have reached an advanced stage regarding the release of six U.S. citizens, three Britons, two West Germans and one Italian.

They believed plans to free the hostages were among issues discussed between Syrian officials and Iranian Deputy President Hassan Habibi, who on Friday ended an official two-day visit to Damascus.

Security sources suggested that some hostages were still kept in secret hideouts in Beirut's predominantly Shiite southern suburbs, contradicting an earlier report that all hostages had been moved to the Bekaa Valley shortly after the deployment of Lebanese troops in Beirut in November.