Palestinian leader Yasser Arafat has said he is launching an investigation into charges that a ship carrying a large amount of weapons was headed for the Gaza Strip.

Chairman Arafat said he has decided to form an internal investigative panel to look into allegations that a ship captured by Israeli commandos last week was carrying military hardware to Palestinian territory.

Mr. Arafat has said if any Palestinians are involved, they will be brought to trial and punished.

Israeli leaders have accused the Palestinian Authority of being behind the operation, saying millions of dollars worth of arms, including rockets and anti-tank weapons, were being smuggled to the Gaza Strip when the ship was intercepted in the Red Sea.

Palestinian officials have denied any connection to the shipment, which Israeli Prime Minister Ariel Sharon says is solid proof that Mr. Arafat is an enemy of Israel.

Palestinian negotiator Saeb Erekat charges Mr. Sharon is using the incident to avoid honoring a ceasefire after more than 15-months of violence.

"Maybe he is preparing the ground to escalate the attacks on the Palestinian people and the Palestinian Authority. Maybe he wants to use this as a pretext to escalate his campaign against President Arafat and the Palestinian Authority," he said.

Despite the denials, evidence has continued to surface about Palestinian involvement in the weapons shipment.

Speaking to reporters from an Israeli jail, the Palestinian captain of the freighter says he received his orders from Palestinian Authority officials. Omar Akawi said he planned to sail the ship through the Suez Canal where smaller boats would pick up the weapons.

The captain said the arms would then be placed in airtight containers and put into the water to drift to the coast of the Gaza Strip. Mr. Akawi said the weapons were to be used by the Palestinians for defensive purposes.

"They were going to be used to protect, it is for the Palestinian people to protect themselves because they are, somebody, is killing them without any reason," he said.

The dispute over the ship has overshadowed diplomatic efforts to bring an end to the Israeli-Palestinian conflict.

European Union foreign policy chief Javier Solana met with Israeli and Palestinian officials in an effort to strengthen U.S. efforts to mediate a permanent truce.

U.S. envoy Anthony Zinni left the region earlier this week without negotiating a formal ceasefire.