"Most of the smuggling is taking place by land, through tunnels. Hamas has taken control of the tunnels in the area. There is Egyptian action aimed to prevent the smuggling, but there have been no special reports lately."
The Shin Bet chief said the recent prisoner exchange deal with Hizbullah has encouraged terror groups to plan additional kidnappings of Israeli soldiers.
According to Diskin, Hamas has become empowered thanks to the ceasefire. "Hamas is very interested in preserving the ceasefire, and maintaining its stability," he said. "Hamas is still anxious to reap the full benefits of the truce: The removal of the siege and the opening of the Rafah crossing. As far as they're concerned, first the crossings open, and then negotiations on (kidnapped soldier Gilad) Shalit can resume.
"Hamas is continuing its massive defense operation. They are exploiting the truce in order to increase their training. They are bringing in weapons for their military wing, and cement has been imported, which the Shin Bet analyzes as a means for building bunkers."
He added that Hamas had completed the first step in the construction of its institutions, which will prepare the foundations for seizing control of all of the Palestinian territories, which has been Hamas' declared vision for years.
Regarding the situation in east Jerusalem, Diskin said that residents holding an Israeli ID were attempting to move into Jerusalem due to the construction of the fence that threatens to disengage them from the rest of the country. For this reason the neighborhoods were slowly emptying out, he said.
According to the Shin Bet director, "the area is out of the IDF's hands. Israel Police is not active in the area, so there is no police activity. This creates phenomena such as arms dealing and Molotov cocktails in southern Jerusalem, and in Abu Dis and Azaria Hamas is beginning to move in. Palestinian forces have also begun to infiltrate the north."
Diskin also informed the government that since the beginning of the year Shin Bet and police forces have managed to thwart the banding together of 12 different terror organizations in east Jerusalem.