Shin Bet security service director Yuval Diskin said on Tuesday that the Islamist group Hamas was busy buying up land within the municipal territory of Jerusalem.

Speaking at the Knesset Foreign Affairs and Defense Committee, Diskin added that the central forces currently operating in East Jerusalem were the Palestinian Authority, Hamas and the Islamic Movement. He explained that they were competing with each other over influence and presence in the area.

Earlier in the meeting, Diskin warned that lifting the naval blockade on Gaza, put in place three years ago when Hamas wrestled power over the Gaza Strip in a bloody coup, would be a "dangerous development for Israel."

"It would be a huge security breach, even if ships are inspected along the way in international ports en route to Gaza," he warned. A port in Cyprus was mentioned during the meeting, as it was the port where the ships of the Gaza-bound aid flotilla docked last month before Israeli navy commandos clashed with activists aboard one of the ships in international waters.

Diskin added that terror organizations in Gaza are continuing to arm themselves and gain strength, both by independent production of weapons and by smuggling.

"The Hamas and the Islamic Jihad are in possession of 5,000 rockets in the Gaza Strip, with a range of up to 40 kilometers," Diskin explained. "Of those rockets, 4,000 belong to Hamas."

"Hamas also possesses several rockets that can reach central Israel," Diskin went on to say.

The director of the Shin Bet also addressed Israel's willingness to ease the general blockade on Gaza, saying that "there is no humanitarian crisis in the Gaza Strip. I don't have any problem with easing the transfer of goods from Israel. But weapons are being smuggled right now from Sinai."