Jerusalem (CNSNews.com) - Israeli troops and tanks entered the southern Gaza Strip before dawn on Wednesday after blowing up three bridges and a power plant in an incursion intended to force the release of a kidnapped Israeli soldier.

The military moves followed three days of intensive mediation efforts, where foreign diplomats tried to convince Palestinian leaders to release of Corporal Gilad Shalit. The 19-year-old soldier was abducted Sunday when Palestinian militants sneaked into an Israeli army outpost through a tunnel under the Israeli-Gaza border.

The U.S. and other international players urged Israel to exercise restraint, and Secretary of State Condoleezza Rice told Israel to "give diplomacy a chance." But after three days, mediators reported no progress in obtaining the soldier's release.

Israeli Prime Minister Ehud Olmert said on Wednesday that Israel would not negotiate with the kidnappers - and would take "extreme action" to retrieve Shalit.

Olmert also said that Israel was not going to re-occupy Gaza.

Hamas spokesman Ghazi Hamad called the Israeli incursion a "grave mistake" and said Israel would pay for it with heavy losses.

Abbas advisior Nabil Abu Rudeineh said the people in Gaza are angry.

"The people are now without electricity. We are in the middle of the summer. It's a very hot area now and the situation is deteriorating," Abu Rudeineh said in an interview with CNN.

"All of the international crossings are closed. The city and country is under complete blackout. Everything is under siege so far the situation is very bad and this is not going to solve anything," he said.

Press reports said that thousands of Palestinians have fled their villages.

'Free Shalit'

Senior Olmert advisor Ra'anan Gissin said the goal of Wednesday's operation was to obtain the release of Shalit and that no one involved in the incident - including Hamas leaders -- would be exempt from Israeli retribution.

"We will continue this operation and gradually increase pressure until we bring about the release of [Shalit]," said Gissin. "In this process, as we search for him, there will be no immunity or sanctuary to those who gave the orders or allowed it to happen."

Israel believes that Damascus-based Hamas political leader Khaled Mashaal ordered the attack on the Israeli Army outpost -- and is preventing Shalit's release. Israel has said it is holding the Hamas-led Palestinian government and P.A. Chairman Mahmoud Abbas responsible for the soldier's safety.

The Israeli military operation began around midnight when Israeli aircraft bombed three bridges in the central Gaza Strip. The aerial attack was followed by artillery fire at the southern Gaza Strip and an attack on an electricity transformer, which cut power to much of the area.

Around 2:00 a.m. Israeli time, armored forces entered the southern Gaza Strip in the first ground operation of its kind since Israel withdrew its troops and uprooted 21 Jewish communities there last summer. The forces penetrated about a mile into the Gaza Strip and were concentrated at what used to be the Palestinian airport, military sources said.

Code-named "Summer Rain, the incursion provides troops with an observation point overlooking Rafiah along the Israeli-Egyptian border where Israel believes its soldier is being held, a military source said.

Israel wants to prevent the terrorists from moving Shalit elsewhere in the Gaza Strip -- or worse yet, smuggling him across the border into the Egyptian Sinai desert.

The military show of force also is intended to send a signal to terrorist organizations that Israel is serious about gaining the release of its soldier. "If they do not release the soldier we have other means at our disposal," said the military source.

Palestinian gunmen reportedly were hunkered down in defensive positions. Militants reportedly erected makeshift earthen barriers and mined roads in the Gaza Strip on Tuesday.

They also fired four Kassam rockets from the northern Gaza Strip at southern Israeli communities on Wednesday. But there was no major confrontation between Israel and the militants when Israel entered the area.

The Popular Resistance Committees, which took part in the attack that led to Shalit's abduction, announced on the al Jazeera Arabic satellite channel on Wednesday that it had kidnapped an Israeli teenager, Eliyahu Asheri, from settlement of Itamar near the West Bank city of Nablus.

According to reports, the PRC said it would publish its demands soon for Asheri's release and earlier threatened to kill him if Israeli troops invaded the Gaza Strip.

Asheri, 18, was last seen at a hitchhiking station in Jerusalem on Sunday evening. Police spokesman Micky Rosenfeld said the police are searching for Asheri but have not yet declared him a kidnap victim.

Shalit's kidnap dominates the Israeli headlines and is being closely watched here.

One of Israel's chief rabbis, Shlomo Amar, called on rabbis throughout the country to pray for Gilad's release; and newspapers printed a special prayer for his freedom and healing. (Gilad reportedly was wounded during the attack on his post.)

In an apparent attempt to ease tensions, Hamas and Fatah announced they had reached an agreement on the establishment of a Palestinian state in the West Bank and Gaza Strip on Tuesday. But the news -- greeted as ho-hum by Israel -- has been squelched by concerns about Gilad and the military confrontation.

Gissin dismissed the Hamas-Fatah deal as a "non-starter" and a "tactical effort" by Hamas to regain financial and economic assistance cut off by the international community.

In Washington on Tuesday, White House Press Secretary Tony Snow -- commenting on the Hamas-Fatah agreement -- said that conditions for the resumption of ties between the international community and the Hamas-led P.A. were clear: Hamas must recognize Israel, abandon terrorism and abide by previous Israeli-Palestinian agreements.

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