JERUSALEM, Feb 2 (Reuters/JMCC) - A senior Hamas leader said on Tuesday indirect talks with Israel on a prisoner exchange had collapsed and blamed Prime Minister Benjamin Netanyahu for hardening Israeli terms.

The main cause ... is that after the interference of the political element, after the interference of Netanyahu personally, there was a big regression and retraction, Mahmoud al-Zahar told BBC World News' Hardtalk programme.

For this reason, everything now is stopped, Zahar said in Gaza.

A Saudi paper, Okaz, reported Tuesday that Hamas officials said talks had been put on hold after the assassination of Hamas commander Mahmoud Mabhouh in Dubai. The movement charged Israel with killing the wanted Mabhouh, found dead in his hotel room Jan. 20.

An official in Netanyahu's office said last month the prime minister had signalled a tougher stance in negotiations mediated by Germany on a deal under which captive Israeli soldier Gilad Shalit would be traded for about 1,000 of the more than 7,000 Palestinians in Israeli jails.

Israel, the Hamas official said, was demanding that dozens of Palestinians imprisoned after being convicted of involvement in lethal attacks be deported upon their release.

Hamas had accepted that some released prisoners would be exiled but wanted them to be able to choose their destinations, said officials familiar with the negotiations.

As a right-wing leader, Netanyahu faces a particular dilemma in freeing Palestinians who might commit further violence. But he is also under heavy public pressure to win Shalit's release.

The soldier was seized in 2006 by militants who tunnelled into Israel from the Gaza Strip, now ruled by Hamas. (Writing by Jeffrey Heller, Editing by Janet Lawrence)