JERUSALEM, March 30 (Allyn Fisher-Ilan and Dan Williams/Reuters) - Prime Minister Benjamin Netanyahu said on Wednesday that a Palestinian man from Gaza held by Israel after what relatives called an overseas abduction was a Hamas member who had given valuable information.

Addressing questions from around the world, including from Arab countries, on a live YouTube forum, Netanyahu defended Israel's detention of engineer Dirar Abu Sisi, said to have disappeared last month in Ukraine, as being legal.

Abu Sisi is a Hamas man. He is being held in detention in Israel. It is a legal arrest, Netanyahu said, replying to a question from an Israeli reporter who moderated the forum.

He has provided valuable information, that is all I can say, Netanyahu added.

Relatives of Abu Sisi, an engineer and manager of the main power plant in Hamas-ruled Gaza, say he was abducted while aboard a train in Ukraine, where authorities say the disappearance is under investigation.

Israeli officials confirmed some weeks later that Abu Sisi is in custody but have refused further comment, citing court-issued gag orders. Sources in Gaza have said he was not known to have political affiliations to Hamas.

Smadar Ben-Natan, an Israeli lawyer for Abu Sisi, accused Israel in an interview of trying to concoct charges against her client, linking his detention to efforts to gather intelligence on Hamas and on an Israeli soldier held by the group.

Abu Sisi denies having any connection to the soldier, Gilad Shalit. No mention of the soldier was made in allegations lodged against Abu Sisi in closed-door remand hearings, Ben-Natan told Israel's Army Radio.

COVER-UP?

The court sessions had led her to believe they are trying to cover up the mistake of seizing him, she said.

When someone came along who they thought was senior (in Hamas) and was located outside the Gaza Strip, they got their hands on him, without this matter being really justified, in retrospect, Ben-Natan said.

Instead of confessing and saying, 'Sorry, turns out what we thought was a mistake, we are sorry, go home, Sir,' they are trying to find what they can blame him with so that it doesn't became clear this whole matter was one big farce, she added.

German newspaper Der Spiegel on Tuesday quoted an unnamed source as saying Israel may have suspected Abu Sisi of knowing the whereabouts of Shalit, held since a 2006 cross-border raid.

Netanyahu would not answer any questions about whether Abu Sisi was being questioned or had given any details about Shalit.

But he laid out some of Israel's negotiating position when asked about the prospect of swapping Palestinian prisoners for Shalit.

Netanyahu said he was willing to release some 450 prisoners as the Islamists want, but would not agree that 150 of those whom Israel accuses of involvement in lethal attacks could return to the West Bank, saying they had to go to Gaza or abroad.

We are taking a lot of action (on the case), and only a small amount of this is known (published), Netanyahu added.

Abu Sisi was scheduled to appear at another remand hearing on Thursday. Ben-Natan, an Israeli, said she expected to know then how the state intends to indict (him), if at all.

(Editing by Andrew Roche)