* Palestine Marathon in its second year
* Olympic runner Masri barred for second time
* Israel says the run "tainted" and anti-Israel
By Nidal al-Mughrabi
GAZA, April 10 (Reuters) - Kicking up dust on the back roads of northern Gaza within sight of the Israeli fence that seals off the enclave, Olympic athlete Nader Al-Masri is still training, despite being barred from competing in his people's largest sporting event.
Masri, who has participated in 40 international contests including the 2008 Olympics in Beijing, was denied a permit by Israeli authorities to travel to the occupied West Bank for the Palestine Marathon on Friday.
"I'm sad. This is a race for all Palestine and I wanted to participate, but unfortunately the Israeli side coldly rejected me," said the 34-year-old policeman.
The Palestine Marathon, was inaugurated last year as an expression of statehood and of the right to free movement demanded by Palestinians.
This year it is being run against the backdrop of heightened diplomatic tensions, with Israeli-Palestinian peace talks on the verge of collapse amidst mutual recriminations
In a statement to Reuters, an Israeli government body in charge of permits said: "The marathon is supported by the Palestinian Authority and is tainted by political shades which delegitimize the State of Israel."
It said Masri's case did not meet the requirements for travel out of Gaza, without elaborating.
He was also barred from running in last year's race - which starts in the West Bank town of Bethlehem and loops round a 10 km route.
"I would've easily come in first ... I know my record and I know the other people's records," Masri told Reuters.
As he trained near his hometown of Beit Hanoun, children sprinted to his side and tried to match his stride before falling back. Neighbours cheered "Nader" as he passed.
"People encourage me to continue my sport, telling me the ban isn't the end and there will be more contests," he said.
Masri was one of thirty runners from Gaza whose permit requests were rejected by Israel, according to Gisha, an Israeli human rights group which litigated Masri's case up to the level of Israel's Supreme Court.
"The right to freedom of movement which should have been a central consideration was given no weight," said Gisha spokeswoman Shai Grunberg.
"It would also seem to run counter to public statements made by security officials themselves about Israel's interest in facilitating normal life for civilians in Gaza," she added.
Travel permits are not Palestinian athletes' only concern, Masri said, bemoaning a lack of government funding.
"As you see, we train in the streets and most of the time in areas adjacent to the border," said Masri.
"Sometimes shots are fired as I run - not at me - but once a shell exploded 500 metres away," he said.
Not far from where Masri trained, gunfire echoed and Palestinian medical officials later said two people collecting gravel from near the fence with Israel were wounded when soldiers opened fire to disperse them from the area.
The Islamist group Hamas runs Gaza after seizing control in 2007, ousting forces loyal to President Mahmoud Abbas one year after Hamas won parliamentary elections.
The takeover prompted an Israeli-led embargo on the Islamist faction which does not recognise Israel's right to exist. (Editing by Robin Pomeroy)