Israel halts funding to Palestinians

TEL AVIV — The Israeli Cabinet voted yesterday to cut off all funding to the Palestinian Authority while acting Prime Minister Ehud Olmert described the self-rule government — now coming under Hamas control — as a “terrorist authority.”

Meanwhile, the head of the armed branch of Palestinian radical movement Islamic Jihad in the West Bank region of Nablus was killed early today by the Israeli army, Palestinian security sources said.

Israel’s economic sanctions, which freeze monthly transfers of as much as $50 million in Palestinian customs revenue, will create a financial crisis in the West Bank and Gaza unless the authority can find alternate sources of funding.

One such source could be the 22-member Arab League, which meets in Algiers today to discuss a plan to make up the lost customs revenue. Damascus, Syria-based Hamas leader Khaled Mashaal was also expected to seek funding during a visit to Iran today.

The financial squeeze was worsened by a U.S. announcement Friday that it is asking the Palestinian Authority to return $50 million in U.S. aid.

U.S. officials yesterday said they had frozen the assets of a private relief organization linked to Hamas, called KindHearts. A review of all U.S. aid for the Palestinians is expected to be completed in the next few weeks.

“Unfortunately, the pressures have begun, and the support and the aid has started to decrease. … Therefore, we are in a real financial crisis,” Palestinian Authority President Mahmoud Abbas said in Gaza, where he will meet this week with Hamas leaders.

The Palestinian Authority, short on funds after years of corruption, will be hard-pressed to pay the salaries of nearly half its workers — including many of the security forces, without the Israeli transfers. There are fears that resulting hardship and instability could prompt a new wave of anti-Israeli violence.

Nevertheless, Israel said it would urge other international donors to halt aid to the Palestinians.

Israel also announced that it will limit the movement of Hamas officials and halt cooperation with the Palestinian police. Officials haven’t decided whether to cut contacts with Mr. Abbas, said a Foreign Ministry spokesman.

Israeli television reported that Israeli officials were disappointed that Mr. Abbas didn’t take a more confrontational line toward Hamas in his speech at the inauguration of the Palestinian parliament on Saturday.

“Israel views the rise of Hamas as a dangerous milestone that turns the PA into a terrorist authority,” Mr. Olmert said at the weekly Cabinet meeting. “This new situation will influence the future of Israeli-PA relations and will begin a period in which ties with the PA are downgraded.”

However, the Cabinet reportedly turned down a recommendation from the Israeli military for even stiffer moves to isolate the Palestinians, such as barring entry to Palestinian workers employed in Israel.

The mixed response is an attempt by Mr. Olmert to meet domestic expectations for a tough stance against Hamas, while taking care not to jeopardize international support for Israel.

“Israel won’t transfer a penny to Hamas,” said Foreign Ministry spokesman Gideon Meir. “Right now, there is no decision on the funds which will go to the humanitarian organizations. We’re differentiating between the Palestinian people and the Palestinian government.”

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