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Israel halts transfer of millions to Palestinians

The Israeli government is taking a calculated risk in response to the Hamas victory.

JERUSALEM - Israel branded the Palestinian government a "terrorist authority" Sunday and halted the transfer of tens of millions of dollars in tax money to the Palestinian Authority after Hamas took control of the Parliament.

But the Israeli government held off on adopting even more drastic measures recommended by security officials, mindful of possible international reaction.

The step underscores the calculated risk Israel is taking in response to the Hamas victory: Israel's efforts to isolate the new Palestinian government could either force Hamas to moderate its views or drive it toward further extremism and deepen the economic despair of the Palestinian people.

Israel and Western countries have demanded that Hamas renounce violence and recognize Israel's right to exist, but it has resisted pressure to moderate. The group took control of the Palestinian legislature when the new Parliament was sworn in Saturday.

"The PA is - in practice - becoming a terrorist authority," acting Israeli Prime Minister Ehud Olmert told his Cabinet at the beginning of its meeting Sunday. "Israel will not hold contacts with a government in which Hamas takes part."

The sanctions came as the Palestinian militant group worked to consolidate its power and form a government, nominating one of its more pragmatic leaders, Ismail Haniyeh, to be the new prime minister.

Haniyeh accused Israel of seeking to undermine the choice made by Palestinian voters.

"This decision taken by Israel today is trying to force the Palestinian people to surrender," he told reporters at his home in a Gaza Strip refugee camp. "These measures will not make the Palestinian people afraid and will not make our Palestinian Cabinet afraid either."

The Israeli Cabinet decided to stop the transfer of the roughly $55-million a month it collects in taxes and tariffs on behalf of the Palestinian Authority. Government spokesman Asaf Shariv said the next payment, scheduled for early March, "won't take place."

Army Radio quoted Defense Minister Shaul Mofaz saying the cutoff would be reviewed each month.

The Palestinian Authority relies on that money to help pay the salaries of roughly 140,000 government employees, including about 57,000 in the security forces.

The Cabinet also decided to ask the international community to stop giving money to the Palestinians, though it said humanitarian aid should continue. Hamas is listed as a terror organization by the United States and the European Union, and many Western countries have threatened to cut off hundreds of millions of dollars in funding for the Palestinian Authority if the group does not moderate.

Should the government, the Palestinians' largest employer, be forced to lay off tens of thousands of workers, it would lead to increased chaos and poverty in Palestinian towns throughout the West Bank and Gaza. Disgruntled security forces have already staged several violent marches and taken over government buildings in recent weeks to protest frozen salaries and small paychecks.

Out-of-work security forces also could opt to vent their frustrations on Israel by staging attacks.

Israeli Foreign Ministry spokesman Mark Regev said his government understands the dangers, but "the risk involved in passing money to a Hamas-led government we think is greater than the alternative."

However, the Cabinet held back from adopting far harsher proposals made by Israeli security officials, including a recommendation to seal off the Gaza Strip from Israel, barring thousands of Palestinian laborers from entering Israel and eliminating all trade with the impoverished area.

Israel's acting foreign minister, Tzipi Livni, said the government did not want to worsen the daily lives of Palestinians or cause an international backlash against Israel.

"Israel will not compromise with terrorism and will continue to fight it with full force," Olmert said. "However, there is no intention of harming the humanitarian needs of the Palestinian population."

Mahmoud Abbas, president of the Palestinian Authority and a member of the Fatah Party that formerly headed it, criticized reaction to the Hamas ascension to power. "We chose in free elections that the whole world witnessed were free and fair," he told reporters in Gaza. "We can't say we will or not accept the results."

Jihad al-Wazir, the acting Palestinian finance minister, said, "We're one bounced check away from a major humanitarian crisis."

The head of the Arab League, Amr Moussa, said Sunday that Arab governments were considering providing the money to make up for the frozen transfers from Israel. Arab governments have not been among the top donors to the Palestinian Authority in the past, and some have failed to give pledged funds.

Abbas was scheduled to meet with Haniyeh in Gaza today and formally ask him to assemble a Cabinet, a task Haniyeh would have five weeks to complete. Haniyeh said Hamas would begin talks with possible coalition partners today.

Haniyeh, 46, is a relative moderate inside Hamas who favored participating in the first 1996 parliamentary elections established by the Oslo peace accords. He was born in a Gaza refugee camp and was deported by Israel, along with hundreds of other Hamas members, to Lebanon in the early 1990s. A former Hamas student leader, Haniyeh was close to party founder Ahmed Yassin, who was assassinated by Israel in 2004.

Early today, Israeli forces in Nablus shot and killed a senior member of Islamic Jihad, Palestinians said. The Israeli military said according to initial reports, Israeli soldiers opened fire on armed Palestinians, killing a Fatah militant.

On Sunday, Israeli troops killed four Palestinians in separate incidents.

Military officials said an Israeli aircraft attacked two Palestinians laying a bomb in the Gaza Strip, near the border fence with Israel. Two militants were killed, Palestinians security officials said.

Later, Israeli troops killed two Palestinians in the Balata refugee camp in the northern West Bank.

Palestinian witnesses said the 17-year-old youths were shot after throwing rocks at soldiers.

The army said they were planting a roadside bomb.

Information from the Associated Press, Knight Ridder Newspapers, Los Angeles Times and Washington Post was used in this report.

[Last modified February 20, 2006, 04:01:08]