Israel to free up Palestinian tax funds

Israel’s Cabinet agreed Sunday to release frozen tax revenue as part of a bid to bolster Palestinian Authority President Mahmoud Abbas in his standoff with the militant Hamas movement.

The decision came as Israeli Prime Minister Ehud Olmert prepared to meet today with Abbas and the leaders of Egypt and Jordan to explore ways to isolate Hamas and revive peacemaking efforts between Israel and the Palestinians.

Israel has pledged to help Abbas, a relative moderate, after Hamas forces routed his Fatah party from the Gaza Strip a week and a half ago, leaving the Islamist movement in sole control there and Fatah’s domain limited to the West Bank.

The decision to unfreeze the Palestinian tax money gives Olmert something concrete to offer the politically weak Abbas during today’s summit in the Egyptian Red Sea resort of Sharm el Sheik.

The government, however, stopped short of approving fund transfers, an Olmert spokesman said. The amounts to be transferred, and timing, are to be determined after the summit, said David Baker, an official in the prime minister’s office.

At stake is between $500 million and $600 million that Israel has withheld since Hamas won Palestinian parliamentary elections in January 2006. Israel transferred $100 million this year and has applied some of the remainder toward debts owed by the Palestinian Authority to Israeli companies.

Under a 1994 economic pact, Israel collects tax and customs revenue on behalf of the Palestinians, about $50 million monthly. It froze those transfers once control of the Palestinian Authority fell to Hamas, which calls for destruction of the Jewish state.

Some Israeli hard-liners said Sunday that Abbas should be required to crack down on armed groups before getting the money.

Avigdor Lieberman, a Cabinet minister from the hawkish Yisrael Beiteinu party, said Abbas “didn’t lift a finger” to help win the release of Cpl. Gilad Shalit, who was captured by Gaza-based militants a year ago today.

Abbas named a new Cabinet this month after factional fighting that, by some tallies, killed nearly 150 people. The new government is led by political independent Salam Fayyad, a moderate respected by leaders in both Israel and the United States.

Israel and the Bush administration hope support for Abbas and Fatah will help isolate Hamas. But the Islamist group insists it is still in charge, in effect leaving Palestinians ruled by rival administrations in Gaza and the West Bank.

Ismail Haniyeh, of Hamas, who insists he is still prime minister, characterized the release of funds by Israel as politically motivated “bribery.”

He said the tax and customs revenue should be distributed to all Palestinians, and not just those in the West Bank.

Egyptian President Hosni Mubarak will play host to the summit, which is to include King Abdullah II of Jordan.

The Arab leaders hope to isolate Hamas out of concern that its takeover in Gaza could destabilize their regimes by encouraging like-minded Islamist groups such as the Muslim Brotherhood in Egypt, analysts said.

“Egypt does not want to have an intransigent, Taliban-like state at its doorstep in Gaza because that would threaten its own security,” said Nabil Abdel Fattah, an expert on Islamist groups at Al Ahram Center for Political and Strategic Studies in Cairo.

Some Arab leaders have called for a revival of the peace process, which stalled after the collapse of the Camp David talks in 2000 and a Palestinian uprising a few months later.

Israel could offer other modest concessions during the summit, including removing some of its checkpoints in the West Bank that impede movement and commerce by Palestinians.

Palestinians say that only significant concessions from Israel, such as a halt to building in Jewish settlements or an end to construction of its West Bank barrier, can revive peacemaking efforts.

Olmert has said he is open to exploring a return to negotiations. But he has rebuffed calls for reviving talks aimed at reaching a final agreement under terms of an Arab League-sponsored initiative that offers Israel normalized relations if it makes peace with the Palestinians.

Olmert has been politically weak since Israel’s inconclusive war last year against Hezbollah fighters in Lebanon, and it is doubtful he has the leeway to make far-reaching concessions at this time.

ellingwood@latimes.com

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Special correspondent Noha el Hennawy in Cairo contributed to this report.