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Israel Will Halt Tax Transfers to Palestinians

Times Staff Writer

Israel announced Sunday that it would withhold millions of dollars in taxes and customs duties from the Palestinian Authority but stopped short of harsher sanctions against a new government and Hamas-dominated parliament.

A day after Hamas assumed control of the Palestinian parliament, the movement formally nominated one of its best-known figures, Ismail Haniya, to be prime minister. Palestinian Authority President Mahmoud Abbas was expected to ask Haniya, who is considered a pragmatist, to form a government.

Israel said it would try to dissuade foreign governments from providing economic aid to the Palestinian Authority and would tighten security checks at the Gaza Strip border in an attempt to reduce the flow of Palestinian workers and goods into Israel. Israel also will try to stop other countries from supplying weapons and other military equipment, which the Palestinians have sought for their security forces.

Israeli leaders set aside more sweeping sanctions recommended last week by the defense establishment that in effect would have cut the Gaza Strip off from Israel and the West Bank by halting the passage of people and cargo. Among the options were to stop allowing workers into Israel and rescind permission for construction of a Gaza seaport.

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Israeli media characterized Sunday’s measures as part of a strategy to gradually increase pressure on the Palestinian Authority after Hamas’ surprising victory in parliamentary elections last month. Israel could tighten the restrictions later.

“This is a measured response. We will respond to what happens on their side and leave as many options open as possible,” said Israeli Foreign Ministry spokesman Mark Regev.

Israeli leaders hope to isolate the Palestinian government internationally if Hamas does not recognize Israel, renounce violence and acknowledge past agreements, such as the 1993 Oslo peace accords. The U.S., Russia, the European Union and the United Nations, who are trying to broker a Mideast peace deal, also have warned that aid to the Palestinian Authority could be in jeopardy.

After Hamas’ victory, Israel held up the transfer of about $55 million in revenue collected on behalf of the Palestinian Authority under a 12-year-old economic pact. It later agreed to transfer those funds, which are desperately needed by the Palestinian government, but warned that it might not do so after Hamas took office. The collections average about $50 million a month.

The Palestinian Authority is in dire financial health, falling well short of meeting its $116-million monthly payroll even before Israel decided to withhold the tax transfers.

Ehud Olmert, the acting Israeli prime minister, said Sunday that Israel would have no contact with a Palestinian government that includes Hamas, which is officially sworn to Israel’s destruction and has carried out dozens of suicide bombings during more than five years of conflict.

Olmert told the Cabinet that with Hamas in command of the legislature and charged with forming the next government, the Palestinian Authority “is, in practice, becoming a terrorist authority.”

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

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Israel will stop transferring the funds this month and put them into an interest-bearing escrow account until Hamas can allay concerns that the money might be used to pay for attacks, Israeli officials said. Appeals to foreign governments to withhold financial assistance from the Palestinians will not apply to humanitarian aid going directly to the Palestinian public.

Olmert is leading his centrist Kadima movement in a national election campaign. He is under pressure to confront Hamas by some opponents who accuse him of vacillating. But Israeli officials also hope to avoid imposing sanctions that might draw international criticism for being too harsh.

Mark Heller, research director at the Jaffee Center for Strategic Studies at Tel Aviv University, said the actions Sunday were a bid for middle ground.

The Cabinet, made up solely of Kadima members, has “done a little bit of this and a little bit of that and tried to cover itself on all fronts,” Heller said.

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Haniya, the Hamas leader, 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.”

Haniya, a former dean at Islamic University in Gaza City, topped the Hamas ballot. He has had good relations with the once-dominant Fatah faction led by Abbas.

Hamas hopes to win pledges of help from Arab and Muslim countries, including Iran, in case aid from Western nations is cut.

Arab League nations were set to meet today in Algiers to hammer out a plan for sending $50 million a month to the Palestinian Authority, said Amr Moussa, the league’s secretary-general. A final decision is not expected until Arab leaders meet in a summit next month in the Sudanese capital, Khartoum.

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Abbas traveled to Gaza City late Sunday to meet with Hamas leaders and begin negotiations over the makeup of the new government. Meeting with reporters on arrival, Abbas said the latest Israeli moves would deepen the Palestinian financial crisis.

“We hope we will be able to overcome this crisis month by month,” he said. The United States last week demanded that the Palestinian Authority return $50 million provided in direct aid for infrastructure projects in the Gaza Strip. The Palestinians agreed to give back the funds, but Abbas said he hoped to discuss the matter with American envoys in the coming week.

During Saturday’s parliamentary swearing-in ceremony, Abbas called on the government to follow his moderate approach toward Israel.

But Hamas -- which is considered a terrorist group by Israel, the United States and the European Union -- says in its founding charter that it does not recognize Israel, and it has repeatedly refused to do so since the elections.

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Hamas leaders have suggested they might agree to a long-term truce if Israel withdraws from land captured during the 1967 Middle East War, meaning the West Bank and East Jerusalem. Israel withdrew from the Gaza Strip and a small portion of the West Bank last summer.

Abbas still has considerable clout as the top elected Palestinian official. Hamas controls 74 of the parliament’s 132 seats. In case of a breakdown, Abbas could sack the Cabinet and name a new prime minister. But Palestinian law does not grant him the power to dissolve parliament and call new elections, setting up the possibility of a damaging political standoff.

It is not yet clear whether Hamas members will dominate the Cabinet. Hamas would like Fatah to join in a unity government, but many senior Fatah members would prefer to stay out in hopes that Hamas fails on its own. A role for Fatah is likely to be high on the agenda of talks over forming a government.

In other developments Sunday, two Palestinian militants were killed by an Israeli airstrike in the southern Gaza Strip as they were setting a bomb near the boundary with Israel, military sources said. The men belonged to the Popular Resistance Committees, the group said.

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Two other Palestinians were killed and at least four injured by Israeli gunfire during clashes in the Balata refugee camp outside the West Bank city of Nablus. An Israeli army spokesman said soldiers opened fire on armed men who appeared to be placing a roadside bomb.

Early today, Israeli troops shot and killed a senior commander of Islamic Jihad in a separate action in Nablus, Israel Radio reported.

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Special correspondent Fayed abu Shammalah in Gaza City contributed to this report, and Times wire services were used in compiling it.

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