Israel said Sunday that it would release about $11 million in Palestinian tax money it had been holding and allow the funds to be used for medicine and equipment for Palestinian hospitals while bypassing the new Hamas-led government.
The decision came against a backdrop of severe economic and humanitarian problems in the Gaza Strip and tensions between Palestinian factions that some believe could ignite civil war. Palestinian Authority President Mahmoud Abbas sought to cool tempers Sunday, but security officials said they had found a bomb in the road near the home of one of his top aides.
Israeli officials said the Palestinian tax money would be used to help stock hospitals in the West Bank and Gaza Strip through international aid organizations, although the mechanism still had to be worked out.
The sum represents slightly more than 5% of the estimated $200 million in tax revenue and customs duties that Israel has collected since Hamas took control of the Palestinian government. Israel collects about $50 million monthly on behalf of the Palestinian Authority under a 12-year-old economic agreement. But the Israelis stopped transferring the money to the Palestinians in February to keep it from Hamas, an Islamic militant group sworn to Israel's destruction.
"We have no intention of helping the Palestinian government. We will not transfer so much as a penny to any Palestinian official. But I say we will render such assistance as may be necessary for humanitarian needs," Israeli Prime Minister Ehud Olmert said during the Cabinet meeting where the decision was approved.
Afterward, Olmert headed for Washington, where he was scheduled to meet with President Bush on Tuesday.
A Palestinian government spokesman criticized the Israeli decision. Ghazi Hamad, the Cabinet secretary, said Israel had no right to spend the Palestinian tax money, which he said had become an instrument of blackmail.
"The money is Palestinian money," Hamad said. "We don't want Israel to control our priorities and direct the money where they want."
Israel's freezing of the tax and customs revenue, its frequent closures of border crossings into the Gaza Strip and a cutoff in most foreign aid to the Hamas-led government have left the Palestinians unable to pay public employees and hospitals reporting severe shortages of medications. Aid groups have warned of a deepening crisis.
Escalating skirmishes between rival gunmen from Hamas and Abbas' Fatah movement have added to the tension.
Abbas, speaking to reporters at a meeting of the World Economic Forum in the Egyptian resort of Sharm el Sheik, insisted Sunday that "there will be no civil war among Palestinians."
"Civil war is a red line that no one dares to cross," he said.
Abbas said he would convene a meeting of the rival factions this week in an effort to restore calm. But top aides to Abbas continue to be targeted in Gaza.
On Sunday, security officials said they had discovered a bomb planted along a road leading from the home of a top security official allied with Abbas. The official, Rashid abu Shbak, has been at the center of Abbas' struggle with the Hamas-led government over control of the assorted Palestinian security agencies, whose ranks total about 70,000 men. Abbas appointed Abu Shbak to oversee three key security agencies despite objections by Hamas.
The day before, another Abbas ally, Tareq abu Rajab, head of the Palestinian intelligence service, was seriously injured in an explosion at the agency's headquarters in Gaza City. One of his bodyguards was killed in the blast.
The tensions in Gaza and the related issue of how Israel should deal with Abbas are likely to be among the topics under discussion when Olmert meets with Bush.
Israeli officials initially had suggested that the trip would be a chance to win support for Olmert's plan to set permanent national borders, by unilateral action if Israel deemed it necessary.
U.S. officials, however, have indicated that they are not ready to begin detailed discussions of any unilateral action by Israel until Olmert has exhausted hopes for talks with Abbas. Though widely seen as politically weak, Abbas is viewed by the United States as the only alternative to dealing with Hamas, which it shuns as a terrorist group.
Olmert, in a television interview Sunday, characterized Abbas as an ineffectual partner.
"I'm afraid that President Mahmoud Abbas doesn't have even the power to take charge of his own government," Olmert said on CNN's "Late Edition With Wolf Blitzer." "So how can he represent that government in the most crucial, complex and sensitive negotiations, about which there are so many divisions within the Palestinian community?"
Two top Israeli ministers, Foreign Minister Tzipi Livni and Vice Premier Shimon Peres, met with Abbas on Sunday on the sidelines of the Sharm el Sheik gathering. It was the highest-level encounter between the two sides since Hamas defeated Fatah in January parliamentary elections.
Livni said there would be further meetings.
Also Sunday, Israeli media reported that defense officials approved the expansion of four Jewish settlements in the West Bank, including three that lie next to Israel and one to the east, near the border with Jordan.
Olmert has called for withdrawing from isolated West Bank settlements and reinforcing Israel's hold on a handful of the closest settlements.
Palestinian officials and Israeli peace groups criticized the move.
"On the eve of Olmert's trip to the U.S., this signals the government's intention to strengthen its hold of the settlement blocks and the Jordan Valley, and this will not facilitate any diplomatic progress in the foreseeable future," Dror Etkes, of the Israeli group Peace Now, told Israel Radio.
Special correspondent Hossam Hamalawy in Cairo contributed to this report.