Israel planning to cut off most funding to Palestinians

Israel is considering barring Palestinian labourers and goods from entering Israeli territory after a Hamas-dominated parliament is sworn in this weekend, security officials said today.

The Israeli campaign against the violently anti-Israel Hamas is focused on bringing the perpetually cash-strapped Palestinian Authority to its knees by drying up desperately-needed income.

Barring access to Israel would be devastating to the already-battered Palestinian economy, which depends heavily on income from Palestinians who work in Israel and on goods travelling to the West Bank and Gaza through Israel.

Israeli officials estimate that the 50,000 Palestinians who work legally and illegally in Israel support 400,000 people.

Thousands of other Palestinians work in Jewish settlements in the West Bank, but it wasn’t clear whether the defence establishment would recommend they also be barred from their jobs, security officials said.

Cutting off electricity to the Palestinian Authority, which is hooked up to Israel’s electrical grid, is another recommendation security officials are mulling over. But senior Defence Ministry official Amos Gilad told Army Radio that idea might not fly because of the misery it would cause the Palestinian people.

Yesterday, government officials said Israel was likely to halt the crucial monthly payments to the Palestinian Authority, though it would not immediately block millions of dollars in humanitarian aid that moves through Israeli banks.

“Israel will not transfer money to a terrorist authority,” Foreign Minister Tzipi Livni told Israel Radio yesterday. “But we have to look at things logically and decide how to differentiate between a terrorist authority and causing a humanitarian crisis.”

An adviser to the prime minister, Dov Weisglass, put it more bluntly.

“It’s like a meeting with a dietician,” Israeli media quoted Weissglas as saying. “We need to make them lose weight, but not to die.”

Hamas’ unexpected routing of the long-ruling Fatah Party in Palestinian parliamentary balloting has sent Israel scrambling to revise its policy toward the Palestinian Authority.

Acting Prime Minister Ehud Olmert has ruled out talks with Hamas until it renounces violence, recognises Israel’s right to exist and accepts past agreements between Israel and the Palestinians.

But a broader policy package was being put together this week. Defence officials were scheduled to convene today to outline their recommendations that will be presented for Cabinet approval on Sunday – a day after the Hamas-dominated parliament is sworn in.

“As of Saturday, all the rules of the game change,” said Haim Ramon, a senior member of Olmert’s centrist Kadima party, expected to lead Israel after its March 28 elections. “What needs to guide us … is that we will not honour agreements with a terrorist authority led by Hamas.”

One of those agreements is Israel’s annual transfer to the Palestinians of taxes and customs duties it collects on behalf of Palestinian merchants and labourers. The transfers are crucial for the Palestinian Authority to pay salaries to 140,000 government workers – 40% of whom work for the security forces and are armed.

Honouring the transfer agreement after Hamas takes power makes no sense, Ramon said. “Is it even conceivable that we would collect money and hand it over to the terrorist organisation?” he told Army Radio.

But Gilad countered that withholding those payments could create problems of its own.

“If you create hunger … that doesn’t help anyone,” he said. “It could even boomerang.”

Hamas’ surprise win immediately provoked international pressure on the group to abandon its violent ideology, with Western nations threatening to withhold hundreds of millions of dollars in aid.

But there recently have been cracks in the international campaign to isolate Hamas, with Russia inviting Hamas leaders to visit later this month, and France supporting the Russian move. Today, Turkey pre-empted Russia, holding meetings in Ankara with Hamas political chief Khaled Mashaal and other Hamas officials.

Livni said she protested the visit in a telephone conversation with Turkey’s Foreign Minister Abdullah Gul. She said Gul assured her Turkey would press Hamas to disarm and recognise Israel.

Hamas’ impending ascent to power hasn’t put a dent in the commanding lead enjoyed by Kadima, formed by Ariel Sharon to set Israel’s final borders through a process of territorial concessions to the Palestinians.

Polls published Wednesday night and today showed Kadima down slightly from previous surveys, but still capturing about one-third of parliament’s 120 seats - at least double what its closest rivals would win.

According to a Dahaf Research Institute poll of 830 people, Kadima would win 41 seats, down from 43. Labour and Likud remained steady at 20 and 15, respectively. The survey had a margin of error of 4.4 percentage points.