Israeli kills top Islamic Jihad bomb-maker

Israel killed the top bomb-maker forIslamic Jihad and another top gunman in an air raid in Gaza City yesterday, hours after an Israeli and three other militants died separately in a fresh surge of Middle East violence.

Witnesses said Israeli aircraft fired two missiles that blew up two vehicles, killing Adnan Bustan, 28, the head of Islamic Jihad's unit that produces rockets and explosives, and Jihad al-Sawafiri, 31, who led a rocket firing squad.

Islamic Jihad had claimed responsibility for one of the worst recent rocket strikes from Gaza on Israel, in which three Israelis were wounded, including a baby, on Friday.

The group quickly vowed to avenge the Israeli strike. "We will burn the ground and respond everywhere," said Abu Dujana, a spokesman for Islamic Jihad.

Hundreds of angry supporters gathered outside a morgue where the bodies were taken and chanted: "Death to Israel, Death to America", as gunmen fired rifles into the air.

An Israeli army spokesman said "the air force attacked two vehicles in the northern Gaza Strip carrying Islamic Jihad terrorists who were responsible for projectile rocket attacks against Israel".

Hours before the raid, a Palestinian stabbed to death an Israeli woman and wounded five other passengers on a minibus in central Israel, an attack that came after an Israeli helicopter gunship killed three militants in Gaza.

The bloodshed was the worst since the Islamic militant group Hamas scored a crushing victory over President Mahmoud Abbas's long-dominant Fatah faction in a January 25 parliamentary election.

The election radically shifted the dynamic between Israel and the Palestinians. Hamas' charter calls for Israel's destruction.

Under pressure from Washington, Interim Israeli Prime Minister Ehud Olmert approved the nearly $55 million transfer of Palestinian tax revenue Israel suspended pending a policy review after Hamas' big win.

Completing the review, Mr Olmert's cabinet decided to transfer the sum Israel owed for last month, minus a collection fee and deductions for Israeli electricity and health care services used by Palestinians, a government official said.

"Since Hamas hasn't yet set up a government and the new parliament is not yet sworn in, every month we will take a new assessment," Mr Olmert told ministers.

A Hamas leader said on Saturday the group hoped to form a government this month. Parliament is to convene on February 16.

The tax revenues Israel collects on behalf of the Palestinians are a main source of funding for the Authority's budget and are used to pay 140,000 government workers.

"This is our money. This is not a favour," Palestinian Economy Minister Mazen Sonnogrot said after the decision. "I hope that such payments will continue in the future."

In Jerusalem, tens of thousands of Jewish settler supporters staged their largest protest in months.

They packed a town square to demand an official inquiry into the wounding of dozens of demonstrators trying to block the partial razing of an unauthorised West Bank enclave.

The protest underscored the growing fears of Israeli rightists over Mr Olmert, whose centrist Kadima party is expected to win a March 28 national election.