Israel may release tax funds to Abbas

Israel is considering handing over millions of dollars in withheld Palestinian tax funds to President Mahmoud Abbas in a move that could bolster him ahead of elections over his Hamas rivals, sources said yesterday.

Western diplomats and Palestinian sources, who spoke on condition of anonymity, said the proposal under consideration calls for releasing the tax money to President Abbas in stages on condition it will bypass the Hamas-led government.

Transferring the funds would mark a shift in Israeli policy, and could allow the moderate Abbas to make payments to Palestinian civil servants, who have not received their full salaries since Hamas came to power in March.

Two sources said Israel was prepared in principle to transfer tax funds directly to Mr Abbas once several technical and timing issues were addressed. An Israeli official said: "No final decision has been made."

Mr Olmert's office declined to comment on Israel's plans for the funds, which total about $500 million.

Top Abbas aide Rafiq Husseini said: "We have not been officially informed. We don't know how much the sum would be."

Another senior Abbas aide, Saeb Erekat, said Israel would not transfer the money directly to Mr Abbas, but use it to pay Palestinian bills to Israeli utilities as it has in the past.

Mr Abbas is expected to hold long-awaited talks with Israeli Prime Minister Ehud Olmert in the coming days, Palestinian officials say. Mr Olmert told reporters the meeting would be "very soon" but gave no date.

Mr Abbas, speaking in the West Bank city of Ramallah, said preparations were underway for a meeting in which he will press Mr Olmert to release the tax money and Palestinian prisoners.

Mr Abbas's call for new presidential and parliamentary elections has triggered fierce fighting in Gaza between his Fatah forces and those loyal to Hamas.

Yesterday, Fatah and Hamas forces withdrew from the streets after a fresh ceasefire aimed at halting a slide to civil war took effect. The previous truce fell apart within 24 hours. "I call on our Palestinian people, all the factions, to show responsibility and restraint," Mr Abbas said.

Hamas spokesman Fawzi Barhoum said the ruling faction would prefer the tax money to go through the Hamas-led government.