U.S. to lift sanctions on new Abbas government

JERUSALEM Sun Jun 17, 2007 1:16am EDT

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JERUSALEM (Reuters) - The United States plans to lift a ban on direct aid to the emergency government that Palestinian President Mahmoud Abbas is forming following Hamas's takeover of the Gaza Strip, Washington's envoy said on Saturday.

Abbas ordered the Hamas-led government disbanded on Thursday after the Islamist group's bloody takeover of the Gaza Strip. Hamas said Abbas's order amounted to a coup and that Prime Minister Ismail Haniyeh, a Hamas leader, remained in power.

"I think ... there won't be any obstacles, economically and politically, in terms of reengaging with this (Abbas-appointed) government. Yes, they will have full support," U.S. Consul-General Jacob Walles told Reuters in an interview.

Walles said Washington and its partners in the Quartet of Middle East mediators -- the European Union, Russia and the United Nations -- will make announcements next week about lifting the economic sanctions that have been in place since Hamas came to power in March 2006.

In a statement, the Quartet voiced support for Abbas and concern about humanitarian conditions in Gaza but did not say whether it would ease its ban on direct aid to the Palestinian Authority.

Walles said the Bush administration wanted to start providing "significant" financial assistance to the Palestinians, both for economic development and for Abbas's security forces.

"It's premature to get into details right now," he said.

Senior Israeli officials said Prime Minister Ehud Olmert and U.S. President George W. Bush would discuss at a meeting next week a series of "gestures" they planned to take, including the release to Abbas of a portion of the Palestinian Authority's tax revenues being withheld by Israel.

Israeli officials estimated that $300 million to $400 million in Palestinian tax revenues could be transferred, short of the $700 million sought by Abbas. Israeli officials say the rest of the money has been frozen by court order.

U.S. and Israeli officials said the goal of easing the embargo was to strengthen Abbas, his secular Fatah faction and other "moderates" in the West Bank, while isolating Hamas Islamists who seized control of the Gaza Strip in fierce fighting.

An economic and diplomatic embargo of the Hamas administration in Gaza would remain in place and would be tightened in some areas, particularly along the Egyptian border to prevent smuggling of weapons.

Western donors led by the United States cut off direct financial aid to the Palestinian Authority in March 2006 after Hamas defeated Abbas's Fatah faction in parliamentary elections.

Coupled with Israel's withholding of tax revenues that it collects on the Palestinians' behalf -- the Authority's main domestic source of funding -- the sanctions have pushed the Palestinian Authority to the brink of financial collapse.

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