U.S. offers $300 million to Gaza, rest to Abbas

By Sue Pleming

SHARM EL-SHEIKH, Egypt (Reuters) - U.S. Secretary of State Hillary Clinton will pledge $900 million for the Palestinians at a donors' conference in Egypt, but only a third of that is earmarked for Gaza, a U.S. official said on Sunday.

State Department spokesman Robert Wood said the pledge at Monday's conference amounted to $300 million to meet "urgent" humanitarian needs in Hamas-ruled Gaza after Israel's military invasion in December, and would be funneled through U.N. and other organizations.

"Hamas is not getting any of this money," Wood told reporters in the Egyptian coastal resort, where Clinton arrived late on Sunday on the first leg of a week-long trip to the Middle East and Europe.

About $200 million of the U.S. pledge would help cover budget shortfalls of the Western-backed Palestinian Authority (PA) and the remainder was for economic reforms, security and private sector projects run by the PA, said Wood.

Monday's conference is aimed at raising funds to help with the post-conflict recovery of Gaza after Israel's offensive, but Washington also wants it to bolster President Mahmoud Abbas's Palestinian Authority, which governs the Israeli-occupied West Bank.

"We have to shore up the Palestinian Authority," said Wood.

How much of the U.S. contribution will ultimately materialize is unclear as the funds have to be agreed by the U.S. Congress, which is more focused on fixing an economic crisis, and suspicious that some of the aid will reach Hamas.

U.S. aid contributions are further complicated by reconciliation talks among Palestinian factions, including Hamas, which the United States brands a terrorist group.

The United States and its so-called Quartet partners in Middle East peacemaking -- Russia, the United Nations and the European Union -- have demanded that Hamas recognize Israel, sign on to Israeli-Palestinian accords and renounce violence before it can be accepted as a partner.

FLEXIBILITY?

But a senior European diplomat said some European countries were looking at how they could be "more flexible" by dealing with a potential Palestinian government that included Hamas, if the wide rift between the two factions could be bridged.

Without a unified government, funds raised at the conference could not be distributed properly, the diplomat said.

Wood said the U.S. position was firm on Hamas meeting the three conditions, and Clinton would reiterate this in informal talks with other Quartet members on Monday.

"We must not send mixed signals to Hamas," said Wood. Clinton did not speak to reporters in person.

After the conference in Egypt, Clinton travels to Jerusalem to see Israeli politicians, who are trying to cobble together a new government after February elections.