JERUSALEM, June 24 (Reuters) - Israel agreed on Sunday to transfer hundreds of millions of dollars to Palestinian President Mahmoud Abbas's new government, a move Hamas dismissed as "bribery" to fuel tensions with Islamists controlling Gaza.
The money, some of the Palestinian tax revenues withheld by Israel since Hamas won election in 2006, is part of an initial package of benefits to bolster Abbas that Prime Minister Ehud Olmert is likely to announce at a summit in Egypt on Monday.
Israel wants to isolate Hamas economically, diplomatically and militarily in the Gaza Strip, where the Islamist group seized control more than a week ago, while allowing funds to flow to Abbas's emergency administration in the West Bank.
Ismail Haniyeh, prime minister of the Hamas-led government that was dismissed by Abbas, called Israel's release of the tax money "financial bribery" and "political blackmail" aimed at "deepening the crisis and divisions" between Fatah and Hamas.
Haniyeh accused Abbas, the Fatah leader, of violating Palestinian law by appointing an emergency administration after his forces were routed in Gaza.
In his first major speech since the fighting ended just over a week ago, Haniyeh said Abbas's actions had resulted in the separation of Hamas-ruled Gaza from a Fatah-dominated West Bank.
An Israeli government official said Olmert's cabinet approved the transfer of about $350 million, short of the $700 million the Palestinians say Israel is holding. Israel says courts have frozen some of the funds to cover Palestinian debts.
The money due to be released by Israel will be given to Abbas's government in stages, the official said, once a mechanism is in place to ensure it does not reach Hamas in Gaza.
"The Israelis should release all our money. These are Palestinian, not Israeli, funds," Saeb Erekat, a senior Abbas aide, told Reuters after the cabinet decision.
Olmert spokeswoman Miri Eisin said the Israeli leader and Abbas would discuss on Monday "the transferring of the funds" to the new Palestinian government.
Their talks, Eisin said, also would focus on "access of movement -- ways to improve dramatically the quality of life of the Palestinians, first and foremost in the West Bank", a reference to easing travel restrictions in the occupied area.
"We will attempt in a sober and cautious manner to take advantage of the opportunities created as a result of the recent events in the Gaza Strip, in order to build a diplomatic process with the Palestinians," Olmert told reporters.
Israel killed one Islamic Jihad militant and wounded another in an air strike on a vehicle in Gaza late on Sunday. It was the first Israeli attack on a car in Gaza in several weeks.
Islamic Jihad has claimed responsibility for more cross-border rocket attacks against southern Israel than any other group since Hamas took control of Gaza.
Olmert said freeing up the tax revenues would "gradually help the new Palestinian government -- one that is not a Hamas government".
The cabinet decision also cleared the way for Israel to resume monthly tax revenue transfers of about $50 million.
Since Hamas's violent takeover of Gaza, Olmert has spoken of laying the groundwork for resuming talks with Abbas on Palestinian statehood, but has stopped short of accepting his call for immediate negotiations on a land-for-peace accord.
Olmert will meet Abbas, Egyptian President Hosni Mubarak and Jordan's King Abdullah on Monday in the Red Sea resort of Sharm el-Sheikh.
Israel plans to choke off all but humanitarian and basic supplies to Gaza, home to 1.5 million people. Olmert pledged Israeli supplies of petrol and electricity would continue. (Additional reporting by Mohammed Assadi in Sharm el-Sheikh and Nidal al-Mughrabi in Gaza and Ori Lewis in Jerusalem)
- Reuters - Thomson Reuters Foundation
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