Israel's Hamas Policy Could Boost Iran, Deepen Palestinian Woes

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Israel's decision to freeze money transfers to the Palestinian Authority (PA) spurred an Iranian call for Arab and Muslim countries to step into the financial vacuum and prop up the newly elected Hamas-led government.

As Iran's Supreme Leader Ayatollah Ali Khamenei encouraged Hamas to stick to its refusal to recognize Israel, Hamas prime ministerial nominee Ismail Haniyeh set about forming the first Palestinian government led by Islamic militants.

Mr. Haniyeh, who is reportedly trying to form a coalition within the next five weeks even though Hamas controls 74 of the 132-seat parliament, said that Palestinians had "lots of alternatives" to financial aid from Israel, Reuters reported Monday. That was highlighted by the visit to Iran of exiled Hamas political leader Khaled Mashaal.

Also Monday, the Muslim Brotherhood, which has associated groups in 86 countries, said it was launching a donation campaign for the new PA. And some Arab foreign ministers were to meet in Algiers to discuss sending the PA $50 million monthly.

But while Israel has stepped up efforts to isolate Hamas politically and economically, it's being careful to avoid triggering a humanitarian crisis. That, experts say, could erode international sympathy for Israel's boycott of the new government and bolster hostile outside influence from the Muslim Brotherhood or Iran.

"There's a careful balance between isolating Hamas and worsening the situation of the Palestinians," says Gerald Steinberg, a political science professor at Bar Ilan University, near Tel Aviv. "If the Palestinian economic situation gets even worse, that will create more pressure on Israel, and create friction between Israel and foreign governments.''

The stoppage of $50 million in monthly customs payments to the Palestinians has the potential to bankrupt the self-rule authority within months. It could also further impoverish an economy blighted by five years of fighting, say observers. And yet, Acting Israeli Prime Minister Ehud Olmert stopped short of sanctions that would have moved closer to an economic disengagement from the Palestinians.

That policy acknowledges sentiment for new progress toward a unilateral separation from the Palestinians, while recognizing that economic ties can't be severed overnight. Israel has already said that it won't turn off the electricity and water supply to the Palestinians, even as Mr. Olmert warned that the new Palestinian government is "becoming a terrorist authority."

"This is a lot of very harsh sounding words that have very little bite," says Gershon Baskin, cochairman of the Israel Palestinian Center for Research and Information. …

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