Israel to Halt Financial Transfers to Palestinians

Israel agreed to make a crucial payment of $54 million in tax and customs revenues to the Palestinians, but officials said future transfers will be halted once Hamas militants form the next Palestinian government.

The decision was taken shortly after a flare-up of violence. Israeli forces pounded the northern Gaza Strip with missiles and artillery fire, killing three Palestinian militants. Hours later, a Palestinian assailant killed one woman and wounded four other people in what police called a politically motivated stabbing in central Israel.

Israel collects millions of dollars in taxes and customs duties for the Palestinians, transferring the funds to the Palestinian Authority each month. Israel delayed the most recent payment last week to protest Hamas' victory in Palestinian legislative elections, deepening a financial crisis for the cash-strapped Palestinian Authority.

Israeli Cabinet minister Zeev Boim said before Sunday's government vote that the money was being transferred because Hamas is not part of the Palestinian government yet.

The Cabinet said it would review the payments each month. Boim said the funds would be cut off if Hamas, which has killed hundreds of Israelis in suicide bombings, does not change its ways.

"If and when Hamas rises to power and supports policies according to its jihad principles of destroying Israel, not another dollar will be transferred," he told Israel Radio.

The United States and Europe have threatened to cut off tens of millions of dollars in Western aid to the Palestinians if Hamas does not renounce violence, disarm and end its calls for Israel's destruction. The United States and European Union list Hamas as a terrorist group, making it difficult, if not illegal, for them to give money to a government led by Hamas.

So far, Hamas has rejected the calls and responded to the threats by soliciting more money from the Arab and Muslim world. Under Palestinian law, Hamas has until early April to put together a new government, although officials say they expect to complete the task before the end of this month.

Mushir al-Masri, an incoming Hamas lawmaker from Gaza, said threats of cutting off money from a Hamas-led government would not "blackmail" the militant group.

Hamas leaders set off on a tour of Arab and Muslim states Sunday to drum up financial and political support.

Mohammed Abu Teir, another incoming Hamas lawmaker, said the group already has lined up $100 million in funding from an Arab country.

"They are ready for us," he said, declining to identify the donor.

The money turned over by the Israelis, collected under existing Israeli-Palestinian accords, pays for a large chunk of the Palestinian Authority's payroll of 137,000 government workers.

Last week, the Palestinian government failed to pay its monthly salaries because its coffers are empty. Continuing failure to meet the payroll could lead to widespread layoffs and ignite violence in already volatile areas.

As the Palestinians scrambled to find enough cash to keep afloat, the Palestinian attorney general said Sunday that senior officials in the authority may have stolen billions of dollars of public funds.

Attorney General Ahmed Al-Meghani told a news conference that his office is investigating dozens of corruption cases involving companies with ties to the Palestinian Authority.

"I cannot count the numbers because I'm not an accountant. It might be billions of dollars. When I end my investigation, I'm going to outline all the numbers in detail," Al-Meghani said.

He said 25 suspects have been arrested and international warrants have been issued for 10 others who fled the area. He declined to identify the suspects because the investigation is proceeding, but he said the probe included the Palestinian oil, tobacco and broadcasting corporations.

Government corruption was a major factor in Hamas' decisive victory over the long-ruling Fatah party in Jan. 25 Palestinian elections.

Early Sunday, Israeli aircraft fired three missiles at a facility of the militant Al Aqsa Martyrs' Brigades in Gaza City early Sunday, killing three militants and wounding five, Palestinian hospital officials said.

Hours later, a Palestinian man riding a bus in the Israeli city of Petach Tikva took out a knife and began stabbing passengers. Police said one woman was killed, and Israel's national rescue service said four others were wounded. There was no immediate claim of responsibility.

Elsewhere in Gaza, Israel reopened the key Karni crossing whose closure more than three weeks ago severely damaged the battered Gaza economy.

Palestinian officials estimated that the Gaza economy lost $30 million due to the closure on intelligence that militants were planning a terror attack there. They said 135 tons of fruits and vegetables spoiled as they waited to cross for delivery to Israeli and European markets.