The United States and Israel are considering a campaign to starve the Palestinian Authority of cash so Palestinians would grow disillusioned with their incoming militant Hamas rulers and return ousted Fatah moderates to power, The New York Times reported on Tuesday.

The newspaper, which quoted unidentified U.S. and Israeli sources, said this approach was being discussed at the highest levels of the U.S. State Department and the Israeli government. The ultimatum to Hamas will be either to recognize Israel's right to exist, abandon violence and accept previous Palestinian-Israeli agreements, or risk isolation and eventual collapse, the newspaper said.

Hamas swept Jan. 25 Palestinian elections on the strength of public dissatisfaction with Fatah's failure to eradicate lawlessness and corruption. It has repeatedly rejected Western demands to change its violent ways.

The strategy to withhold aid is not new. Since Hamas' electoral victory, the West has been threatening to withhold nearly $1 billion in annual aid to the Palestinians, though Russia's recent invitation to Hamas to visit Moscow, and France's support for the Russian approach, have cracked the united front.

Israel has also threatened to cut off monthly transfers to the Palestinians of about $50 million from taxes and customs it collects for them, once Hamas takes power. The new Palestinian parliament is to convene for its first session on Saturday, and a new Cabinet is expected to be appointed within weeks.

What is new is the strategy to force regime change by impoverishing the Palestinians even further, according to the newspaper report. As the U.S. and Israeli officials see it, Palestinians would grow so miserable that Palestinian leader Mahmoud Abbas, Fatah's leader, would dissolve parliament and call early elections within months, the New York Times said.

The strategy's risks include the probability that Hamas would try to make up withheld money from the rest of the Muslim world, and from private donors, and that Palestinians would blame the United States and Israel, and not Hamas, for their growing misery, the newspaper said. Hamas has already tried to drum up more money from the Muslim world, but has received commitments so far, and no cash.

Besides the cash squeeze, Israel has other leverage on the Palestinian Authority, including its control of the movement of people and goods between the non-contiguous West Bank and Gaza Strip, and the number of workers allowed into Israel, the newspaper noted.