GAZA CITY, Gaza Strip – The United States lifted sanctions on the Palestinian Authority Monday, four days after the Islamic Hamas movement seized the Gaza Strip, leaving President Mahmoud Abbas to set up a rival Fatah-only government in the West Bank.
U.S. Secretary of State Condoleezza Rice said she had informed new Palestinian Prime Minister Salam Fayyad of the decision in phone call earlier Monday.
"I told him the United States would resume full assistance to the Palestinian government and normal government to government contacts," she told reporters at the State Department.
The European Union, which traditionally has been the Palestinian Authority's largest donor, and Israel also moved toward lifting embargoes on the new Palestinian government.
Russia also said it supported Abbas's move to form an emergency government, but urged him and Islamic Hamas to seek a "wide-ranging dialogue."
Abbas hurriedly swore in the new Cabinet on Sunday, days after dissolving a unity government between his Fatah movement and Hamas, following that group's violent takeover of the Gaza Strip.
The rift has left the Palestinians with two governments — a Fatah-allied government in the West Bank and the Hamas leadership in Gaza. Abbas seeks peace with Israel, whereas Hamas, which killed hundreds of Israelis in suicide bombings, is sworn to the Jewish state's destruction.
The dispute has endangered the Palestinians' goal of forming an independent state in the two territories, which are located on opposite sides of Israel.
Meanwhile, at least one Palestinian was killed and 15 wounded as gunmen and Israeli soldiers exchanged fire Monday at the Erez crossing between Israel and Gaza.
The Israeli army said the casualties were all caused by the Palestinian attackers, who hurled a hand grenade and fired bursts of automatic weapons fire at a group of people huddled in a concrete tunnel on the Gaza side of the crossing as they sought to flee the coastal strip.
Abu Mujahid, spokesman for the militant Popular Resistance Committees, said two of his group's men fired at soldiers at Erez and the Israelis fired back, hitting civilians.
An eyewitness, who refused to give his name for fear of retribution, said four Palestinian gunmen raced past people at the crossing and opened fire on the Israelis, setting off the exchange.
Since Hamas took over Gaza, the Erez crossing has been crowded with Gazans trying to flee. Israel has let only a few through the crossing.
The international community has largely rallied behind the Abbas government, led by Prime Minister Salam Fayyad, an internationally respected economist.
EU foreign policy chief Javier Solana announced in Luxembourg on Monday that the 27-nation bloc would resume direct financial aid to the Palestinian Authority now that Hamas is no longer part of the government.
"We absolutely have to back" the new government in the West Bank, said Luxembourg Foreign Minister Jean Asselborn. "The question of today is: How can we help the 1.4 million people in Gaza?"
Riyad al-Malki, the new Palestinian minister of information and justice, welcomed the announcement.
"There are encouraging steps. We hope that these steps will be carried out quickly," he said.
Both the Haniyeh and Fayyad governments profess to represent Palestinians in both the West Bank and Gaza. To drive home that point, al-Malki said the EU aid would also go to pay salaries for government employees in Gaza.
Israel has said it would consider unlocking $550 million in customs duties it has withheld from the Palestinians since Hamas took power.
The White House said President Bush called Abbas on Monday "to express support for him and the Palestinian moderates."
Abbas told Bush that "this is the time to resume the political negotiations and to revive the hope of the Palestinian people," Abbas spokesman Nabil Abu Rdeneh said.
The two men spoke a day before Bush is to meet with Israeli Prime Minister Ehud Olmert in Washington. On Sunday, Olmert said his country would be a "genuine partner" of the new Palestinian government.
He said he and Fayyad "discussed the need to address the humanitarian situation in Gaza and make sure the people of Gaza don't suffer."
The Russian Foreign Ministry said it hoped the Cabinet would "normalize" the situation and restore humanitarian aid supplies.
The ministry said Moscow expects that "the new emergency Cabinet of the Palestinian National Authority will take all necessary actions for the normalization of the situation, improving the humanitarian situation in the Palestinian territories and most importantly, halting the inter-Palestinian conflict.
"This requires the establishment of a wide-ranging dialogue between all Palestinian political forces, including Hamas," the ministry said.
The stark division between Gaza and the West Bank since Hamas' takeover of Gaza has raised fears about a possible humanitarian crisis in Gaza.
Over the weekend, panicked Gaza residents stocked up on basic supplies, fearing shortages of food, fuel and other staples. But the run on markets had subsided by Monday, with Gazans reassured by Israeli assurances that humanitarian aid would go through.
Fears were alleviated in part after the sole provider of gasoline to Gaza, Israeli company Dor Alon, renewed shipments cut off last week during the heavy fighting.
Israeli Foreign Ministry spokesman Mark Regev said Israel was aware of the humanitarian dangers facing the Gaza Strip. But he said Israel had not yet figured out a way to deal with the Hamas rulers of Gaza.
Hamas routed the poorly disciplined, squabbling Fatah in Gaza despite being heavily outnumbered. On Sunday, Abbas formed a committee Sunday to investigate the Fatah collapse, aides to the Palestinian leader said.
Abbas also dissolved the months-old Palestinian National Security Council on Monday, then reconstituted it without Hamas representation in a further bid to weaken the Islamic group.
• Visit FOXNews.com's Mideast Center for more in-depth coverage.
The Associated Press contributed to this report.