JERUSALEM (Reuters) - Israel plans to tighten a financial clampdown on Hamas-ruled Gaza, denying it access to funds including Palestinian tax revenues released to President Mahmoud Abbas, senior officials said on Tuesday.
Israel and the United States want to isolate Hamas economically, diplomatically and militarily in the Gaza Strip, which the Islamist group seized by force last week.
Israel and its Western allies have decided to open the financial taps to support the Western-backed emergency government set up in the West Bank by Abbas, the Fatah leader.
Senior Israeli officials, speaking on condition of anonymity, said Israel was discussing with the United States the scope of their Gaza embargo.
In addition to barring Palestinian tax funds transferred to Abbas from reaching Gaza to run Hamas-controlled government agencies and pay salaries, Israel is considering banning private transfers to individual Gazans through Western Union and other financial institutions, a senior Israeli official said.
Israeli officials said humanitarian supplies would not be cut off.
Israeli Prime Minister Ehud Olmert will meet U.S. President George W. Bush at the White House later on Tuesday.
"Gaza is a terrorist-controlled entity now," said the Israeli official, who is working with the Bush administration to isolate Hamas.
The United States and the European Union have thrown their support behind Abbas's new government, announcing they will end a 15-month-old economic embargo of the Palestinian Authority.
But it is unclear whether the EU will go along with U.S. and Israeli efforts to isolate Gaza, whose 1.5 million residents are aid-dependent.
Israeli officials estimated that $300 million to $400 million in Palestinian tax revenues would be transferred, short of the $700 million sought by Abbas. Israeli officials say the rest of the money has been frozen by court order.
"We will do it (transfers) in steps," said the senior Israeli official, who spoke on condition of anonymity.
The official said the return of the tax money came with at least one major condition attached: "No financial assistance can go to any entity or person with connections to the Hamas-run administration in Gaza."
"That means no salaries or direct transfers" to government workers in Gaza using the tax money, the official added.
A European Union aid programme known as the Temporary International Mechanism plans to continue paying monthly "allowances" -- approximately $360 each -- directly to the Palestinian Authority's non-security work force, including those in Hamas-controlled Gaza, EU officials said.
But an Israeli official and Western diplomats said Israel wants to scale back the European programme to only pay allowances to workers in Gaza's health sector to ensure hospitals keep functioning.
Abbas has yet to spell out what relationship his administration in the West Bank will have with Hamas authorities in Gaza. Gaza and the West Bank are separated by 45 km of Israeli territory.
Israel and the United States want Abbas to focus on trying to prevent any spill-over of the fighting from Gaza to the West Bank, where Fatah holds sway under Israeli occupation and where Hamas has threatened reprisals.
Ismail Haniyeh of Hamas has said he still considers a three-month-old unity coalition in which he is prime minister as the legitimate Palestinian government and accuses Abbas of participating in a U.S.-led plot to overthrow him.