Ahmadinejad, Iran - AP - 20.7.11
Iranian President Mahmoud Ahmadinejad on July 20, 2011. Photo by AP
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Iran has reduced or possibly halted its funding of Hamas after the Islamist movement, which rules the Gaza Strip, failed to show public support for Syrian President Bashar Assad, diplomats said on Sunday.

Hamas has denied that it is in financial crisis but says it faces liquidity problems stemming from inconsistent revenues from tax collection in the Gaza Strip and foreign aid.

The West refuses to have diplomatic relations with the group because it refuses to recognize Israel and renounce violence. It receives undisclosed sums of cash from Iran, which has acknowledged providing financial and political support to Hamas.

One diplomat, who asked not to be identified, said intelligence reports showed that Iran had reduced funding for Hamas.

Other diplomatic sources, also relying on intelligence assessments, said the payments had stopped over the past two months.

The diplomats cited Iran's displeasure over Hamas' refusal to hold rallies in support of Tehran's ally, Assad, in Palestinian refugee camps in Syria after an uprising against his rule. Hamas' leadership outside the Gaza Strip is headquartered in Damascus.

Hamas is also widely believed to receive money from the Muslim Brotherhood, Egypt's most popular and organized Islamist political force. Diplomats said those payments also may have been reduced because the Brotherhood has diverted funds to support the so-called Arab Spring revolts.

In a sign of a cash crunch, the Hamas government in Gaza has failed to pay the July salaries of its 40,000 employees in the civil service and security forces. Hamas leaders promised full payments in August, but not all employees received their wages as scheduled on Sunday.

In 2010, Hamas put its Gaza budget at 540-million dollars, with local revenues from taxes on merchants and on goods brought in from Israel and through smuggling tunnels under the Egyptian border accounting for only 55-million dollars.

Since seizing the Gaza Strip in 2007 from forces loyal to Palestinian President Mahmoud Abbas' Fatah movement, Hamas has run several investment projects in former Israeli settlements in the enclave.

They include farms, greenhouses, entertainment facilities and restaurants in areas Israel withdrew from in 2005.