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The United States said Monday it would judge the new Palestinian cabinet on whether it uproots terrorists - and not on its ties to Palestinian Authority Chairman Yasser Arafat.

The formation of the new cabinet leaves Arafat in control of security forces. The Bush administration wanted security forces to be placed under a single interior minister, but Arafat put a hand-picked confidant, Hakam Balawi, into the post.

Balawi's appointment was a clear victory for Arafat. Qureia had been trying for weeks to get his own candidate, General Nasser Yussef, into that slot.

As interior minister, Balawi - a member of Fatah's Central Committee and one of Arafat's close associates - will control three of the PA's eight security forces: the Preventive Security Service, the police and civil defense.

Still, the State Department said the cabinet would be judged on its performance, not on how it was set up.

"Whatever the structure, good or bad, the only criterion that matters is dismantling the terrorist groups," said State Department spokesman Richard Boucher.

Boucher said this has been U.S. policy all along. "The policy on Arafat hasn't changed at all," he said. "We think he is a failed leader."

However, Qureia himself has said he will not order a confrontation with the violent groups, preferring to negotiate an end to the attacks.

U.S. diplomats are in touch with the new government, Boucher said.

U.S. President George W. Bush, in a break with previous presidents, has refused to deal with Arafat. While much of the world's nations consider Arafat the legitimate leader of the Palestinian people, Bush has implicated Arafat in terrorism against Israel and in financial irregularities.

Boucher said there was no answer yet to the question of whether the new government was "fatally flawed" because of its ties to Arafat.

Israel is likely to open a dialogue with Qureia's new government once it is sworn in, government sources in Jerusalem have predicted.

"We are ready to continue with negotiations," Prime Minister Ariel Sharon said Monday, while setting a key condition: starting the process of dismantling violent groups. "On this there can be no compromise," Sharon told visiting French Jewish leaders.

Arafat's advisor Nabil Abu Rudeineh said Monday that after the new government is installed, talks with Israel will be possible, the Itim news agency reported. He said such meetings would have to be based on previous agreements and the will to carry out the road map.

In another development, Arafat's national security adviser, Jibril Rajoub, attacked the Bush administration, saying it was controlled by Zionist groups and biased in favor of Israel. "The word 'Arab' causes them [U.S. officials] nausea and revulsion," Rajoub said in a recent interview with the London-based daily Al Haqaeq.