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Prime Minister Ehud Olmert will tell U.S. President George W. Bush at the White House Tuesday that he does not intend to miss the chance for diplomatic progress created by the events in the Gaza Strip. Olmert and Bush are expected to discuss ways of stabilizing and strengthening the rule of Palestinian Authority Chairman Mahmoud Abbas.

Olmert is expected to tell Bush that Hamas' rise must be prevented in the West Bank and that "pragmatic" elements in the PA should continue exerting pressure on Hamas in Gaza.

A government source in Jerusalem said Abbas was under conflicting pressures. On the one hand, there are efforts to return him to a unity government with Hamas; on the other, the U.S. and Israel support Abbas' new position of seeking to establish a Fatah government in the West Bank. Olmert is prepared to release PA tax money frozen in Israel, but will wait to see whether the new Palestinian emergency government headed by Salam Fayad stabilizes following today's swearing-in ceremony. (See full story, Page 2)

Senior Israeli officials said Olmert and Bush would discuss a series of "gestures" they planned to take, including the release to Abbas of a portion of the Palestinian Authority's tax revenues being withheld by Israel.

Israeli officials estimated that $300 million to $400 million in Palestinian tax revenues could be transferred, short of the $700 million sought by Abbas. Israeli officials say the rest of the money has been frozen by court order.

U.S. and Israeli officials said the goal of easing the embargo was to strengthen Abbas, his secular Fatah faction and other "moderates" in the West Bank, while isolating Hamas Islamists who seized control of the Gaza Strip in fierce fighting.

An economic and diplomatic embargo of the Hamas administration in Gaza would remain in place and would be tightened in some areas, particularly along the Egyptian border to prevent the smuggling of weapons.

The source added that Israel would not enter the Gaza Strip if Hamas did not fire on Israel, and Israel would not take responsibility for a million and a half Palestinians. "The world will have to do its part. We won't go back to civil administration in Gaza," the source said. Olmert left last night for the U.S., and will head to Washington tomorrow for preparatory talks ahead of his meeting with Bush.

Olmert will also call for an international arms embargo against Iran and Syria, which continue to supply weapons to Hezbollah, and to extend and bolster UNIFIL in southern Lebanon.

Olmert and Bush will also discuss the Iranian nuclear threat. During the strategic dialogue last month between Israel and the U.S., it was agreed that another evaluation would be made at the end of the year on sanctions with Iran. According to the government source, "then we will prepare for harsher sanctions or something else and different."

According to reports reaching Jerusalem, the middle class and business community in Iran are concerned about economic sanctions.

Olmert will propose to Bush an increase in "external sanctions" beyond the U.N. Security Council resolution, such as stopping investment by American institutions in firms doing business in Iran, stopping Iranian citizens from visiting Western countries and limiting contact with Iran's nuclear program.

Shalit deal may be closer

The Egyptian security delegation, which was forced to leave the Gaza Strip due to the battle between Hamas and Fatah, will continue to mediate between Israel and the Palestinians to release kidnapped Israeli soldier Gilad Shalit.

Sources in Israel said they believed that in a few days, assuming the situation in Gaza calms down, efforts at brokering a deal will be renewed. The sources based their evaluation on the fact that Hamas, the senior organization involved in holding Shalit, still needs a deal to present an achievement to the families of prisoners in Israel.

The defeat of Fatah in Gaza may even increase the chances of a deal with Israel, by which Hamas can show the international community it can be dealt with and that complete anarchy does not reign in the strip.

In this context, statements by senior Hamas leaders yesterday might refer to a release in the near future of the kidnapped BBC journalist Alan Johnston, held by the Dormush clan. However, Israel believes it will be easier to bring about Johnston's release than Shalit's.