Israel will try to delegitimize the new Palestinian Hamas government by insisting that international aid be given to humanitarian organizations and not the PA authorities.
This was decided during a debate by Foreign Minister Tzipi Livni and senior officials on international policy toward the new Palestinian government.
The international community presented three prerequisites for negotiating and aiding the new Palestinian government: renouncing violence, recognizing Israel and accepting the existing agreements.
However, it does not want to cause an economic crisis and "see hungry children," a Jerusalem source said.
"It's like a meeting with a dietician. We have to make them much thinner, but not enough to die," said the prime minister's adviser Dov Weissglas.
Some officials suggested separating the Palestinian population, which would continue receiving the aid, and its government. This was also the American administration's position, it was said at the meeting.
Israeli National Security Council head Giora Eiland questioned whether separating the aid from the PA would be effective at all, since the overwhelming majority of Palestinian workers in the humanitarian organizations are Hamas people.
Minster Livni said Israel would suspend transferring the tax funds it collects for the PA, a step to which, Jerusalem assumes, the American administration would not object.
Acting Prime Minister Ehud Olmert is to decide tomorrow on Israel's reaction to Hamas' rise to power in the PA.
Defense Minister Shaul Mofaz will meet heads of the defense establishment to prepare a summary of its proposals to reduce the ties with the PA, to present to Olmert.
His ministry has a plan for swift closure of the Erez and Karni checkpoints in the Gaza Strip and turning them into international border crossings.
An interministerial team headed by Weissglas and another headed by Eiland will also present proposals to Olmert.
Olmert will decide whether to start punitive measures toward the PA immediately or first present an ultimatum to PA Chairman Mahmoud Abbas to keep his promise to dismantle the terror organizations.
Next week White House envoys Elliot Abrams and David Welch are due to visit the region for talks of how to deal with Hamas' rise to power.
Putin, Quartet envoy discuss Mideast
Russian President Vladimir Putin yesterday met the envoy of the Quartet of Middle East peace mediators to discuss the tense situation in the region after last month's surprise election victory of militant Palestinian group Hamas.
Envoy James Wolfensohn, the former president of the World Bank, said he had come to Moscow to seek advice as well as to inform the Russian leadership of his work.
"I am here both to report to you and get your guidance," he said. Russia holds the current chairmanship of the Group of Eight industrialized nations.
Putin told Wolfensohn he was "very glad to have an opportunity to talk about the situation currently developing in the region."
The Hamas victory has prompted threats from the U.S. and EU to cut off massive aid to the Palestinians unless the group recognizes Israel and renounces violence.
'Moscow invite encourages Hamas'
Putin's invitation to Hamas leaders for talks in Moscow could encourage the Palestinian militant group's hardline approach to Israel, President Moshe Katsav said yesterday.
"There should not be any erosion in the approach of the international community [regarding Hamas]," Katsav told journalists in Athens.
"This invitation will maybe encourage Hamas not to change their policy," Katsav said.
Katsav, who started a three-day official visit to Greece on Tuesday, denied Israel was applying pressure for the international isolation of the Palestinian authority.
"We have no intention of boycotting Hamas," he said. "If Hamas continues the policies of the previous administration ... we are ready to negotiate with the Hamas administration.
"If they will not change their policy, reality will not permit us really to negotiate seriously ... It is not a question of isolation."