AFTER HAMAS TAKES GAZA, ISRAEL DECIDES FATAH NOT SO BAD, AFTER ALL

Analysis by Peter Hirschberg

(IPS) JERUSALEM -- As Hamas forces seized control of the Gaza Strip this week, Israeli leaders sat on the sidelines, watching with dismay but not intervening.

But now that the Islamic movement has vanquished the more moderate Fatah forces and established its control over the coastal strip and its population of 1.4 million Palestinians, the Israeli government's way of confronting this new reality is becoming clear: reward the moderates and punish the extremists.

Israeli Prime Minister Ehud Olmert chatted by phone Friday with Egyptian President Hosni Mubarak and assured him that Israel would adopt measures to boost Palestinian President Mahmoud Abbas, who heads the more moderate Fatah movement.

A statement released by the Prime Minister's Office said Olmert had told the Egyptian leader that Israel would do all it can "to help moderates in the Palestinian Authority after the radical Hamas took Gaza by force."

The Israeli hope is that the Palestinian people will ultimately turn their backs on Hamas. The first step is likely to be Israel's readiness to release to Abbas some of the hundreds of millions of dollars it owes the Palestinian Authority in the form of customs duties it collects, and which it froze after Hamas came to power last year.

Israel, like western countries, imposed an economic embargo on the Palestinian Authority after Hamas beat Fatah in parliamentary elections 17 months ago and refused to accede to international demands that it recognize Israel and renounce violence.

But the decision by Abbas on Thursday to disband the Hamas-led national unity government and declare a state of emergency has opened the way for Israel to free up the frozen tax revenues.

"The fact that President Abbas has fired the Hamas government is a very positive move in our opinion, and makes it easier to deal with and help the moderates," said Miri Eisin, a spokeswoman for Olmert.

It won't be the first time that Israel has adopted a policy of trying to bolster Palestinian moderates. But it has not always been effective in executing this approach.

Neither former prime minister Ariel Sharon nor Olmert have been particularly generous in making concessions to Abbas. Earlier this year, Olmert promized to implement a series of measures to make life easier for Palestinians in the West Bank, especially relieving stifling travel restrictions. But on the ground, little changed as almost all of the roadblocks across the West Bank, set up by Israel to keep suicide bombers out of its cities, remained in place.

Israel's decision to withdraw unilaterally from Gaza in August 2005 -- without negotiating with the Palestinians -- also undermined moderate Palestinian leaders. Hamas, which had argued against talking to Israel and in favour of armed attacks, appeared vindicated -- Israel was withdrawing its forces from Gaza, pulling down all the settlements it had built there, and the Palestinians had not had to make any concessions.

When Olmert arrives in Washington next week for a meeting with U.S. President George W. Bush, he is likely to find a like-minded president. But the United States will want him to go further than just ending the moratorium on funds. They will want the Israeli leader to make good on his unfulfilled pledges to ease travel restrictions in the West Bank.

In Gaza, by contrast, Israel is likely to tighten the embargo in some areas, especially along the Gaza-Egypt border where militants have been smuggling weapons into the strip through underground tunnels. For now, the military has received clear instructions not to intervene in Gaza.

Israel is also likely to try to accentuate the differences between Gaza and the West Bank, insisting that they must now be dealt with as separate entities. The government is even said to be contemplating declaring Gaza an enemy entity.

Gaza and the West Bank are, in reality, now two distinct entities -- not just geographically. Each will have its own government: Hamas has rejected Abbas's decision to dismiss Prime Minister Ismail Haniyeh and disband the government, saying it is an attempt to overturn the results of a legitimate election.

Reflecting the differences between the two areas, the Israeli media has this week taken to referring to the more impoverished and religiously devout Gaza Strip as "Hamastan," while it refers to the less devout West Bank, with its more educated population of some two million, as "Fatahland."

Israel could attempt to restart talks with Abbas, with the view to reaching an agreement in the West Bank alone. But that is an unlikely scenario, since the Palestinians view the West Bank and Gaza as integral parts of a future state, and Abbas will be disinclined to accept an invitation to talks that are based on separating the two areas.

On Sunday, Olmert will discuss an idea with UN Secretary General Ban Ki-moon in New York that has been revived in the last week -- the stationing of an international peacekeeping force in Gaza. The Israeli leader has already asked his National Security Council and the foreign ministry to draw up a position paper on the idea.

It is difficult, though, to find an Israeli official who believes an international force will ever arrive in Gaza. Neither western countries nor Arab states, they say, will ever be prepared to send troops to police the narrow alleyways of Gaza's densely populated, impoverished refugee camps.