Israeli PM Ehud Olmert, right, and FM Tzipi Livni, attend the weekly cabinet meeting in Jerusalem, 24 Jun 2007

Israel's Cabinet approved the release of frozen tax funds to Palestinian President Mahmoud Abbas, who heads a moderate, western-backed government in the West Bank. The aim is to strengthen Mr. Abbas and to isolate Hamas after its violent takeover of the Gaza Strip.

Israel has withheld about $600 million in tax revenues since Hamas took power in March of last year. Officials say Israel plans to release about $350 million in stages, once a mechanism is in place to insure that the money will not reach the Hamas-led regime in Gaza.

Prime Minister Ehud Olmert told the Cabinet that Israel wants to cooperate with President Abbas because he is committed to a peaceful resolution of the Middle East conflict. By contrast, Hamas seeks the destruction of the Jewish state.

Mr. Olmert will present the aid package at a summit meeting with Mr. Abbas in the Egyptian Red Sea resort of Sharm el-Sheikh on Monday. Egyptian President Hosni Mubarak will host the meeting and Jordan's King Abdullah will also attend.

Mr. Olmert said that at the summit, Israel would present its demands regarding security and the war on terror. He did not elaborate, but in the past Israel has demanded that Mr. Abbas disarm terrorist groups as called for in the internationally-backed "Roadmap" peace plan.

Hamas reacted angrily, saying Israel is effectively paying Mr. Abbas to crush the Islamic resistance. But Hamas spokesman Sami Abu Zuhri said they will not succeed.

Hamas represents a large portion of the Palestinian people and isolating or weakening the group is impossible, he said.

Aides to President Abbas complained that Israel is only releasing part of the withheld tax revenues. They said it is Palestinian money, and all of it should be released.