JERUSALEM, Feb 24 (Reuters) The U.N. is urging donors to provide funds to keep the Palestinian Authority running after Israel starts withholding tax revenues next week, rebuffing the Jewish state's appeal for a suspension of aid, diplomats said today.
The U.N. stand has put a spotlight on disagreements over Israeli and Western efforts to put pressure on a Hamas-led Palestinian government to renounce violence, recognise Israel and abide by interim peace deals with the Jewish state.
The U.N.'s special envoy to the Middle East, Alvaro de Soto, will brief the Security Council on Tuesday on his talks in the region, aides said. He has expressed concern in recent days that an aid cut-off could lead to the collapse of the cash-strapped Palestinian Authority.
''We are advocating that the (Palestinian Authority) institutions should not be starved of funds to the point where they collapse,'' said a diplomatic source who spoke on condition of anonymity because of the sensitivity of the matter.
The U.N. is often at odds with Israel, which views the world body as pro-Palestinian.
Israel argues that a 2001 Security Council resolution obliging member states to cut off funds to ''terrorist'' groups applies to the Palestinian Authority starting on February 18, when Hamas was sworn in as the majority bloc in the parliament.
De Soto countered that Israel's decision to withhold the tax money it collects on behalf of the Palestinian Authority ran counter to the position taken last month by the so-called Quartet of major peace mediators -- the United States, the European Union, the United Nations and Russia.
DEBATE WITHIN QUARTET In its Jan. 30 statement, the Quartet said aid should continue to flow to the caretaker government, at least until Hamas forms a new cabinet.
''When we've seen the new government, there will be a review'' to decide whether to withhold aid, said a diplomatic source involved in the deliberations.
Hamas, which crushed President Mahmoud Abbas's long-dominant Fatah party in the January 25 Palestinian election, is not expected to complete the formation of a new government until next month.
Diplomatic sources said there was a debate within the Quartet over giving Hamas time to outline its policies before taking any action on aid.
The United Nations has not asked donor-nations for specific dollar-amounts for the Palestinian Authority, but Palestinian officials say it needs about 0 million a month to pay workers' salaries and keep Palestinian ministries functioning.
De Soto said after meeting with Abbas earlier this week that the U N hoped aid flows would continue in order to head off ''a fiscal crisis in the coming period.'' The U N stepped up its push after Israel's decision to withhold the transfer of the approximately million in tax revenues it collects each month.
Israel announced the decision after Washington, the Jewish state's biggest ally, asked the Palestinian Authority to return 50 million dollars of its own aid to ensure it does not reach Hamas, whose charter calls for the destruction of the Jewish state.
During a visit to the region this week, U.S. Secretary of State Condoleezza Rice urged Arab countries to deny aid to a Palestinian government led by Hamas if it refused to recognise Israel and meet other international demands.
Saudi Arabia and Egypt rejected her appeals, and Israel's arch-foe Iran said it would help fund the new government.
Quartet member Russia has also offered to provide emergency assistance to the Palestinians, and has invited Hamas leaders to Moscow for talks expected to take place as early as March 3.