Palestinians on verge of total chaos - report

JERUSALEM, June 13 (Reuters) The Palestinian territories are in a state of near civil war and just one act of violence, such as a high-profile assassination, could trigger total mayhem, an international think tank said today.

The International Crisis Group also said President Mahmoud Abbas's determination to hold a referendum on July 26 on a statehood proposal that implicitly recognises Israel risked igniting more fighting with the ruling Hamas militant group.

Abbas and the Hamas government have been locked in a bitter power struggle since the Islamists took office after trouncing the president's Fatah movement in January elections.

''Today the situation is but one tragic step -- the assassination of a senior Fatah or Hamas leader, for example -- from all-out chaos,'' the Brussels-based ICG said in a report.

In the latest internal violence, Fatah gunmen set fire to the West Bank office of Palestinian Prime Minister Ismail Haniyeh, a senior Hamas leader, yesterday after a day of running clashes between the rival camps. About 20 people have been killed in fighting in the Gaza Strip in the past month.

The report said the Hamas election win and the reaction of Fatah, which had dominated the political scene for decades, had worsened chaos and pushed the Palestinians to ''near civil war''.

''In this increasingly bloody power struggle, both camps are mobilising armed militias, stockpiling weapons, resorting to killings and spreading bedlam,'' the report said.

Abbas's referendum on a manifesto penned by Palestinian prisoners in an Israeli jail is at the heart of the tensions.

Hamas has labelled the referendum a coup attempt.

The proposal calls for a Palestinian state in the entire West Bank and in Gaza, thus implicitly recognising Israel.

The ICG report said the Palestinians were facing one of the most hostile external environments in their history.

The United States, the European Union and Israel have cut aid and other transfers to the government over Hamas's refusal to recognise the Jewish state, renounce violence and accept interim peace deals.

That has left the Palestinian Authority unable to pay salaries or deliver basic services.

Hamas is sworn to destroy Israel and last Friday ended a 16-month truce with the Jewish state.

The ICG report also criticised the policy of the Quartet of Middle East peace mediators in trying to find ways to back the moderate Abbas, saying this risked exacerbating internal strife.

The Quartet, comprising the United States, the European Union, Russia and the United Nations, is putting together an aid mechanism that would provide some assistance to needy Palestinians while bypassing the government.

The Quartet and other outside parties were counting on sanctions and dissatisfaction among Palestinians over their plunging economic fortunes to ensure the government's downfall, the report said.

But if its government fell, Hamas would not go quietly, the report added.

''Hamas almost certainly would revert to internal violence or violence targeting Israel, causing maximum chaos,'' it said.

REUTERS SHB KP1738