Israel-Palestinian summit postponed amid discord

JERUSALEM, June 6 (Reuters) Palestinian President Mahmoud Abbas today called off a summit with Israeli Prime Minister Ehud Olmert, seeking commitments Israel will release frozen Palestinian funds and take other steps.

''Abbas will not meet Olmert unless he responds to Palestinian demands, or at least some of these demands,'' Palestinian Foreign Minister Ziad Abu Amr said.

Olmert and Abbas had been due to meet in Jericho tomorrow for what would have been their first encounter in the occupied West Bank, reviving US-brokered talks that are supposed to focus on aspects of Palestinian statehood but have been stalled since April.

Olmert told British Prime Minister Tony Blair by telephone ''it was the Palestinians who had requested the postponement for their own reasons'', Olmert's office said. Government spokesman David Baker said Olmert was ready to meet Abbas at ''any time''.

Olmert wrote in a British newspaper that Israel was prepared to make ''painful concessions'' to achieve peace with the Palestinians and was ready to discuss with Arab states their land-for-peace initiative.

After a meeting with his security cabinet, Olmert's office said Israel was interested in peace with Syria but stopped short of signalling any change in Israel's refusal to renew talks with Damascus last held in 2000.

Ahead of the planned Olmert-Abbas summit, negotiators had been haggling over Israeli confidence-building measures, including release of Palestinian tax funds Israel has withheld since Islamist Hamas came to power in 2006 and an easing of travel restrictions in the West Bank.

Olmert has been under heavy US pressure to make gestures that could strengthen Abbas's secular Fatah faction in its power struggle with Hamas, which leads a Palestinian unity government.

Saeb Erekat, an Abbas aide, said the Palestinians wanted word from Israel it would free up the tax revenues, estimated by Palestinian officials at some 700 million dollars.

''We are not setting conditions but these are points that should be agreed upon (before the meeting),'' he said.

FUNDING DISPUTE Ahead of the planned talks, Olmert's office signalled a willingness to transfer at least some of the funds, although not the full amount sought by the Palestinians.

Israeli officials estimate only 300 million dollars to 400 million dollars could be transferred to the Palestinians because the rest of the money has been frozen by court orders.

The officials also said any transfers would have to go through a mechanism to ensure money did not end up in Hamas hands. Abbas's aides say all the money should be returned without conditions.

Abu Amr said Abbas and Olmert would both attend a meeting in Cairo of the Quartet of Middle East mediators on June 25, but Olmert's office said no invitation had been extended to the Israeli leader.

Olmert also signalled ahead of the planned summit he would not accept Abbas's call for a truce with militants in the Gaza Strip and the West Bank.

Israel stepped up its military operations in Gaza last month in response to a surge in rocket attacks against Israeli towns.

Israeli forces killed two Palestinians today, including one in the West Bank, and Hamas fired mortar bombs at an Israeli-run border crossing with Gaza.

Olmert has been under US pressure to make progress in talks with Abbas ahead of the Israeli leader's visit to Washington on June 19.

Fatah and Hamas formed the unity government in March but fighting between them has continued. Abbas said yesterday the Palestinians were on the brink of civil war.

Olmert last met Abbas on April 15 as part of US-brokered talks meant to take place every two weeks.

REUTERS ABM RK2215