New Abbas Palestinian government opens door to aid

RAMALLAH, West Bank, June 17 (Reuters) Palestinian President Mahmoud Abbas swore in an emergency government today in a move that could bolster him in his power struggle with Islamist Hamas rivals by ending a US-led aid embargo.

The 13-member cabinet, including an ex-guerrilla chief as interior minister, replaces a short-lived unity government Abbas dismissed after Hamas seized control of the Gaza Strip in a surge of factional fighting last week.

''Security of the citizen is the priority on the basis of the sovereignty of the law,'' Salam Fayyad, the Western-trained economist who becomes prime minister, told Palestinians in a televised address.

Abbas aides said he had issued decrees bypassing constitutional limits on his powers to establish the emergency government and keep it in place without the approval of the Palestinian parliament, which has a Hamas majority.

Abbas also issued bans on Hamas's armed institutions, while Fayyad froze government accounts to prevent Hamas's dismissed ministers from gaining access to funds -- though Washington had already taken similar steps on international accounts.

Hamas, which convincingly defeated Abbas's long-dominant and more secular Fatah to win Palestinian elections last year, denounced the new cabinet as a ''coup'' mechanism.

Flexing his executive muscle, Abbas named retired guerrilla chief and Fatah ally Abdel-Razak Yahya as interior minister -- a post overseeing all Palestinian security forces.

''Today is a new era, a turning point for ending the siege and rebuilding the Palestinian Authority,'' Abbas spokesman Nabil Abu Rdainah said.

The US consul-general who handles relations with the Palestinians said Washington would lift a ban on direct financial aid to the new emergency government, clearing the way for the European Union and Israel to follow suit.

''There won't be any obstacles economically and politically in terms of re-engaging with this government ... They will have full support,'' Jacob Walles told Reuters.

Western powers imposed an aid embargo after Hamas came to power in March 2006 because it failed to recognise Israel, renounce violence and accept interim peace deals. Hamas secured alternative support from Israel's arch-foe Iran.

HAMAS FIEFDOM Yahya cannot be expected to wield much clout in Gaza, now effectively a Hamas fiefdom. But his appointment could stave off infighting in the occupied West Bank, where Fatah holds sway and where Hamas has threatened reprisals for round-ups of its men.

Hamas has made some conciliatory overtures, however. It still refers to Abbas as president, and says it does not want a Hamas mini-state in Gaza, where 1.5 million people are crowded along 40 km (25 miles) of coast between Israel and Egypt.

Israeli Prime Minister Ehud Olmert, en route to the United States for talks with President George W. Bush, welcomed Abbas's forming of a new government under Fayyad as a breakthrough for peace efforts.

''(The current situation) presents an opportunity that has not existed for a long time,'' Olmert said on Saturday.

''This opens opportunities.'' Separately, two Katyusha rockets hit the northern Israeli town of Kiryat Shmona near the border with Lebanon. It was the first apparent cross-border attack since last year's war between Israel and Hezbollah guerrillas in Lebanon.

Hezbollah denied any links to the firing, and a security source in Lebanon said it was Palestinian fighters.

Hamas said it would not recognise the emergency cabinet.

''Fayyad's government is not a national government and is not legitimate. It will not win legitimacy or recognition, except from the occupation (Israel) and the Americans,'' Sami Abu Zuhri, a Hamas official, told Reuters.

Gaza and the much larger West Bank are only about 45 km (30 miles) apart, with Israel in between, but they now appear poised to function as two separate territories.

Putting new pressure on Hamas, a top Israeli energy company, Dor Alon, said it was suspending fuel supplies for private use in Gaza, though the tap remained open for power stations.

''We should simply increase the isolation of Gaza,'' Israeli Infrastructure Minister Binyamin Ben-Eliezer told Army Radio.

But another official played down speculation Israel could try to further choke off Gaza, which is also supported by Egypt.

''We won't cut off electricity and water,'' Deputy Defence Minister Efraim Sneh told Israel Radio.

Fayyad serves as Palestinian prime minister, replacing Ismail Haniyeh of Hamas. He also holds the finance and foreign affairs portfolios.

REUTERS PJ KP2238