EU cuts fuel supply to Gaza pending Hamas assurances

JERUSALEM, Aug 20 (Reuters) The European Union said today it will not resume paying for fuel shipments to the Gaza Strip's main power plant until it receives assurances Hamas will not tax electricity to fund its government in the territory.

Gaza's power plant shut down operations yesterday, causing blackouts across large parts of the impoverished territory after the EU stopped paying for fuel provided by a private Israeli company.

EU officials said they feared Hamas would try to use the power plant -- and the revenues generated from EU taxpayer-funded fuel -- to bypass a crippling Western boycott and finance its government.

A top Hamas official in Gaza, Ahmed Youssef, said the group was ready to provide the European Union with the assurances it needs to resume the flow of fuel to the plant.

He criticised the bloc's decision to halt the payments, comparing it to what he called Israel's policy of ''collective punishment''.

One of Palestinian President Mahmoud Abbas's first decrees after Hamas seized control of Gaza in June was to exempt its 1.5 million residents from paying taxes, a move designed to keep Hamas from collecting any local revenues.

EU officials said the bloc suspended the payments after it received information that Hamas was planning to introduce taxes on electricity bills.

''This would not allow us to continue paying for fuel helping to produce the electricity,'' said EU spokeswoman Antonia Mochan.

But she added: ''We are ready to resume payment of these fuel deliveries within hours once we have assurances that these taxes will not be introduced.'' Palestinian Information Minister Riyad al-Malki said electricity from the power plant was already a source of revenue for Hamas, but he did not explain how.

A senior official in the Hamas administration in Gaza said the EU's concerns were unfounded.

''There is no new tax and we have no plans to introduce any new tax on electricity bills,'' the Hamas official said.

Kanaan Abaid, deputy chairman of the Palestinian Energy Authority, said none of the revenues generated at the plant reached Hamas or its administration in Gaza.

CRISIS The European Union, the United States and Israel consider Hamas a ''terrorist'' organisation. They have thrown their financial and political support behind Abbas and the new government he established in the occupied West Bank, headed by Prime Minister Salam Fayyad.

Israeli officials said the EU decided to stop paying for the fuel for the power plant at Fayyad's request. The EU declined to comment and Fayyad's aides were not immediately available.

Since Hamas took over in Gaza, the territory's main border crossings with Israel and Egypt have been closed to all but humanitarian supplies, prompting aid groups to warn of a looming crisis.

As summer temperatures in Gaza soared today, residents sought refuge outdoors and at the beach.

''I cannot stand the heat,'' said 75-year-old Salem Abu Mustafa, resting on a mattress in the alley outside his home.

The al-Mezan Centre for Human Rights, based in Gaza, said the power shortage could lead to a health and sanitation crisis.

The EU has been paying for fuel shipments to the Gaza power plant since 2006. The last EU-funded delivery was on Wednesday.

The Nahal Oz border crossing, used to bring in the fuel, was closed on Thursday by Israel, citing a security threat.

Reuters CS VP0104