EU says will resume funding fuel for Gaza plant

JERUSALEM, Aug 21 (Reuters) The European Union said today it agreed to resume funding fuel shipments to the main power plant in the Hamas-controlled Gaza Strip after receiving assurances the bloc would have greater oversight.

Starved of EU-funded and Israeli-supplied fuel, the plant has cut off power to large parts of the Gaza Strip, causing widespread blackouts and greater hardship in the impoverished territory two months after Hamas seized control.

''In agreement with the Palestinian Authority, the (European) Commission will resume tomorrow, on a provisional basis, deliveries of fuel to the Gaza power plant,'' the EU said.

The EU stopped paying for the fuel, provided by a private Israeli company, because it was concerned that Hamas would try to use the sale of electricity to fund its government in Gaza, bypassing a European-backed embargo of the Islamist group.

The EU has been paying for fuel shipments to the Gaza power plant since 2006. The last EU-funded delivery was August 15.

The decision to resume funding for fuel was announced hours after Hamas leader Ismail Haniyeh said he gave assurances to the EU that his government had no plans to introduce any new taxes on electricity generated by the plant.

''We did not do it and we will not do it,'' said Haniyeh, prime minister of the Hamas-led government that was sacked by Palestinian President Mahmoud Abbas of Fatah after Gaza's takeover by the Islamists.

Kanaan Abaid, deputy chairman of the Palestinian Energy Authority in Gaza, said full power should be restored by midday tomorrow.

''This is a blessed decision that will alleviate the suffering of the people of Gaza,'' Abaid said.

CONDITIONAL RESUMPTION Palestinian Information Minister Riyad al-Malki, who serves in Abbas's government, said resumption of EU payments was ''conditional'' and could be halted again if a European and Palestinian committee found funds were being diverted to Hamas.

Hamas accused Abbas of pressuring the EU to suspend fuel payments to try to undermine the group and its control in Gaza.

One of Abbas's first decrees after Fatah forces were routed in Gaza was to exempt its 1.5 million residents from paying taxes, a move designed to keep Hamas from collecting any revenues.

Western diplomats and Israeli officials said the EU stopped paying for the fuel at the request of Salam Fayyad, whom Abbas appointed prime minister after sacking Haniyeh. Fayyad's aides denied this.

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

REUTERS GT ND2150