Bush Offers Palestinians Aid

The $50 million financial package, drawn from unspent fiscal 2005 funds, amounted to the most tangible sign of Bush's support. It was negotiated up until Wednesday night with House Majority Leader Tom DeLay (Tex.) and other congressional Republicans who have objected to direct aid to the Palestinians.

Instead of steering the money to nongovernmental organizations or using it to pay Palestinian debts to Israel, the United States will deposit the funds in a special account managed by Palestinian Finance Minister Salam Fayyad, who has been praised for building a transparent operation. With U.S. oversight, the money is to be used to build housing, schools, roads, water facilities and health clinics in Gaza to help ease the transition as Israelis withdraw.

Abbas spent much of the private meeting with Bush airing his grievances about the security wall that Israel is building around Palestinian communities, a White House aide said. Abbas, the aide said, also explained that the Islamic Resistance Movement, or Hamas -- listed as a terrorist group by the United States -- is gaining popularity in advance of July 17 parliamentary elections because of the government's difficulty meeting high expectations for change after the January presidential election.

Bush did not press Abbas harder on dismantling terrorist groups, the aide said, because the president's envoy, Gen. William E. Ward, gave a positive assessment of the Palestinians' efforts to stem violence. Asked during the public appearance if he is satisfied that Abbas has done enough to combat terrorism, Bush answered instead with a testimonial to Palestinian democracy. Yet he did say in his opening statement that "only the defeat of violence will lead to sovereignty."

Bush stressed that the Israeli barrier "must be a security rather than political barrier" and must minimize its impact on Palestinian civilians. Abbas, on the other hand, denounced it as "illegitimate."

Addressing Bush's focus on democracy and freedom, Abbas said that "democracy is like a coin" and that "on the other side of the coin is freedom." Under continued Israeli occupation, he said, "we lack freedom" and this "will weaken the democratic march."

Israeli officials, who days earlier had privately dismissed Abbas as a weak and vacillating leader, appeared somewhat surprised by Bush's strong endorsement. But one Israeli official said Bush's praise for Abbas still left in place the fundamentals of the understanding between Sharon and Bush. In the Israeli view, Bush has not wavered from the idea that militant groups must be disarmed and, in Bush's words, "held to account."

In the diplomacy of the Middle East, in which every word carries meaning, both Israelis and Palestinians were struck by two new formulations offered by Bush.

Bush warned Israel not to undertake activity that would "prejudice final-status negotiations with regard to Gaza, the West Bank and Jerusalem." The inclusion of Jerusalem in that standard formulation raised eyebrows in the Israeli capital and cheered Palestinians, because it suggested the White House supports the Palestinian view that Israeli construction is designed to cut off East Jerusalem -- the future capital of Palestine -- from the rest of the West Bank.

At another point, Bush said, "Changes to the 1949 armistice lines must be mutually agreed to." The language stood in contrast to Bush's commitments to Sharon a year ago that Israel might expect to keep large settlements in a final peace deal. U.S. officials have always said a final peace deal must be reached through negotiations, but Palestinians said Bush's language represented a counterbalance to the commitments made to Sharon.