With Hamas Takeover, Tough Calls for Israel

"It has always thought of its policy toward the Palestinians and the region as moves in a chess game," he said. "But the situation has always been far more like trying to keep a small boat steady in a rushing river."

After Israel's withdrawal, Gaza was seen as a test of the Palestinians' ability to build a state. But Israel, citing security concerns, closed Gaza's trading passages more often than not. The agricultural projects envisioned as the foundation of a new economy collapsed.

Stunned by the Hamas election victory a few months later, Israeli officials privately blamed the Bush administration, which had lobbied in favor of Hamas's participation as part of its policy to promote democracy in the Middle East.

"Terrorists are using the system to get more and more power," Tzipi Livni, Israel's foreign minister, told a seminar in Herzliya last week, adding that until they "adopt certain values," such groups should be barred from the ballot. "Unfortunately, it didn't work before the elections in the Palestinian Authority."

Israel immediately froze the monthly transfer of tax revenue it collects for the Palestinians under the Oslo agreement, and Western nations cut aid to the Hamas-led administration.

In domestic court filings, the Israeli government argued that its military occupation of Gaza had ended, freeing it of responsibility for the welfare of the people who live there. The United Nations still classifies Gaza and the West Bank as Israeli-occupied territory.

The Palestinian Authority could no longer pay salaries to teachers, doctors, bureaucrats and some 65,000 members of the security forces. Hamas refused international demands that it recognize Israel and renounce violence in exchange for a resumption of aid.

The embargo hit the strip hardest because a higher percentage of its population relies on government salaries for income. Rocket fire from Gaza into southern Israel became a near-daily event. Israeli restrictions on Gaza residents traveling to the West Bank furthered a sense of division between the two territories.

"The steps taken by the international community with the presumed purpose of bringing about a Palestinian entity that will live in peace with its neighbor Israel have had precisely the opposite effect," Alvaro de Soto, the U.N. special coordinator for the Middle East Peace Process, wrote in a May "end-of-mission" report.

Olmert has pledged to release some of the estimated $700 million in frozen tax revenue to Abbas and restore the monthly transfers. International donors have said they would renew financial aid to his government.

But Kevin Kennedy, the U.N.'s humanitarian coordinator for the occupied Palestinian territory, said last week that 65 percent of Palestinians now live on less than $2.41 a day. He said the number of Israeli military checkpoints, barriers and obstacles in the West Bank has increased by 43 percent since Israel pledged to reduce them under a 2005 agreement brokered by Secretary of State Condoleezza Rice.

Kennedy said that with Hamas in charge of security on the Gaza side, the Gaza passages are now effectively sealed. The Israeli military has been allowing daily aid convoys to supply Gaza with food staples, medicines and fuel, but a humanitarian crisis looms unless trade can be normalized.

"Israel, as the occupying power, is responsible for the health and welfare of the occupied population in Gaza," Kennedy said. "Whether they do it on their own or have someone else do it for them, that's another matter."