MELISSA BLOCK, host:
Israel is taking a tough line against a reconciliation deal between two rival Palestinian factions. A unity agreement is set to be signed this Wednesday in Cairo. On one side is Fatah, which controls the Palestinian Authority. On the other, Hamas, the hard-line Islamist group that rules the Gaza Strip. Israel considers Hamas a terrorist organization and is leveling punitive actions against the Palestinian government for agreeing to the deal.
NPR's Jackie Northam reports from Jerusalem.
JACKIE NORTHAM: The Israeli government wasted no time in denouncing the reconciliation deal between Fatah and Hamas when it was announced last week. The agreement would help end the bitter four-year divide between the two groups. But Israeli Prime Minister Benjamin Netanyahu told the Palestinian government it would have to choose whether it wants peace with Israel or with Hamas.
Since then, Netanyahu's government has been ratcheting up both the rhetoric and actions to undermine the reconciliation agreement. On Sunday, Israel announced it would withhold the transfer of more than $90 million in tax funds and customs fees for the Palestinian Authority, led by Mahmoud Abbas.
Israeli Foreign Ministry spokesman Yigal Palmor says the Israeli government is worried the money will go to Hamas.
Mr. YIGAL PALMOR (Spokesman, Foreign Ministry, Israel): Surely no one could expect Israel to transfer money into the hands of a world-recognized terror organization such as Hamas. And it is up for the Palestinian government to decide what they want to do - whether they want to incorporate Hamas into government and then, of course, kiss goodbye all options for negotiations, or try to choose the road for peace and negotiation, which is incompatible with Hamas.
NORTHAM: The tax payments account for more than two-thirds of the Palestinian Authority's budget. They've been collected and transferred by Israel since the 1990s as part of interim peace deals.
Hanan Ashrawi, a member of the Palestinian Legislative Council, says these sorts of moves by the Israeli government are ridiculous. Ashrawi says uniting Palestinians is the only way to bring stability to the region and push forward the peace process.
Ms. HANAN ASHRAWI (Member, Palestinian Legislative Council): If Netanyahu and the current Israeli leadership had any sense, which I doubt, then they would certainly have been encouraged by this development, rather than attempting this very, very irresponsible, ignorant approach of divide and conquer and find excuses to avoid talking to the Palestinians.
NORTHAM: Mustafa Barghouti, a longtime political activist who helped negotiate the reconciliation agreement, says he's also surprised by Israel's reaction.
Dr. MU.S.TAFA BARGHOUTI (Physician/Political Activist): Mr. Netanyahu has been blaming Mr. Abbas for many months that Mr. Abbas cannot represent all Palestinians. Now he can represent all Palestinians, so why they are upset? I don't understand.
NORTHAM: Hillel Frisch, a senior researcher at the Begin-Sadat Center for Strategic Studies in Jerusalem, says the Palestinian reconciliation actually helps Netanyahu at a delicate diplomatic moment. There's growing support for a bid by the Palestinian government to win recognition of statehood at the United Nations General Assembly in September. Frisch says Abbas' decision to reconcile with Hamas could change things.
Dr. HILLEL FRISCH (Senior Researcher, Begin-Sadat Center for Strategic Studies): The Israelis can turn to the international community and say, there is no partner. I mean, he's not playing by the rules of the game.
I would say politically I think that Israel has gained by this move.
NORTHAM: But Frisch says it's a different story on the security front. Egypt, which brokered the reconciliation deal, has indicated it will soon reopen the Rafah border crossing it shares with the Gaza Strip, the area controlled by Hamas. Israel says this will help Hamas build up its weapons stocks.
Foreign Ministry spokesman Palmor says Israel would like to preserve the common interests of security and border arrangements with Egypt.
Mr. PALMOR: There are many security challenges and threats across the border, and we need to keep the same level of cooperation that we've had in the past, again, in the interest of both countries.
NORTHAM: Still, Palmor says Egypt is changing and Israel isn't sure what its new policies are.
Jackie Northam, NPR News, Jerusalem.