UN criticises Israel's move to withhold Palestinian cash

Alvaro de Soto said the decision made by the Israeli cabinet on Sunday was "premature" and declared that it ran counter to the agreed policy last month of the international "Quartet" of the US, EU, UN and Russia. The US has not criticised Israel's decision.

The Quartet drew attention to the parlous state of PA finances and said the outgoing "caretaker" government should be supported. It also said that international funding should be judged against the willingness of a Hamas government, which has not yet been formed, to renounce violence, recognise Israel and sign up to past agreements between Israel and the PA.

Mr De Soto said duties and taxes Israel collects on the PA's behalf and normally remits every month "are monies that belong to the Palestinians and should not be withheld". He added that it followed from the Quartet statement "that the formation of a new government and the approval of its programme should be awaited and that actions prior to that would be premature".

The halt to the remittance was one of a tough series of sanctions against what the acting Prime Minister, Ehud Olmert, said was in practice becoming a "terrorist" authority. Israel also called for a halt, internationally, to PA funding other than humanitarian aid.

Mark Regev, the Foreign Ministry spokesman, said in response to Mr De Soto's remarks: "The Government's decision of stands."

As Mahmoud Abbas, the Palestinian President, began talks with Hamas's Prime Minister-in-waiting, Ishmael Haniya, in Gaza, Iran's Supreme Leader, Ayatollah Ali Khamenei, called on the Muslim world to assist a Hamas-led PA.

He told Khaled Mashaal, the Damascus-based head of Hamas's political bureau, who was on a visit to Tehran: "Annual financial assistance to Palestine is one way Muslim nations can share the responsibility of Palestine," according to Iranian state radio.