Israel agreed Sunday to begin releasing hundreds of millions of dollars in frozen tax funds to Palestinian President Mahmoud Abbas, part of a package of planned goodwill gestures meant to strengthen the moderate Palestinian leader in his standoff against the Islamic militant group Hamas.

The decision to unfreeze the money came a day before Prime Minister Ehud Olmert heads to Egypt for a high-profile summit with Abbas, President Hosni Mubarak of Egypt and Jordanian King Abdullah II.

The gathering is meant to give Abbas a high-profile display of support against his Hamas rivals, who violently seized control of the Gaza Strip in a bloody rout of Abbas' Fatah movement earlier this month.

But Olmert sought to play down expectations ahead of the summit. "We have an interest in having this meeting, but I don't want anyone to think we're on the brink of a dramatic breakthrough," Olmert told his Cabinet, according to a meeting participant.

The Palestinian infighting has left the Palestinians with two governments - Abbas' new Cabinet in the West Bank, and the Hamas rulers in Gaza. Israel and moderate Arab leaders have joined together in support of Abbas, a moderate who favors peace with Israel, while trying to isolate Hamas, a radical group pledged to Israel's destruction.

Olmert aide David Baker said in the current environment, it is premature to begin talks on a final peace deal, despite calls from the Palestinians and other Arab countries to do so.

Israel is prepared to discuss "a political horizon," he said. "These talks do not include final status issues, but rather how the prime minister and the president of the Palestinian Authority would envision a future Palestinian state."

Deposed Palestinian Prime Minister Ismail of Hamas, speaking in Gaza, called hopes for the summit "illusions" and a "mirage." He said, "the Americans won't give anything. Israel won't give us anything. Our land, our nation will not come back to us except with steadfastness and resistance," a code word for attacks against Israel.

The main proposal at Sunday's Cabinet meeting was the release of some US$550 million of Palestinian tax money that Israel has withheld since January 2006, when Hamas - which Israel considers a terrorist group - swept Palestinian parliamentary elections.

(China Daily via agencies June 25, 2007)