Israel decided yesterday to release to the Palestinians a payment of nearly $55 million that it froze after Hamas?s election victory but said future transfers, vital to the Palestinian economy, were unlikely. The United States had urged Israel to keep handing over customs revenues to the Palestinian Authority at least until Hamas, an Islamic militant group that has called for the destruction of the Jewish state, formally enters the government.

In a surge in violence, a Palestinian stabbed to death a woman and wounded five other passengers on a minibus in Israel hours after an Israeli helicopter gunship killed three militants in the Gaza Strip. Hours earlier, an Israeli helicopter gunship killed three militants from al-Aqsa Martyrs Brigades as they drove in a car in Gaza City. It was the worst bloodshed since Hamas scored a crushing victory over President Mahmoud Abbas's long-dominant Fatah faction in a Jan. 25 election.

Israel had been scheduled to transfer nearly $55 million to the Palestinian Authority last Wednesday but announced at the time it had decided to suspend automatic monthly payments pending a policy review by interim Prime Minister Ehud Olmert.

?Abu Mazen is still president and the transfer is happening under the Oslo accords,? Israeli cabinet minister Zeev Boim told reporters, referring to Abbas and interim Israeli-Palestinian peace deals, which Hamas rejects.

But Boim, speaking after a cabinet meeting, said that with a Hamas-led government likely, the payment could be the last. ?It looks like it will be the last payment, before a Hamas government is formed as Hamas does not seem to be changing its position with regard to Israel,? Boim said.

Tax revenues Israel collects on behalf of the Palestinian Authority are a main source of funding for the Palestinian budget and are used to pay 140,000 government workers. ?This is our money. This is not a favour,? Palestinian Economy Minister Mazen Sonnogrot said after the Israeli decision to forward funds owed for January. ?I hope that such payments will continue in the future.?

To make up for lost revenue, the Palestinians hoped to receive cash soon from Saudi Arabia and other Arab states. The Palestinian Authority runs on a budget of about $100 million a month. In addition to the taxes collected by Israel, it receives about $1 billion from international donors.

The United States and the European Union have said a Hamas-led Palestinian Authority would risk losing crucial foreign aid unless the group disarmed and recognised Israel. A Hamas leader said Saturday it hoped to form a government later this month after agreeing with Abbas to convene parliament on Feb. 16.

In Petah Tikva, a city near Tel Aviv, a Palestinian boarded a taxi-minibus, took out a knife and began to stab passengers in a morning rush hour attack at the start of the Israeli work week, police said. The assailant, from the West Bank, was disarmed by passersby, some of whom beat him, and taken to a local police station for interrogation, police said. There was no immediate claim of responsibility.

The army said its air strike which killed three al-Aqsa Martyrs Brigades militants was in retaliation for a rocket attack on Friday against an Israeli collective farm in which three people were wounded, including a baby.

More than 50 Jewish settler families evacuated from the Gaza Strip in a withdrawal Israel completed in September live on a caravan site at the farm. Israeli media reports said many of them left their temporary homes for shelter in Israel, out of rocket range from Gaza, after Friday?s attack.