The United States said yesterday its ban on direct aid to the Palestinian government would remain in place but it broke ranks with Israel by authorising contacts with some members of the new unity administration.

The US consulate in Jeru-salem said Washington would continue to shun Hamas ministers in the power-sharing cabinet but permit contacts with non-Hamas members on a case-by-case basis depending on developments.

The decision to allow some contacts marked a shift in US policy and a break with Israel, which has vowed to boycott the new government in its entirety, including non-Hamas ministers.

Earlier yesterday, Israeli Prime Minister Ehud Olmert ruled out resuming talks on Palestinian statehood with President Mahmoud Abbas and urged the international community to shun the government established on Saturday.

Olmert?s cabinet approved his policy, officials said. Pales-tinians hope the partnership between Abbas?s secular Fatah faction and Islamist Hamas will stop factional fighting and ease a crippling aid embargo that has increased poverty.

Limited contacts

But Micaela Schweitzer-Bluhm, spokeswoman for the US consulate in Jerusalem, said the year-old US ban on direct aid to the Palestinian government would remain in place until it recognised Israel and renounced violence as demanded by the Quartet of Middle East mediators.

?This must continue to be the measure for any support,? she said. ?There?s no change in our assistance policy. But we remain committed to providing assistance to the Palestinian people and we?ll continue to do that through the UN and other organisations.? Israel has also vowed not to hand over to the unity government tax revenues it has been withholding.

Olmert said his contacts with Abbas would be limited to matters related to ?the quality of life of the Palestinian population? in areas under Israel?s control. ?We think that the new government, as it has been declared and presented, limits our ability to conduct a dialogue with ... (Abbas) and narrows the range of issues which we might have been able to discuss in the coming period,? Olmert told his cabinet.

He said the new government?s platform contained ?very problematic elements?, an apparent reference to its call for ?resistance? against Israel in ?all its forms?.

While the unity government gives Abbas authority to negotiate with Israel, Hamas would have an effective veto over any deal that emerges, Israeli officials said.

The change in U.S. contact policy will bring Washington in line with Britain and other European powers that have signalled a willingness to hold talks at least with non-Hamas ministers.

Diplomats said the decision would allow contacts with Fatah members and independents in the new cabinet, including Finance Minister Salam Fayyad, a Western-backed reformer.

?We will continue our policy of not having contacts with members of foreign terrorist organisations,? Schweitzer-Bluhm said. The United States considers Hamas a terrorist group.

But she said Washington would not suspend contacts with ?individual Palestinians solely based on their participation in the unity government?, so long as they are not Hamas members.

?We will make individual decisions based on our evaluation of the situation,? Schweitzer-Bluhm said.

Another official said the United States could consider future contacts with non-Hamas ministers as unofficial in nature, and not directly related to the new government.

Adam Entous</B>