Palestinian President Mahmoud Abbas yesterday asked Hamas to form a new Palestinian Government and to pursue his peace agenda, but the Islamist militant group said talks with the Jewish state would be a waste of time.

Facing a looming financial crisis after Israel halted monthly tax payments to an already cash-strapped Palestinian Authority, Hamas's top political leader, Khaled Meshaal, said Iran would play an increasing role in Palestinian affairs.

US and Israeli officials are concerned Iran will try to exert control over a Hamas-led government, making the resumption of peace talks even more unlikely.

"Talking to Israel is a waste of time as long as there is no talk about withdrawing from Palestine," Meshaal said in Teheran ahead of one-on-one talks in Gaza between Abbas and Hamas's prime minister-designate, Ismail Haniyeh.

Israel has likewise vowed to boycott Hamas, whose charter calls for the destruction of the Jewish state. It says it cannot not even consider dealing with the group until Hamas amends the charter, renounces violence and accepts past peace deals.

But interim Prime Minister Ehud Olmert, in a television interview, said there was still hope for peace with the Palestinians.

"Despite the slimmer chance, hope has not ceased," Olmert told Israel's Channel 1 television. "I am responsible for ... the struggle against Hamas and also protecting the hope and chance of reaching an agreement."

US Secretary of State Condoleezza Rice arrived in Egypt yesterday before travelling to Saudi Arabia and the United Arab Emirates, where she will lobby states to deny aid to a Hamas-led Palestinian government.

Abbas met Haniyeh at 6 pm (1600 GMT), presenting him with a formal letter authorizing him to form a government. Abbas also spelled out guidelines for a future Hamas administration, including a commitment from the militant group to abide by past interim peace accords with Israel.

Some Palestinian political analysts have predicted a constitutional crisis if Hamas continues to reject Abbas's peace agenda. Hamas has given no ground, but both sides so far appear eager to avoid a confrontation.

Haniyeh, a Hamas leader viewed by many Palestinians as a pragmatist, now has up to five weeks to form an administration.

Source: China Daily