U.S. May Withhold Aid To Israel Over Wall

"It is something that is being looked at. Real questions have been raised about the fence and we’re discussing how we should express our concerns in a concrete way," he said.

The official said the proposal was still being debated by the White House and the State Department and that no decision on it would likely be made before September.

The wall is also expected to cut annexed east Jerusalem off from the rest of the West Bank.

It will eventually snake some 900 kilometers (540 miles) along the West Bank and leave even larger swathes of its territory on the Israeli side and could cost up to $2.2 million a kilometer or a total of $1.8 billion, even though the Israeli economy is in dire straits.

U.S. Concerns

Shortly after the official spoke, Secretary of State Colin Powell stressed U.S. concerns about the construction of the wall, which the Palestinians fear is an attempt to establish the boundaries of their future state outside the negotiating process.

"We are concerned when the fence crosses over onto the land of others, and if it is constructed in a way which makes it more difficult to move forward on the roadmap, this causes us a problem," Powell said in an interview with Radio Sawa, a U.S.-funded Arabic-language radio station that broadcasts to the Middle East.

Powell, however, did not address the question of loan guarantees, but the senior official’s comments confirmed a report in the Israeli newspaper Haaretz, which said Sunday, August 3, the penalties were a possibility.

In March, President Bush proposed an emergency spending bill that would give Israel an additional $10 billion in assistance to help its ailing economy.

Nine billion dollars of that assistance, which has not yet been approved by Congress, would come in the form of loan guarantees.

Israeli Prime Minister Ariel Sharon declared July 29 during a joint press conference with U.S. President George W. Bush in the White House that Israel would continue the construction of its separating wall.

But Bush, who dismissed the wall as a "problem" to the peace process and confidence-building with the Palestinians, said during the press conference he understood the "fence" was a "sensitive issue" to Israel.

The statements came as Israel’s security services arrested Tuesday 47 mainly foreign opponents of its controversial wall as they tried to halt construction through a Palestinian family’s garden in the West Bank.

Troops burst into the house of the Amar family in the village of Mashah as well as the garden where the protestors had erected a tent, activists and military sources told AFP. Israeli authorities had declared the area "a closed military zone".

Those arrested included 41 members of the International Solidarity Movement (ISM) and six Israelis. It is understood that some of the foreign activists were from the United States, Britain, France, Italy, Germany and Sweden.

They told AFP by telephone that the troops who had arrested them put them on two buses which were taking them to a police post at the nearby Jewish settlement at Ariel.

Abbas-Sharon Meeting Cancelled

In another development, the Palestinian premier cancelled a meeting with his Israeli counterpart over Israel’s reluctance to implement the peace roadmap, a Palestinian source close to Abbas told AFP early Tuesday.

"Abu Mazen (Abbas’ nom de guerre) cancelled the meeting because he sees no serious sign from the Israelis about implementing the roadmap," the Palestinian source said on condition of anonymity, saying a central issue was Israel’s reluctance to free a significant number of Palestinian prisoners.

The meeting, which was due to take place Wednesday, was to have been the third bilateral meeting between the two prime ministers who last met in al-Quds (occupied Jerusalem) on July 20 before embarking on separate visits to Washington for talks with Bush.

"The Israelis would only use this event to exploit the release of only 400 or so prisoners, most of whom had already finished their sentences," he said.

Israel said Sunday, August 3, it would free 442 Palestinian prisoners later this week, a number that fell well short of thousands of releases eagerly awaited by the Palestinians.

Israel’s cabinet said early last week that 540 Palestinian prisoners were slated for release.

Around 80 prisoners, all of whom had reached the end of their prison term, were released last week, and another 20 or so of the original number are still being checked by Israel’s Shin Bet internal security services, an Israeli source said late Sunday.