Sending a series of mixed signals, the Israeli government yesterday dispatched its Foreign Minister, Mr Shimon Peres, for a second day of talks with Palestinian ministers, but simultaneously sent policemen to close down the Jerusalem offices of the most prominent moderate Palestinian leader, Mr Sari Nusseibeh.
It agreed in principle to release tax revenues it has been withholding from the Palestinian Authority, but then set conditions that made any early dispensation of such funds almost impossible.
And while its Prime Minister, Mr Ariel Sharon, echoing comments from President Bush about signs of reform in the Palestinian leadership, said he sensed a "window of hope", his new army chief declared that Israel was still fighting its war of independence.
Meeting after Mr Bush had urged Israel to ease living conditions for ordinary Palestinians - many hundreds of thousands of whom have been living under curfew as Israel reoccupies West Bank cities following a series of suicide bombings last month - Mr Sharon and senior ministers approved the unfreezing of a small proportion of the approximately $400 million in tax revenues Israel has been withholding from Mr Yasser Arafat's PA. But they said they would only dispense the funds if they could be satisfied that the money would not be used "to finance terrorism". Government sources explained that, by this, they effectively meant they would not release the funds to the PA, but rather were seeking a means of channelling money to "ordinary Palestinians" via an international aid agency. This despite the fact that, according to past accords, the money belongs to the PA - since it was collected on its behalf from Palestinians working in Israel.
The PA's Finance Minister, Mr Salam Fayed, said bitterly yesterday that he was "a finance minister without any finance" - a situation he had attempted to resolve in talks on Monday night with Mr Peres, the first ministerial level contacts between the two sides in four months. Mr Peres also met with Mr Abdel Razak Yehiyeh, the PA Interior Minister and with Mr Saeb Erekat, the former chief Palestinian peace negotiator, and more talks are planned. But while Mr Erekat said the meeting covered including financial, security and political issues, there was no concrete progress.
Indeed, there was no hint of a softening of the Israeli government's firm position against substantive political negotiations so long as Mr Arafat heads the PA - a position firmly endorsed in Mr Bush's speech on June 24th. Yesterday's police closure of Mr Nusseibeh's offices in east Jerusalem underlined that stance. Mr Nusseibeh is the president of Al-Quds University, and also Mr Arafat's official representative in the city, and the Israeli government alleged that he was in breach of Israeli-Palestinian agreements outlawing Palestinian political activity in Jerusalem. He is also the most outspoken of Palestinian moderates, having last month organised a public petition against suicide bombings inside Israel, and consistently called on Mr Arafat, as a means of securing a permanent peace accord with Israel, to drop the demand for a "right of return" to Israel of millions of Palestinian refugees. Mr Nusseibeh was away in Greece when police "invaded his office" in East Jerusalem, his assistant said.
Not far from that office a Palestinian gunman fired on an Israeli policeman who had stopped him and asked for his ID. The policeman was badly hurt in the stomach. In an ensuing exchange of fire with other policemen, a Palestinian passer-by was shot dead. Israeli police said it was unclear whether one of their officers or the gunman had fired the fatal bullet.
Hours earlier, Israeli troops killed Moamar Daraghmeh, a member of Islamic Jihad, outside Jenin in the West Bank. Palestinian sources said he was armed and en route to a "mission" against an Israeli target.
Such attacks have tapered off in recent days, with the army having recaptured the West Bank cities after June's suicide bombings. Military sources predict the army may maintain its presence throughout the West Bank for several months.