Washington: The Bush administration is poised to lift its economic and diplomatic embargo against the Palestinian government in the West Bank now that a US backed moderate has evicted Islamic radicals from governance.

US Secretary of State, Condoleezza Rice, is expected to announce the new US stance early this week, a senior US official said on Sunday. That announcement will coincide with a visit by Israeli Prime Minister Ehud Olmert, who is holding high level talks in Washington beginning Monday.

The White House declined to comment Sunday, but Jacob Walles, the US consul general in Jerusalem, said on Saturday that the international aid embargo imposed after Hamas won parliamentary elections last year will no longer apply to Palestinian President, Mahmoud Abbas government, and that he expected it to be lifted this week.

The US move essentially would reset US policy to the days before the Islamic militant group Hamas swept legislative elections in early 2006 and upended US and international peacemaking. The United States, Israel and the European Union regard Hamas as a terrorist organization. Hamas violent takeover of the Gaza Strip last week, however, essentially split the Palestinian government. Hamas, which does not recognize

Israel's right to exist, now runs Gaza, home to an estimated 1.5 million Palestinians. Abbas and his secular Fatah Party now run the West Bank. The West Bank, although much larger, also is home to estimated 1.5 million Palestinians. That move cleared the way for the United States to resume direct aid payments to the Palestinian government, something it has refused to do so long as Hamas was a part of the government and could benefit from US aid.

Five years ago, President George W. Bush called for a separate, independent Palestine alongside Israel. He was the first US President to back that notion so fully and publicly. But his administration has taken heavy criticism for letting the peace process drift while conditions worsened for the impoverished Palestinians. "I think there was a need and a recognition to support Abbas several years ago when there was more of a chance that he could succeed as a moderate leader, and we did not provide that kind of effort, there was not, I think, a consistent plan to do that," Democratic Sen Jack Reed, a member of the Senate Armed Services Committee, said on Sunday on CNN. "And today, he (Abbas) finds himself overwhelmed in Gaza by Hamas".

Gaza was long the seat of power for Hamas while the West Bank is a stronghold for Fatah, the party of former Palestinian Leader, Yasser Arafat. Some in the United States and in Europe have advocated a policy dubbed the 'West Bank first' in which the West Bank would stand as an example of what a future Palestinian state could be.

Critics on the other side say that leaves Palestinians living in the Gaza Strip without international aid. Europeans oppose this idea, and others worry it would leave the Gaza Strip open to funding and influence from Iran and Syria.

After losing Gaza in a swift, five day Hamas assault on his forces, Abbas moved quickly to cement his rule in the West Bank. He replaced the prime minister, Ismail Haniyeh of Hamas, with Finance Minister Salam Fayyad, a US educated, internationally respected economist. Fayyad then moved forward with plans to form an emergency government, a move that Hamas has deemed illegal.

The new government was sworn in by Sunday. "I think, Fayyad, the newly named prime minister, is a serious, serious person with real capability," Democratic Sen. Joseph Biden said on Sunday on the ABC talk show this Week. "I think we should be supporting him. I am confident, the Israelis are going to do that, but it s a very difficult situation. ?We have to do what we can, along with the Israelis, to ease the burden on the West Bank to give Abbas and Fayyad an opportunity to demonstrate some progress while containing Hamas in Gaza."

The State Department began hinting about the coming shift on Friday, but a statement from the United States and other nations working toward Mideast peace on Saturday made no mention of a resumption in aid. The Bush administration has quickly pressed Israel to ease its freeze on tax revenues it collects monthly on behalf of the Palestinian Authority. It is not clear whether Israel will make that move now, but the tax receipts are expected to be discussed during Olmert's visit with Rice and Bush's national security adviser Stephen Hadley on Monday and with the president on Tuesday.

In New York on Sunday, Olmert said his country would be a genuine partner of a new Palestinian government and promised to consider releasing the hundreds of millions of dollars in frozen tax funds. The senior US official, who spoke on condition of anonymity to describe internal discussions, said that any US gestures toward Abbas will be made independently of Israel.