Acting Prime Minister Ehud Olmert decided on Friday to defer the government decision on sanctions against the Palestinian Authority once Hamas assumes power until Sunday. The Hamas-led PLC will be sworn in on Saturday. Olmert had assembled senior governmental officials Friday morning to review the Defense and Foreign Ministries' recommendations regarding Israel's policies towards the Hamas-led PA. Israel is tightening the noose around the Palestinian Authority in an effort to isolate the Hamas internationally until it renounces violence and recognizes the Jewish state. As part of that effort, Israel was considering labeling the PA an enemy on the level of Syria, Lebanon and Libya after Hamas takes over the Palestinian Legislative Council on Saturday, according to Foreign Ministry sources. No deadline has been set for when the PA's designation as a "terror entity" would be put into effect. In keeping with the program of isolation, Defense Minister Shaul Mofaz on Thursday approved a long list of harsh economic sanctions ranging from a ban on Palestinian workers entering Israel to an immediate halt of money transfers to the PA. "The swearing-in of the Palestinian parliament on Saturday rings a gong for us," Mofaz told security officials at the meeting on the sanctions. "A Hamas government will mean an authority of terror and murder. Already today Hamas is part of the axis of evil that begins in Iran, continues to Syria, Hizbullah and now to the Palestinian Authority... This is a serious threat to Israel." In addition to slamming the brakes on funding, Mofaz accepted recommendations to turn the Gaza Strip's Karni and Erez crossings into international border terminals. If the recommendation is accepted by Olmert, the Palestinians would no longer be allowed to move merchandise out of Gaza free of charge and would need to pay customs and other taxes. Mofaz also froze plans to build a harbor and airport in Gaza. For the time being, Mofaz ordered the defense establishment to refrain from placing any restrictions on the transfer of humanitarian, electricity and water supplies to Gaza. The measures, which officials said were expected to be approved by Olmert during a high-level meeting on Friday, would go into effect beginning Sunday. The sanctions' goal, officials said, was to convince Hamas to meet Israel's conditions for talks - an acceptance of previous agreements with the PA, recognition of Israel's right to exist and the dismantling of its terror infrastructure. Mofaz appointed Coordinator of Government Activities in the Territories Maj.-Gen. Yosef Mishlav to head a team which will present weekly recommendations on how to further isolate Hamas. "As of Saturday, all the rules of the game change," said Haim Ramon, a senior member of Olmert's Kadima party. "What needs to guide us... is that we will not honor agreements with a terrorist authority led by Hamas." One of those agreements is the annual transfer to the Palestinians of about $600 million in taxes and customs duties Israel collects on behalf of Palestinian merchants and laborers. The transfers are crucial for the PA and are mostly used to pay the salaries of 140,000 government workers - 40 percent of whom work for the security forces. Honoring the transfer agreement after Hamas takes power makes no sense, Ramon said. "Is it even conceivable that we would collect money and hand it over to the terrorist organization," he asked. But while some security officials recommended harsher measures such as cutting off the electricity supply to Gaza, Mofaz ordered the defense establishment to hold back for now and to allow the transfer of water, electricity and humanitarian supplies into Gaza. Maj.-Gen. (res.) Amos Gilad, head of the Defense Ministry's Political-Military Bureau argued Thursday that extreme measures like stopping the electricity flow to Gaza could backfire. "Cutting off the electricity to the Palestinian people, who will then suffer, is not necessarily productive," Gilad said. "Every step that seems attractive is not necessarily the right one to take." Senior security officials who participated in Thursday's meeting with Mofaz, including head of the Shin Bet (Israel Security Agency) Yuval Diskin and head of Military Intelligence Maj.-Gen. Amos Yadlin, asserted that Hamas was still involved in anti-Israel terror despite the group's attempts to present itself as terror-free. Hamas's goal is to mislead the public and to cause fractures among international decision makers while it is busy building up its forces for a violent showdown with Israel, the officials told Mofaz. Foreign Minister Tzipi Livni declared on Israel Radio Thursday that the rules of the game will change next week, once Hamas has entered the legislature. But EU foreign policy chief Javier Solana, who met with Livni while on a tour of the Middle East, said the European Union would not consider next week the date for the formation of a new government. Hamas still needs to form a cabinet after taking over the legislature. The EU - as well as fellow Quartet members the US, Russia, and the UN - has signed onto the same demands made by Israel for international support: that Hamas recognize Israel, renounce violence and accept previous agreements between Israel and the PA. But differences over the timing of when to implement a changed approach - particularly cutting funds - have emerged. At the same time, the UN welcomed indications that Israel won't oppose humanitarian aid to the Palestinians, as part of an effort to make a distinction between the Palestinian population and government. "It never occurred to me that Israel would want to see people who are in need of the most basic assistance deprived of that assistance because of the way they voted," UN Middle East peace envoy Alvaro de Soto told the Post. "Palestinians simply aspire for better and cleaner government, and remain desirous of achieving a two-state solution by peaceful means. "I am also sure that, as they review assistance in light of the stance taken by a new PA government, decision-makers will bear in mind how hard it is to compartmentalize humanitarian assistance neatly," since the PA provides most of the social services to meet basic needs. "To deprive the PA of the ability to provide essential services to the people could generate a new set of humanitarian problems and create a new emergency, while eroding the PA's basic delivery capacity over time," he said. "The PA is not a light switch that you can turn on and off at will." The new situation the Palestinian population will be forced to confront is not an optimistic one, security officials said. The year 2005 saw a significant improvement in the Palestinian economy and welfare. Tourism in Bethlehem increased 160% last year. "Unemployment in Gaza decreased by 6 percent, and despite the closures, thousands of Palestinian laborers entered Israel to earn a living," an official said. "There was a belief that once Abu Mazen [PA Chairman Mahmoud Abbas] took office, the situation would improve. Investors were far more optimistic." Hamas's belief that funds will pour in from Arab and Muslim countries, particularly Iran, has yet to be realized, an official said, adding, "Iran has never donated funds to the PA, and the Arab countries were never considered to be the major donors." To back up his statements, he noted that of the $6.48 billion donated to the PA between 1996 and 2006, the US was the leading donor, with Europe, Japan, the World Bank and Norway following. The US donated 20% of that sum at $1.3b., Europe donated 17.1% at $1.1b., Japan followed at 8.2% at $0.53b. and Norway 5.6% or $0.32b. Saudi Arabia donated 5%, $0.32b and $2.4b was donated by 30 countries, including Germany, France, Australia and China, as well as the Gulf States, comprising 38.3% of the amount, security officials said. However, officials warned that if the world continued to donate funds to the new government, it is more than likely that money sent by Iran would be used for terror purposes, as such funds would not be under scrutiny.