Israel sent two messages to the Palestinian Authority and the international community Sunday, saying officials wouldn't meet visitors who insisted on meeting Hamas officials and that it would use withheld PA revenue to pay Palestinian utility bills. A blue-ribbon panel recommended Sunday that Israeli officials revive a policy used to isolate Yasser Arafat in 2003 and refuse to interact with foreign diplomats who met Hamas officials during visits to the region. That recommendation was one of several made during a meeting convened Sunday afternoon by Acting Prime Minister Ehud Olmert to discuss Israel's relations with the Hamas-led PA. This meeting was preceded by the weekly cabinet meeting, where it was decided that while the policy of not transferring between $50 million-$60m. a month of customs and tax revenue collected on behalf of the Palestinians to the PA would continue, Israel would deduct from this sum money it was owed for electricity, water and medical services provided to the Palestinians. These bills total about $30m. a month. This decision was likely to mute criticism, coming primarily from Europe, of Israel's decision to withhold the revenue. EU foreign policy chief Javier Solana said last week that Israel was obligated to transfer the money to the PA. "This is Palestinian money, which cannot be withheld," he said. EU Mideast envoy Marc Otte, in an interview with The Jerusalem Post last week, said that using the funds to pay for services provided to the PA was a possible solution to the issue. "Israel has to take a stance, what will it do with this money," Otte said. "Israel has said it would continue to provide electricity and water, and let supplies go to the PA - but who is going to pay for them." Sunday's cabinet decision to use these monies to pay PA bills was the carrot offered to the international community. At the subsequent meeting called by Olmert to draft recommendations for policy toward the PA, a stick was extended toward foreign diplomats in the form of a proposed Israeli boycott of those who met with Hamas leaders. This decision was meant to keep international officials from granting Hamas legitimacy by paying visits to the organization's leaders. The first test of the policy will likely come soon, when South African President Thabo Mbeki, who last week declared his intention to visit the region in the near future, will have to decide whether to go ahead with his trip. A senior European diplomat said yesterday that the boycott recommendation was more "form than substance," since international leaders were not exactly lining up to meet PA Prime Minister Ismail Haniyeh. "What's the point, other than to make a point," he said. The diplomat said low-level contacts with Hamas would continue, but that now everyone would be even more careful than before not to publicize them. The policy panel also recommended that Israel not hold any contact with the PA, which they characterized as a "hostile regime," and that the government work to prevent the "administrative establishment of the Hamas government." The recommendations will be brought for approval at next Sunday's cabinet. The panel issued a statement saying Israel viewed the PA as a unitary authority, and not one that had "two heads" - a reference to Haniyeh and PA Chairman Mahmoud Abbas. The statement also said there would be no "personal disavowal" of Abbas, meaning that contacts with him could continue. Olmert has made clear, however, that he had no intention of negotiating with Abbas, since the PA was now led by Hamas. The panel said Israel would find ways to provide humanitarian aid to the Palestinians that would bypass the PA. It was also recommended that, subject to security considerations, the crossing points into the Gaza Strip would be kept open to enable the passage of this assistance. Among those attending the policy meeting were Defense Minister Shaul Mofaz, Foreign Minister Tzipi Livni, Internal Security Minister Gideon Ezra, Minister-without-Portfolio Tzahi Hanegbi, chief of General Staff Lt.-Gen. Dan Halutz, Shin Bet head Yuval Diskin, OC Intelligence Maj.-Gen. Amos Yadlin, the IDF's coordinator of government activities in the territories, Maj.-Gen. Yosef Mishlev, National Security Council head Giora Eiland, the prime ministerial adviser, Dov Weisglass and other representatives from the Prime Minister's Office. Olmert, in an interview published Sunday in Time magazine, said he was not overly optimistic about giving up a unilateral strategy for negotiations with the PA. Olmert said that for negotiations to be opened with Hamas, the organization would not only need to alter its rhetoric. "They need to change their entire way of life, they need to change entirely their state of mind about Israel's existence. It's so much deeper than rhetoric," he said. Olmert characterized Hamas as a "typical fundamentalist, extremist religious movement that does not think in political terms the way we're accustomed to. Therefore I'm not very optimistic they can change overnight. They can change their rhetoric but they can't change substance." He said Hamas could not accept a two-state solution and was dedicated to the creation of "an Islamic religious fundamentalist state all across the Middle East to Africa, to Asia." Olmert said Israel would not allow a humanitarian crisis to develop in the Palestinian territories. "We promise we will do everything we can to help meet the humanitarian needs of the Palestinian people, without any hesitation whatsoever," he said. Olmert praised US President George W. Bush, saying that the two of them had a "very strong emotional bond," and that "every time we speak, we both feel it deeply." "I know how he feels and he [knows] how I feel," Olmert said. "I think it grew out of his first trip to Israel, when I hosted him in Jerusalem. He knows that I like him. I very much depend on the understanding and cooperation of President Bush. The reason I think [disengagement] can be done is because of the trust and understanding we have for each other." Olmert said he believed Bush would emerge as "the person who had more courage to change the Middle East than any person before him. I know the war in Iraq is controversial in the states, but for us in the Middle East it has made a great and significant impact." Turning to Prime Minister Ariel Sharon, Olmert said he had not visited him in the hospital and that he wanted to remember him as he was, "not as an aging 80-year-old man living in bed, helpless and unconscious." Olmert said the last time he met with Sharon was on the day of his massive stroke on January 4, when Olmert was preparing to assume the powers of the prime minister for only three hours, as Sharon was to go in to the hospital for an operation. "At the end of the meeting, I stood up and said, 'Arik, this country needs you. Stay well. Come back. I am looking forward to hearing your voice on the phone tomorrow saying, "Ehud I relieve you of your responsibilities. I'm back in town."'" "Then I hugged him and he hugged me, and I said good-bye. I want to remember that," Olmert said.