Feb. 17 (Bloomberg) -- U.S. Secretary of State Condoleezza Rice said she will ask Arab allies to demand that an incoming Hamas-led government abandon terrorism and accept Israel, during her trip to the region next week.

``What I will say about Hamas is those who are committed to an international consensus behind the road map and behind the peace process should be demanding of any Palestinian entity that it also be committed to the peace process,'' Rice told a roundtable of Arab news outlets today at the State Department.

Hamas's sweeping Jan. 25 victory in legislative elections is set to dominate her trip. The Islamic movement, whose charter calls for Israel's destruction, won 74 of the parliament's 132 seats and will form the next government. The newly elected Palestinian Legislative Council holds its first session tomorrow, where lawmakers will be sworn in.

The State Department announced today that the U.S. had asked the Palestinian Authority to return $50 million in direct assistance provided in 2005 for new infrastructure projects in the Gaza Strip, which Israel evacuated in August.

``This is all part of our program of reviewing our assistance programs,'' State Department spokesman Sean McCormack said.

Search for Money

Expecting a cut-off in foreign aid, Hamas has been seeking alternative sources of money, including Iran. Hamas also receives assistance from Islamic charities in Saudi Arabia and throughout the Middle East.

``Clearly Saudi Arabia has made a lot of progress in terms of tracking terrorist financing and in terms of these private groups,'' Rice said. ``I think there's still work to do.''

Asked about the possibility of Iran or other Hamas supporters filling in the budgetary gap, Rice said, ``The Palestinian need for resources is a lot, by most estimates $1.9 billion a year. It will be interesting to see if that can be gotten from states that are not committed to the peace process.''

Rice said Iran's support for terrorist groups and its nuclear program have isolated the country in the world. Earlier this week, she announced the U.S. was seeking an extra $75 million in funding from Congress to back Iranian dissidents.

Today, the State Department said it was awarding $5 million in grants ``to accelerate the work of reformers in Syria,'' which Rice described as Iran's ``sidekick.''

Policy Defended

Rice defended the U.S. policy of promoting democracy in the Middle East. The strategy has come under fire in light of Hamas's victory, strong gains by the Muslim Brotherhood in Egypt's recent parliamentary elections, and advances for Islamists in the Iraqi election.

Representative Henry Hyde, an Illinois Republican who chairs the U.S. House International Relations Committee, told Rice yesterday in a hearing that the democracy promotion effort may ``constitute an uncontrollable experiment with an outcome akin to that faced by the sorcerer's apprentice.''

Rice said the administration is ``absolutely not'' sorry for promoting elections that led to victories for groups hostile to the U.S. ``It was the only thing to do,'' she said.

To contact the reporter on this story: Janine Zacharia in Washington at o jzacharia@bloomberg.net

Last Updated: February 17, 2006 16:07 EST