Oct. 5 (Bloomberg) -- Israel will open a key border crossing with the Gaza Strip soon, Prime Minister Ehud Olmert said after talks with U.S. Secretary of State Condoleezza Rice, a move that will ease humanitarian needs in the Palestinian territories.

Defense Minister Amir Peretz will discuss the opening of the Karni crossing with Rice today, according to an e-mailed statement from the Israeli government. The crossing has been open for only two days since the end of June, the World Bank said in a report Sept. 3, restricting the movement of people and goods and strangling the Palestinian economy.

Olmert told Rice during talks late yesterday in Jerusalem he is willing to help Palestinian Authority President Mahmoud Abbas implement the so-called ``road map'' peace plan and ``create a better atmosphere'' for peacemaking.

Rice is on a five-day tour of the Middle East in an effort to reinvigorate the peace process and bolster Abbas, whose efforts to form a coalition government with Hamas have stalled. The Islamist movement, which won parliamentary elections in January and controls the Palestinian government, is classified as a terrorist organization by Israel, the U.S. and European Union.

Israel won't release Palestinian prisoners until Corporal Gilad Shalit is freed, the government said in its statement, adding that would ``embolden Hamas.'' The soldier was captured June 25 by Palestinian gunmen who tunneled out of Gaza and captured his tank unit. Israel has been engaged in daily military operations in Gaza since the abduction.

Palestinian Budget

International governments, which provide 60 percent of the Palestinian Authority's budget, cut off funding after Hamas refused to renounce terrorism, recognize Israel and honor past accords, conditions set by the U.S., European Union, United Nations and Russia, a grouping known as the Quartet on Middle East peace.

The Quartet's so-called ``road map'' plan envisages an independent Palestinian state peacefully co-existing with Israel.

``Up to this point, there are no indications that these conditions are going to be met'' by Hamas, Abbas, also known as Abu Mazen, said in a news conference yesterday with Rice in the West Bank city of Ramallah. Talks on forming the unity government are ``disrupted,'' he said.

Rice's visit comes amid increasing violence between Abbas's Fatah movement and Hamas. Clashes this week in Gaza between security force factions left at least 11 people dead. A Hamas official was killed yesterday in the West Bank by unidentified gunmen, hours before Rice's arrival.

European and Arab governments have been pressuring the Bush administration to re-engage in the peace process now that the focus of international diplomacy has shifted from Israel's battle against Hezbollah in Lebanon.

Arab Talks

Rice met in Cairo Oct. 3 with foreign ministers from Egypt and Jordan as well as from the Gulf Cooperation Council, a regional group composed of Kuwait, Saudi Arabia, Qatar, Oman, Bahrain and the United Arab Emirates.

``The lack of settlement for the Palestinians'' is the root of the Middle East's problems, Egyptian Foreign Minister Ahmed Aboul Gheit said after meeting Rice. ``The Palestinian problem is the scourge of this region.''

The Israeli government has withheld tax revenue and restricted access to the Gaza Strip and West Bank since Hamas took control. Olmert and Rice discussed the tax issue and the prime minister said he would ``present ideas on humanitarian assistance'' to the Palestinian Authority, such as aid to hospitals and medicines.

Real incomes may contract by at least a third this year in the Palestinian territories, pushing two thirds of the population into poverty, the World Bank said in its report last month.

Weapons Smuggling

While Israel has legitimate concerns that militants will attack the border crossing and use it to smuggle weapons, more traffic could flow through Karni if Israel used scanners and other technology and the Palestinian Authority created a single agency to manage its side of the border, the report said.

Gaza's border crossings with Egypt have also been closed since the end of June while roadblocks for inspections inside the West Bank have boosted transportation costs as much as sevenfold on some routes, the World Bank said.

The U.S. is ``very concerned about humanitarian conditions in the Palestinian territories and about the economic situation,'' Rice said after talks with Abbas, according to a U.S. State Department transcript of the news conference.

``I will of course see what I can do to make sure that some of those crossings are indeed open longer and more frequently so that economic activity can return,'' she said.

Security Plans

The U.S. plans to bolster Abbas through a $26 million initiative that includes expansion of his presidential guard to 6,000 men from the current 3,500, a move that would increase Israeli trust in the Palestinians to control their own security, the New York Times said yesterday. The report cited unidentified donors who were briefed by the U.S. security coordinator for the Palestinians, Lieutenant General Keith Dayton.

``We are working very closely on some security plans,'' Rice told the news conference, without elaborating.

Hamas official Ismail Radwan told reporters in Gaza that Rice's visit to the Palestinian territories is ``unwelcome.'' The trip ``is a U.S. attempt to support Israel, and it doesn't aim at reviving the stalled Middle East peace process as she claims,'' Radwan said.

To contact the reporters on this story: Ed Johnson in Sydney at ejohnson28@bloomberg.net; Gwen Ackerman in Jerusalem at gackerman@bloomberg.net.

Last Updated: October 4, 2006 21:56 EDT