JERUSALEM, Dec 24: Israel approved on Sunday the transfer up to 100 million dollars of customs duties owed to the Palestinians, following talks the day before between Prime Minister Ehud Olmert and president Mahmud Abbas.

The Israeli cabinet voted unanimously to transfer the funds -- earmarked as “humanitarian aid” -- to the Palestinian Authority headed by Mr Abbas, thus steering clear of the Hamas-led Palestinian government.

The transfer had been agreed in principle the night before at the first meeting in six months between Mr Olmert and Mr Abbas at the Israeli leader's residence in Al Quds.

“During the meeting I agreed, after consulting ministers, to release a sum of money from the taxes held by the Israeli government at a sum of up to 100 million dollars,” said Mr Olmert before going into Sunday's cabinet meeting.

The funds are meant “to help in humanitarian aid to the Palestinian people who suffer among other things due to the failing conduct of their government which is not part of the international community,” he told reporters.

“The aid will be transferred through a special mechanism that will ensure the money is used only for humanitarian aid.” Israel, which like the West considers Hamas a terrorist organisation, stopped transferring custom duties -- which it collects on behalf of the Palestinian Authority on goods destined for the Palestinian territories -- after Hamas formed a cabinet in March, two months after sweeping elections.

PRISONERS: Israel may release some Palestinian prisoners in the coming days as a gesture of goodwill toward Palestinian leader Abbas, an Israeli official said on Sunday a day after Mr Abbas met Ehud Olmert.