By Adam Entous and Nidal al-Mughrabi JERUSALEM/GAZA, June 5 (Reuters) - Hamas has seized control of the Palestinian water agency that is spearheading Middle East envoy Tony Blair's signature project in the Gaza Strip, Palestinian and Western officials said on Thursday. Hamas's takeover of the Palestinian Water Authority in Gaza cements the group's control over the territory and could cast doubt on the future of the North Gaza Sewage Treatment Works project -- a centrepiece of an economic package touted by Blair to try to bolster the chances of a peace deal this year. The seizure comes ahead of planned tender by the Water Authority for building a water treatment plant, and amid delicate negotiations with Israel on bringing critical building supplies into Gaza, which Hamas Islamists seized a year ago. An official with the World Bank, the Washington-based international lending agency which is coordinating the project, said construction was expected to move forward as planned. Gazans view the task as urgent -- last year, five people drowned in a wave of raw sewage from a plant in North Gaza. Israel has argued that equipment needed to repair the sewage system can be used to make rockets that are fired into Israel. Blair's office had no immediate comment on the day's developments. The former British prime minister is the special envoy to the Palestinians from the Quartet of international powers. Hamas officials also had no immediate comment. Hamas may see the Water Authority as a means to raise funds to get around an Israeli-led blockade of the territory that has sharply reduced supplies of fuel and other essentials. The authority collects fees for wells. With water scarce in parched Gaza and imports restricted, wells are in high demand. Rebhi al-Sheikh, deputy chairman of the Water Authority, said Hamas gunmen took over the main building at midday on Wednesday, asserting they were acting on orders from Hamas leader Ismail Haniyeh's cabinet and his Interior Ministry. Sheikh said the gunmen seized keys and vehicles belonging to the Authority, which has reported directly to Palestinian President Mahmoud Abbas's Western-backed government in the West Bank despite Hamas's takeover of the territory last June. PLAN IN JEOPARDY Sheikh said a $60 million sewage treatment facility, touted by Blair, may now be in jeopardy, citing a U.S.-led boycott on financial dealings with Hamas, which refuses to recognise Israel and renounce violence. "Coordination with donor countries could be affected because donor parties could question the credibility of the Water Authority now that it has been taken over by Hamas," Sheikh said. He said Israeli cooperation could also be hindered. Israel has tightened its cordon of the Gaza Strip since Hamas's takeover, and it took months of lobbying by Blair and other Western officials to get permission to bring in pipes, wire and other equipment to bolster the crumbling sewage system. A World Bank official said the unit of the Palestinian Water Authority that is directly overseeing the sewage project was based in another building that was not taken over by Hamas. The official said the unit was still reporting directly to Abbas's government, and not to Hamas's administration in Gaza. Israeli officials had no immediate comment on the impact of Hamas's takeover of the Water Authority on the project, which Blair touted at a news conference in Jerusalem last month. The project is largely contingent on cooperation from Israel, which controls Gaza's commercial crossings. Blair's office said last month that Israel's Defence Ministry had agreed to provide a "letter of comfort" to the water authority in order to encourage potential donors to provide funds for the project. It is unclear if Hamas's actions would get in the way of that plan. Sheikh said representatives of the Water Authority, Blair's office and the World Bank had met with Israeli officials earlier this week to work out arrangements to bring in building supplies and other equipment. "I call upon rational people in Hamas to think of the grave consequences that will affect the water sector and to be aware of the projects with donors that may get suspended," Sheikh said.
Palestinian youths throw stones at Israeli border police officers during a protest against the construction of Israel's controversial barrier in the West Bank village of Nilleen, near Ramallah, June 4, 2008. ...
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