An internal, confidential Foreign Ministry report advises that the creation of a Fatah-Hamas unity government in the Palestinian Authority would offer Israel a strategic opportunity. The views expressed in the paper are clearly counter to those expressed by Prime Minister Benjamin Netanyahu since the reconciliation reached last week by the Palestinian factions. The reconciliation document is expected to be signed in Cairo today.

"The Palestinian move is not only a security threat but also a strategic opportunity to create genuine change in the Palestinian context," the report states. "Such change may serve the long-term interests of Israel."

Open gallery view Mahmoud Abbas and Benjamin Netanyahu in Jerusalem. Credit: AP

The report was delivered earlier this week to Foreign Minister Avigdor Lieberman, Foreign Ministry Director General Rafael Barak and other senior figures. It was prepared by the ministry's policy planning division, which is staffed by career diplomats and is responsible for formulating foreign policy recommendations.

The division was expanded, and its role heightened, as part of the implementation of the recommendations of the Winograd Committee. That panel investigated Israel's failings in the the 2006 Second Lebanon War.

Instead of counseling blanket opposition to a Palestinian unity government the authors of the report recommend that Israel adopt a "constructive approach that would sharpen the dilemma on the Palestinian side" regarding the aims of such a government and Hamas' unwillingness to recognize Israel.

The authors of the report believe that a more positive approach to Palestinian reconciliation efforts would help to improve relations between Jerusalem and Washington. "Israel must be a team player and coordinate its response to a Palestinian unity government with the administration," the report states. "This will empower the United States and serve Israeli interests."

Since last Wednesday, when Fatah and Hamas announced their reconciliation, Netanyahu has assailed the accord. Despite the fact that Israel was taken aback by the Palestinian move, Netanyahu issued a statement within two hours after the announcement - rejecting it out of hand. Two days later Finance Minister Yuval Steinitz announced he would delay the transfer to the PA of NIS 300 million that Israel collected in taxes on its behalf.

The authors of the Foreign Ministry report offered a very different way of responding to the Fatah-Hamas agreement. "At the current stage, prior to the confirmation of the agreement, Israel must be careful in its policy and declarations," the report states in an indirect critique of Netanyahu.

The report recommends a measured Israeli response to the potential formation of a Palestinian unity government that takes into consideration the need to address Palestinian plans to seek international recognition for a Palestinian state at the UN General Assembly in September.

"We must avoid expressions or moves that will weaken Israel against the Palestinians in the international arena, especially in view of the strategic challenges that are expected during the year," the report stressed.

Yesterday Netanyahu continued his offensive against the agreement, calling on PA President Mahmoud Abbas to cancel the deal immediately.

"The agreement between Abu Mazen [Abbas] and Hamas strikes a serious blow to the peace process," Netanyahu said in a meeting with Mideast Quartet envoy Tony Blair. "How is it possible to achieve peace with a government, half of which calls for the destruction of Israel and even praises the arch-murderer Osama Bin Laden?" he added.

The report includes a series of recommendations. Topping the list is the continuation of security coordination with the Palestinian Authority, "which is in Israel's interest and has resulted in a dramatic drop in terrorism." The report also recommends that Israel should ask the international community to set detailed criteria for the proposed new Palestinian government.

It also recommended that an official delegation be sent to Cairo, in order to heighten coordination with Egypt's interim government. Isaac Molho, Netanyahu's envoy for the peace process, is slated to travel to Cairo Sunday to meeting with Egyptian Foreign Minister Nabil al-Arabi and other senior figures.

Netanyahu will meet with his British counterpart, David Cameron, in London today before traveling to Paris tomorrow for a meeting with French President Nicolas Sarkozy. Netanyahu is expected to ask his colleagues to express opposition to a Palestinian unity government and to contribute to blocking the expected demand for international recognition of an independent state at the UN General Assembly in the fall.

Both Britain and France have expressed their support for Palestinian reconciliation and are leaning toward supporting international recognition for a Palestinian state in September.