The decision by Israel and Washington to release millions of dollars to Mahmoud Abbas and his Fatah government will have a huge impact on the lives of Palestinians living in the West Bank.

Palestinian officials say the money will first pay the salaries of government workers, whose wages had been slashed under economic sanctions set in place when Hamas took power last year. Tens of thousands of Palestinians are supported through government salaries so the money will have a huge impact on the standard of life.

Some of the cash will also go towards building up Mr Abbas' security forces, which were crushed by Hamas last week in Gaza.

With the Islamist Hamas government now consigned to the coastal strip, Israel and Western donors are keen to help Mr Abbas shore up support, by lavishing funds on the West Bank and showing Palestinians what life could be like under pro-Western rule.

Israel has promised to unfreeze $300 to $400 million of Palestinian tax revenues withheld from the Palestinian Authority.

Washington said it would renew about $86 million in aid to Mr Abbas initially intended to boost the Palestinian President's security forces. The European Union also said it would restore assistance to the Palestinians.

Despite promising more aid for Palestinians, most of that assistance will completely bypass Gaza, where Islamist Hamas now rules around 1.5 million Palestinians.

"There is already an understanding with Mr Abbas, that that money must not and cannot go towards terrorism," said Mark Regev, an Israeli foreign ministry spokesman.

Mr. Regev said Israel was "considering its options" in determining how to ensure humanitarian aid reached Palestinians in Gaza while maintaining its embargo against Hamas.

"None of it will go to Hamas, but nobody is opposed to humanitarian aid," he said.

Senior Israeli officials were reportedly considering measures to tighten financial sanctions against Hamas-ruled Gaza, including a new policy that would ban private transfers to individual Gazans through Western Union and other financial institutions.

Mr Regev said no final decisions had been made.

"We're waiting for the dust to settle before deciding on our different options," he said.

Political analysts here said any double standard of aid reaching Palestinians in the West Bank and bypassing those living in Gaza would only deepen divisions between the Hamas and Fatah factions, stoking tensions.

Some warned any attempt to "buy" loyalty from Palestinians living in the West Bank would backfire, undermining Mr Abbas' power by making him appear like a puppet of the West.

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