The Bush administration is to trim up to $300 million from a multibillion-dollar package of loan guarantees for Israel, congressional sources said today.
In an apparent rebuke for Israel's settlement activities in Palestinian areas, the sources indicated additional cuts could be made from future loan installments.
Israel agreed on the final figure after months of talks between US national security adviser Ms Condoleezza Rice and Mr Dov Weisglass, Israeli Prime Minister Ariel Sharon's chief of
staff.
It was unclear whether the first deduction totaling $289.5 million would, as expected, include a portion of the cost of construction of Israel's barrier through the West Bank.
President Bush has called the fence a problem and a potential obstacle to resolving the Israeli-Palestinian conflict.
Additional deductions could be made from future installments under the $9 billion package of US loan
guarantees, the sources said.
Israeli officials had no immediate comment.
The move follows an announcement today that senior US official Mr William Burns will visit Israel and the Palestinian territories next weekend for the first time since August.
A State Department official said the assistant secretary of state for Near East affairs, would also go to Egypt before joining Secretary of State Colin Powell on a tour of North Africa next week.
The Bush administration has stepped back from active intervention to back Middle East peace efforts for most of this year because of its preoccupation with Iraq.
In the meantime two groups of unofficial Israel and Palestinian negotiators have launched peace initiatives of their own, independent of the internationally-backed "road map" peace plan.