The State Department has confirmed that Secretary of State Condoleezza Rice met Tuesday with Palestinian Finance Minister Salam Fayyad. It was the first meeting at that level under a new U.S. policy allowing contacts with non-Hamas members of the Palestinian unity government. VOA's David Gollust reports from the State Department.

Condoleezza Rice (file photo)

The meeting was not listed in the secretary's public schedule, but officials say Rice spent a half-hour with the Palestinian official, joining in a meeting already underway between Fayyad and Assistant Secretary of State for Near Eastern Affairs David Welch.

The United States lists the militant Islamic movement Hamas as a terrorist organization and banned all contact with the Hamas-dominated cabinet set up after the group's surprise election victory in January, 2006.

But it has adopted a more nuanced policy since Hamas and the mainstream Fatah Party reached a Saudi-mediated unity government deal in February.

Ismail Haniyeh (file photo)

Even though the new government is still headed by Hamas Prime Minister Ismail Haniyeh, U.S. officials may have contacts with Fatah members of the cabinet as well as with independents like Fayyad, who was finance minister in the pre-Hamas era.

In a talk with reporters, State Department spokesman Sean McCormack said United States has long had dealings with Fayyad, a U.S.-educated economist, and his presence in the new cabinet is no reason to stop the dialogue:

"We have said previously that we are not going to cut off contact with individuals who had previously expressed their view that they personally, as well as the Palestinian Authority, should abide by the Quartet principles that were laid out. And there is no question about Salam Fayyad's views on this issue," he said.

The United States bars direct aid to the Palestinian government because it refuses to accept peacemaking terms laid down by the Quartet in 2006, including recognizing Israel, renouncing terrorism, and accepting commitments of previous Palestinian governments.

It continues humanitarian aid, channeled through non-governmental organizations including the U.N.'s Palestinian refugee agency, UNWRA.

The United States gave its assent last year to a European Union plan, known as the temporary international mechanism, under which European funds have been used to pay the salaries of Palestinian health workers and others even though they work for Hamas-controlled ministries.

Under questioning, spokesman McCormack indicated that a further easing of U.S, policy is under consideration.

He said Bush administration officials are discussing changes in bank regulations that would allow foreign aid money to flow into accounts controlled by Fayyad, but technically held by the Palestine Liberation Organization, as opposed to the unity government.

The change would affect contributions from European and Arab states, but McCormack said no U.S. money would go into the PLO accounts.

The United States provides some funding to agencies under direct control of Palestinian Authority chief Mahmoud Abbas of Fatah.

Last week, the Bush administration said it was ready to provide nearly $60 million to train and equip Palestinian security forces loyal to Abbas, and to upgrade a cargo crossing between the Gaza strip and Israel that is a vital economic link for Gaza Palestinians.