An Israeli sweep in the West Bank has targeted alleged funding for Palestinian terrorism. Israel is accusing Iran of trying to increase its influence in the cash strapped Palestinian territories.

Palestinians sit in front of damaged currency exchange office raided by Israeli army in Ramallah, Wednesday, Sept. 20, 2006

Israeli troops raided the homes and offices of 14 Palestinian money changers in four West Bank towns, confiscating nearly $1.5 million. The army said the money came mostly from Iran and was earmarked for terrorism. It said the cash traveled through Hamas, Islamic Jihad and Hezbollah offices in Syria and Lebanon.

Palestinian militant groups were allegedly using the money to produce explosives belts, rockets and car bombs. Israeli spokesman Mark Regev says Israel wants to make sure.

" That that money won't come back to haunt us all in suicide bombings," he said.

Israel says Iran has been increasingly supporting terrorism in the Palestinian territories since the election of the Islamic militant group Hamas in January. Hamas, which seeks Israel's destruction, has sought alternative funding because it is broke in the wake of international sanctions.

"No one wants to deal with this Hamas regime, which is of course very extreme and refuses to renounce terrorism," Regev said.

But while money may be reaching militants, most ordinary Palestinians are in financial straits. Hamas has been unable to pay the salaries of 165,000 government employees for six months and Israel fears a humanitarian crisis.

Regev says it's a dilemma.

"And I think the challenge that we have now is to create a mechanism whereby there is direct support for the Palestinian people and, at the same time, that that mechanism will bypass the Hamas government," he said.

While Palestinians initially blamed Israel and the United States for the economic crisis, their anger is now directed toward the Hamas government. Civil servants and school teachers have been on strike for three weeks, demanding their salaries.