Ramallah: Israeli Prime Minister Benjamin Netanyahu said that he would not permit the Palestinian Authority to hold elections in Occupied East Jerusalm for parliamentary or presidential elections as planned under the Palestinian reconciliation deal.

“Israel will not negotiate with the Palestinian unity government and will oppose Hamas’ participation in it,” a statement from the Israeli Security Council read.

In a related development, a senior Israeli official said on Monday that Israel is deeply disappointed with the US State Department’s announcement that the US will continue to work with the new Palestinian unity government.

State Department Spokeswoman Jen Psaki said on Monday that the US intends to work with the new Fatah-Hamas government but will be watching it closely to ensure that it upholds the principles of the Quartet-recognising Israel, rejecting terror and honouring previously signed agreements.

The spokeswoman said that the Obama Administration has no intention of cutting off financial aid to the PA which amounts to $500 million (Dh1.86 million) a year.

The Israeli daily the Jerusalem Post reported on Tuesday that Israeli officials went as far as to blame the US for setting back the peace process between Israel and the Palestinians.

In retaliation for the inclusion of Hamas in the government, Israel says it will reduce tax revenues that it releases to the Palestinian Authority and also suspended VIP cards of senior Palestinian officials for freedom of movement. Visits between the West Bank and Gaza Strip will also be suspended.

Palestinian President Mahmoud Abbas said that he would use all diplomatic channels to respond to Israel’s aggressive measures.

Meanwhile, Israel Deputy Defence Minister Dany Danon is currently in the US to conduct a major incitement campaign against the PA and the Palestinian unity government, reminding and recalling the US vows to Israel that it would not support any government supported by Hamas.

Danon has gained the sympathy and support of several US lawmakers who stated that the US financial aid should be suspended immediately after unity government was announced and sworn in.