Israel to release Palestinian funds

JERUSALEM (CNN) -- High-level Israeli and Palestinian officials agreed in talks Wednesday on the transfer of a portion of frozen Palestinian assets, Israeli sources said.

The officials also made progress on Israeli withdrawal from Gaza and on facilitating international humanitarian aid, according to the sources.

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The talks came amid continued efforts to try to ease tensions in the Middle East and get both sides back to the negotiating table to revive the peace process.

The office of Israeli Foreign Minister Shimon Peres, who led the Israeli delegation, said the two sides agreed that 70 million shekels (about $5.9 million) of frozen assets will be transferred to the Palestinian Authority next week.

Israel has been withholding the money because of concern it would be used to fund terrorism.

On Gaza, the Israelis said they believe the Palestinian security force there is capable of bringing order to the region. And if those forces can secure the area, Israeli forces would be able to withdraw, Peres' office said.

Both sides agreed they can facilitate the movement of international humanitarian assistance.

Mark Sofer, a senior Foreign Ministry official, said talks were "serious and cordial."

"This was part of our sincere effort to ease the conditions for Palestinians," he said, adding that the security question is the key to how quickly everything else will happen.

There was no immediate comment from the Palestinian delegation, which was headed by chief negotiator Saeb Erakat.

Israeli officials said another meeting is to be held between lower-level officials. Palestinian sources said another round of high-level talks would be held in about two weeks.

Erakat and the Palestinian delegation met last week in Washington with top U.S. officials, including Secretary of State Colin Powell and National Security Adviser Condoleezza Rice.

Latest developments

Palestinian Finance Minister Salam Fayyad told Reuters early Thursday that a holding company had been formed to consolidate all Palestinian Authority funds and assets under a single umbrella, a reform that meets a key U.S. demand. Fayyad said told Reuters that Palestinian President Yasser Arafat gave formal approval on Wednesday night to the creation of the new Palestinian Investment Fund which would be under the finance minister's direct control.

U.S. President George W. Bush had demanded the Palestinians overhaul their finances, clean up corruption and choose leaders

"not compromised by terror" before he would back the eventual creation of a provisional Palestinian state.

-- CNN's Samson Desta contributed to this report.