Fears grow that US has shelved Middle East peace plan

Fears were growing yesterday that the American administration may have put the peace process between Israel and the Palestinians on hold.

Last week, in a move widely interpreted as intended to help Tony Blair win domestic support, President George Bush announced that the international "road-map" to peace would be released as soon as the new Palestinian Prime Minister was named. Mahmoud Abbas was officially appointed Palestinian premier on Wednesday, but yesterday the road-map had not been released. Fears were growing that its release would be delayed. European diplomatic sources said they had been told it may not be issued until Mr Abbas names his Cabinet.

A delay would be damaging for Mr Blair, who put great emphasis at the Azores summit on Sunday on Washington's moving forward of the Middle East peace process even as it attacked Iraq. It would also leave the dire situation in the occupied territories unaddressed while the Arab world rages at the attack on Iraq.

The road-map is a peace plan drawn up by the Middle East "quartet" – the US, Russia, the EU and the UN – based on President Bush's call last year for a Palestinian state alongside Israel. It is a timetable for each side to fulfil various conditions and calls for a Palestinian state within three years of the plan being adopted.

Yasser Arafat – who is now supposed to be sidelined to make way for Mr Abbas – has said the Palestinians accept the road-map, in spite of earlier objections. But the Israeli government has said it wants to make more than 100 changes to the plan, and on Monday said it would press the US government to drop all references to an "independent" Palestinian state and replace them with "certain attributes of sovereignty".

Ariel Sharon has already said that the only Palestinian state he is prepared to accept will be one where Israel controls the borders and air space. The Palestinian security forces would be lightly armed and Israel would have a veto on any international treaties that the Palestinian state made.

The publication of the road-map has been repeatedly delayed, which analysts say suits Israel. At the end of last year it was put off until after the Israeli elections in January, then until the formation of the new Israeli government, then until the appointment of Mr Abbas. "Are we seeing another excuse?" one European diplomatic source asked. "The road-map has been complete and ready to go since last December."

Meanwhile, the US State Department yesterday denied Israeli reports that the White House had approved new aid of $10bn (£6.4bn) to rescue Israel's economy, which is in ruins after two and a half years of the intifada and Mr Sharon's military response. The Israeli Finance Ministry had announced that the US administration had agreed an emergency aid package of $1bn of direct military aid to Israel, plus $9bn of loan guarantees.

Israel is already the biggest recipient of US foreign aid in the world. The Israeli tourist industry has collapsed, foreign investors are staying away and the costs of sustaining Mr Sharon's military policies are bankrupting the country. Any aid and loan guarantees would have to be approved by Congress.