JERUSALEM — In imposing sanctions on the Palestinians now that a Hamas-dominated Parliament has been sworn in, interim Prime Minister Ehud Olmert faced two acute dilemmas: How to undermine Hamas without hurting the Palestinian people, and how to convince Israeli voters that he is being tough enough on

Hamas without alienating the international community.

The steps he took — freezing the transfer of tax moneys Israel collects for the Palestinians, appealing to the international community to withhold funds that could be used for terror, curbing the freedom of movement of Hamas officials and stepping up security checks on Palestinian workers at border crossing points — were meant to

strike the golden mean.

The measures, however, failed to impress Hamas, the international community or the Israeli opposition. Palestinian Prime Minister-designate Ismail Haniyeh said Hamas had funding “alternatives in the Arab and Islamic world. ” The Americans and the European Union indicated that they would have preferred Israel to wait until a

Hamas government is formed. And, predictably, with elections in Israel less than six weeks away, Olmert, the head of the Kadima Party, came under strong criticism from rivals on both the right and the left. The right said it was too little too late; the left that it was too much too soon.

It is still too early to say what effect all of this is having on the voters — but if there is any single issue that could enable the opposition parties to make inroads on Kadima Party’s huge lead in the polls, it is the threat Hamas rule in the West Bank and Gaza Strip poses to Israel.

By taking relatively mild steps, Olmert wanted to avoid any possibility of a humanitarian catastrophe on the Palestinian side for which Israel would be blamed. “The international community wouldn’t tolerate pictures of starving Palestinian children, and the address for its complaints would be Israel, ” Foreign Minister Tzipi Livni said.

Nor does Olmert want to do anything that might spark a new round of Palestinian terror. That is probably the one way he could lose the upcoming election.

Some pundits argue that Olmert’s room for maneuver against Hamas is extremely limited anyway, precisely because of Israel’s need to retain the moral high ground and the international support that goes with it. By far the most dramatic measure Olmert could have taken short of war would have been to cut Gaza off from Israel

and the West Bank. But that would have meant violating a customs agreement Israel signed with the Palestinian Authority.

Moreover, as political analyst Aluf Benn points out in Ha’aretz, the Oslo accords, the “road map, ” the disengagement plan and the agreements governing the border crossing all stipulate that Israel must “preserve the status of the West Bank and the Gaza Strip as a single territorial unit. “

The international community would have been up in arms and Israel’s trump card — international backing against an unrepentant terrorist group in power — would have been jeopardized.

At the core of the argument inside the Israeli establishment over how to deal with Hamas is the question of whether or not the organization can be tamed.

In other words, are the economic sanctions designed to pressure Hamas into recognizing Israel and negotiating a deal, or to convince the Palestinians to call new elections and vote an implacable Hamas out of office? There are two schools of thought — the majority who say Hamas will never change and that Israel should move

swiftly to curb its nefarious influence on Palestinian affairs, and a small minority who argue that Hamas should be allowed to fail in government on its own, with as little Israeli prodding as possible.

The chief of the Shin Bet, Yuval Diskin, has been the most outspoken voice for the majority. He told the Knesset’s Foreign Affairs and Defense Committee Monday that over time, a Hamas-run entity would constitute a strategic threat to Israel, and that Israel should not accept any Hamas offer of a cease-fire, because the organization would only use it to bring in arms and recruit Muslim militiamen from Al-Qaida and other organizations to fight Israel. His operative conclusion: Israel must to do what it can to get Hamas out of office as soon as possible.

Israel’s national security adviser, Giora Eiland, takes the minority view. In the discussions leading up to Olmert’s decision on sanctions, he argued that Israel’s main card in fighting Hamas is international support, and that, therefore, Israel should not be seen to be doing anything that might be construed as not giving Hamas a chance

to embrace moderation. “Anyone starting sanctions now could shoot himself in the foot and lose international support, ” he declared. Eiland maintains that Israel should let Hamas make the mistakes — like turning to Iran for aid, or restarting terror against Israel.

There are more than two voices on the Palestinian side. Palestinian Authority President Mahmoud Abbas, although a member of the defeated Fatah party, still wields a great deal of power, and he is urging Hamas to honor all previous agreements with Israel, and calling on Israel to re-open peace talks with him.

Among the Hamas leadership, there are differences in tone, too — with Haniyeh indicating that the organization might be ready for a long cease-fire with Israel, and the party’s Damascus-based leader, Khaled Meshaal, saying there will be no compromises with the “Zionist entity. ” Meshaal is now in Tehran seeking Iranian

economic and other support.

The Israeli right, especially the Likud, is accusing Olmert of weakness in the face of an existential threat posed by a Hamas-Tehran axis. In campaign ads, they have dubbed the interim prime minister “Smolmert ” — a play on his name and the Hebrew word for left wing. “The Likud is trying to push him into tough action against the

Palestinian population. And that would lead to a new wave of terror from which there would be just one beneficiary at the polls: the Likud,” political analyst Nahum Barnea wrote in Yediot Achronot.

The left argues that instead of imposing sanctions from which Israel will eventually have to back down, the government should look to Abbas as a potential peace partner. If there is progress there and Hamas tries to block it, there is a possibility that the Palestinians will hold new elections and vote Hamas out of power, they insist.