The U.S. is beginning work on tens of millions of dollars worth of aid projects aimed at boosting the Palestinian economy and President Mahmoud Abbas at the expense of Hamas.

Along a mile-long stretch of road leading to Ramallah — the seat of Mr. Abbas' government — bulldozers ripped up a street notorious for its crater-sized potholes and sprawling traffic backups at the Israeli military checkpoint near the Qalandiya refugee camp.

The $2.5 million project, commissioned by the U.S. Agency for International Development, had been suspended after the January 2006 victory by the militant movement Hamas in Palestinian elections. The project got the green light after Mr. Abbas dismissed the Hamas government because of its violent takeover of the Gaza Strip.

"The Qalandiya road is probably the most heavily traveled road in the West Bank," with about 70,000 people traveling on it every day, said Howard Sumka, director of USAID for the West Bank and Gaza Strip. "It was a disaster; it was a succession of potholes. It was a major bottleneck and a major annoyance for the Palestinians."

Mr. Sumka said USAID expects to spend about $190 million over the next year on projects such as road and water infrastructure, health care and agriculture. Within the coming weeks, the agency is expected to award a $20 million contract that will fund about 200 road-upgrade projects aimed at easing double-digit unemployment.

"There is a long array of programs we're going to be able to do now that we have somewhat more freedom in the West Bank," said Mr. Sumka, who added that most of the money will come from funds that were previously allocated but never spent.

USAID is one of the main arms of the U.S. government that is being enlisted to create jobs and resuscitate economic life in the West Bank as a way of building popularity for moderates such as Mr. Abbas, who supports peace negotiations with Israel

But Palestinians, who are still smarting from nearly 18 months of a U.S. boycott of their government, say there is widespread suspicion that the aid is being used as political leverage to meddle in the rift between Mr. Abbas' Fatah party and Hamas.

"The funding was revealed as a political tool to advance the donor country's political agenda and not do what it's supposed to do, which is serve Palestinian developmental needs," said Sam Bahour, a businessman in Ramallah.

Mr. Bahour said he is concerned that the aid may be shut off again in the future if a new Palestinian Cabinet is appointed that is not to the liking of the Bush administration.

"This is putting out a carrot but keeping the stick in clear view — meaning the boycott can come back tomorrow if government is changed," he said.

Samir Barghouti, the director of the Arab Center for Agricultural Development, said his nongovernmental organization is poised to receive an increased level of funding for its micro-loans program geared toward low-income farmers.

But he warned that the effect of the funding program is likely to boomerang if Israel doesn't ease restrictions on the movements of Palestinians in the West Bank. He also said Palestinians worry that the aid will fall into the hands of corrupt cronies of former President Yasser Arafat.

After a seven-year uprising against Israel and 1½-year aid boycott, Palestinian Authority institutions are reeling and the economy is depressed. One Palestinian official said some of the damage may never be repaired.

"Some investors have emigrated to Jordan, and they aren't going to come back if they don't see progress," said Khalil Nijem, a director-general in the Palestinian Ministry of Planning.

Mr. Sumka said there would be no new project financing for the Gaza Strip because of a ban on working with Hamas, which is considered a terrorist organization by the United States.

Little of the funding for the West Bank project will pass through the Palestinian Authority, he added. Instead the money is being paid out directly to the contractors.