WASHINGTON Ñ U.S. officials said the Bush administration has refused to include $200 million in the request for annual American military aid to Israel for fiscal 2003. The officials said the funds, approved by the State Department, were meant to help Israel acquire systems for counter-insurgency and missile defense.

The Bush administration's refusal to grant the additional funds came amid Washington's demand for an Israeli troop withdrawal from Palestinian Authority-controlled areas of the West Bank and Gaza Strip.

"We do expect a complete withdrawal from Palestinian-controlled areas, including Ramallah and the other areas that the Israeli Defense Forces recently entered," State Department spokesman Richard Boucher said. "Such a complete withdrawal would greatly facilitate the work of General Zinni."

The funds were pledged by the previous Clinton administration. They represented a quarter of Israel's request of $800 million in special U.S. military and security funding approved by then-President Bill Clinton during his last months in office in 2000.

The counter-insurgency aid was to have been separate from the annual $3 billion in U.S. economic and military aid to Israel and part of Washington's help to allies fighting Islamic insurgency. U.S. officials cited budget woes as well as concern over an Arab backlash as reasons for withholding the additional Israeli aid request.

Last month, however, the administration disclosed that the Defense Department granted Israel $28 million in special aid for sensors as well as equipment to detect and dispose of bombs. The funding was allocated in 2001.

In Congress, 230 House and Senate members called on President George Bush to deem as terrorist organizations three groups aligned to PA Chairman Yasser Arafat. They included Arafat's security force.

The appeal to Bush would include a freezing of assets to these groups, identified as the Arafat's Fatah militia, Al Aqsa Brigade and the Palestinian leader's Force 17 praetorian guard. The federal lawmakers said the three groups are no different from such Islamic insurgency groups as Hamas and Islamic Jihad already declared terrorist organizations by the United States.

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