Hamas formally took power Wednesday, with Palestinian President Mahmoud Abbas swearing in 24 Cabinet ministers, including 14 who served time in Israeli prisons.

Incoming Palestinian Prime Minister Ismail Haniya, left, waves as he arrives with members of his cabinet for the swearing in ceremony at the offices of Palestinian leader Mahmud Abbas in Gaza City, Wednesday, March 29, 2006. Hamas formally took power Wednesday, with the Palestinian president swearing in its 24-member Cabinet, including 14 ministers who served time in Israeli prisons. [AP]

Soon after the ceremony Canada announced it was suspending aid to the cash-strapped Palestinian Authority, and other nations were expected to follow suit.

State Department spokesman Sean McCormack said the United States is looking for ways to get humanitarian aid to the Palestinian people, but "we are not going to provide funds to a terrorist organization. And we are not going to provide U.S. funds to a Hamas-led government."

With Hamas now at the helm, the Palestinian government faces a crippling international economic boycott, and may run into immediate difficulties next week when March salaries are to be paid for some 140,000 government employees.

The Palestinian Authority gets a large part of its approximately $1.9 billion annual budget from overseas sources. Without money from the Arab world, Europe and the United States, a Hamas-led government would be nearly broke.

The newly installed Palestinian Information Minister, Youssef Rizka, called the Canadian action "hasty" and said it "shows obvious bias."

"What we need from the Canadian government is that it ask the Israeli authorities to admit that they are occupying Palestinian land," he told The Associated Press.

Canadian Foreign Affairs Minister Peter MacKay said his government had no choice but to suspend assistance and decline any contact with the new Hamas Cabinet.

"The stated platform of this government has not addressed the concerns raised by Canada and others concerning nonviolence, the recognition of Israel and acceptance of previous agreements and obligations, including the roadmap for peace," MacKay said.

"As a result, Canada will have no contact with the members of the Hamas Cabinet and is suspending assistance to the Palestinian Authority."

However, Ottawa emphasized it would continue giving humanitarian aid to the Palestinian people through U.N. and nongovernment organizations.

Wednesday's swearing-in ceremony came just a day after Israel's election and drew clear lines of confrontation. Hamas says it will not soften its violent platform and Israel's victorious Kadima Party says if that is the case, Israel will set the borders of a Palestinian state itself, without negotiations, and keep large areas of the West Bank.

Arab leaders, wrapping up an annual summit in the Sudanese capital, Khartoum, rejected any Israeli move to unilaterally draw its borders with a West Bank withdrawal. In a final statement, they renewed a peace offer for Israel ¡ª a 2002 initiative that Israel has rejected, promising a peace with Arab states in return for a withdrawal from all occupied Arab lands.

Israeli officials said it is very unlikely acting Prime Minister Ehud Olmert will create a "Hamas bypass" and negotiate directly with the moderate Abbas as long as Hamas refuses to change. Abbas, leader of the defeated Fatah Party, was elected separately and wields considerable power.

Israel suspended tens of millions of dollars in monthly tax transfers to the Palestinian Authority after the Hamas victory, and Israeli Foreign Ministry spokesman Mark Regev said the Israeli Cabinet would decide on additional sanctions next week.

"With Hamas taking over now, you can't have business as usual," Regev said.

The Cabinet ministers took their oath in two ceremonies, held simultaneously in the West Bank and Gaza because Israel bans the travel of Hamas leaders between the two territories. The two locales were hooked up by video conference.

Abbas presided over the 10-minute ceremony in Gaza City, looking glum, then left without speaking.

The first to be sworn in was Prime Minister Ismail Haniyeh, who walked along a red carpet, then placed his hand on a copy of the Muslim holy book, the Quran, laid out on a low table. He pledged to be "loyal to the homeland and its sacred places."

Haniyeh later told a news conference his government would cooperate with Abbas. He reiterated Hamas won't negotiate with Israel under the current terms, but appeared to be softening his message. Haniyeh said if Abbas wants to go ahead with peace talks, "it's his prerogative and we have no problem with that."

Abbas then held a separate news conference and said the new government "knows what is required" of it, including dealing with Israel. Abbas reiterated that many differences remain between him and Hamas, and that both sides should try to bridge them.

In all, the new Cabinet has 24 ministers, including Haniyeh. Ten are from Gaza and 14 are from the West Bank. Nine have engineering degrees and the rest are university graduates in other fields. Nineteen are Hamas activists and five are independents. One is a woman and one a Coptic Christian.

Fourteen spent time in Israeli prisons, serving terms ranging from six months to six years, most for membership in Hamas or fundraising activities. Haniyeh was arrested by Israel in 1989, and served three years for allegedly heading a Hamas unit that hunted down suspected informers for Israel.

Hamas claims its military and political wings are separate, while Israel maintains Hamas politicians have had direct knowledge of the group's violent attacks that have killed hundreds of Israelis over the years.

The militants took office just a day after Olmert, head of the centrist Kadima Party, emerged as the victor in Israel's parliament election. It will probably take several weeks for Olmert to form a ruling coalition. He has said he would only invite parties that accept his West Bank plan.

Olmert has said he would take unilateral action if the Palestinians don't indicate a readiness for compromise in a reasonable period of time. Olmert wants to keep large West Bank settlement blocs, but dismantle several dozen smaller settlements with about 70,000 residents.