Palestinian Foreign Minister Mahmoud Zahar says Ottawa's stance on the Israeli-Palestinian conflict is doing Canada no favours in the Middle East, but serves U.S. and Israeli interests. ((Bassem Tellawi/Associated Press))

A top Hamas official has warned Canada risks making an enemy of the Palestinian people by suspending aid and siding with Israel, according to a newspaper report.

Palestinian Foreign Minister Mahmoud Zahar told the Globe and Mail that he is upset Foreign Affairs Minister Peter MacKay didn't meet with him during his visit to the Middle East.

Hamas formed the Palestinian government after winning parliamentary elections early last year. Israel and several Western nations suspended tens of millions of dollars in humanitarian aid to the Palestinian Authority following the surprise win, challenging Hamas to renounce violence and recognize Israel.

Canada gives roughly $25 million each year to help Palestinians and their government. As most flows through aid agencies and the UN, Ottawa actually suspended about $7 million.

Zahar told the Globe he would have asked MacKay to explain Canada's decision to freeze the money, a move he said is hurting ordinary Palestinians. The decision doesn't help Canada's national interest but serves the U.S. and Israel, he told the paper.

Canada considers Hamas an organization associated with terrorism. In March 2006, MacKay said "not a red cent" would go to Hamas, which he called a "terrorist organization."

Zahar made headlines last summer by entering Gaza with a suitcase containing $20 million in cash from donors following a trip to Egypt, Indonesia, Malaysia, Pakistan, Iran and other countries sympathetic to Hamas.

Israel praises 'warm relations'

MacKay, who arrived in the region last week, did meet with moderate Palestinian President Mahmoud Abbas, a member of the rival Fatah group. Hamas and Fatah have been locked in a struggle for political power for months. Several attempts to form a unity government have failed.

On Sunday, Israel's Foreign Ministry issued a news release praising the Conservative government's "particularly warm relations with Israel" and decision to boycott funding to Hamas.

"The Harper government was the first to boycott Hamas immediately after its election, and supported Israel during the Lebanon war against Hezbollah," said the news release.

Critics of Prime Minister Stephen Harper's public support of Israel during the recent war with the Lebanese-based militant group Hezbollah say Canada is abandoning a long traditional of neutrality or objectivity in the region.

MacKay, who has repeatedly said he's in the region to listen to all sides, says Canada can still play the role of honest broker.

Earlier Monday, he toured Israel by helicopter and was to meet with the families of two Israeli soldiers whose abduction sparked the more than month long conflict with Hezbollah.

He is set to address the Herzliya Conference later Monday, a prestigious academic conference on national policy issues in the Herzliya region north of Tel Aviv. Israeli presidents, prime ministers and military officials have used the gathering to make major policy announcements.

In 2006, Olmert used the conference to announce he backed the creation of a Palestinian state and that Israel would have to give up parts of West Bank.

Former prime minister Ariel Sharon has used the conference to declare his support for the US-backed "road map" peace plan, and announce his "disengagement plan" to withdraw from Gaza and parts of the West Bank.

On the weekend, MacKay expressed concerns about the route of Israel's security barrier. He will meet with Israeli Prime Minister Ehud Olmert later Monday.

With files from The Canadian Press