CRAWFORD, Texas (Reuters) – The Bush administration is showing signs of easing its hard-line approach toward Hamas, in response to the militant group’s rising political clout in the Palestinian territories and appeals for flexibility from European allies, officials and diplomats said.

The White House acceded to Hamas running candidates in Palestinian elections, even though it has refused to disarm and Washington lists it as a major terrorist organization.

Officials said they may be open to contacts with some Hamas political affiliates and left open the possibility of dealing with the group if it gave up weapons and ended violence, in contrast to past calls for its total dismantlement.

U.S. officials and diplomats cast any shift as pragmatic: Hamas-funded social services are popular with many Palestinians; it is winning local races and was expected to make a strong showing in newly postponed parliamentary elections, and some Hamas-backed politicians and affiliates are seen as moderates.

The shift also follows a behind-the-scenes push by European allies, including Britain and France, for Washington to drop its call to dismantle Hamas completely. European officials warned Washington that doing so would be a “disaster” for Palestinians who benefit from Hamas aid, sources said.

“There is now a realization that they (Hamas) do have a role to play… that if you can bring them into the political fold, then you’ll be marginalizing the military elements of those groups,” said a European diplomat.

White House spokesman Scott McClellan said President Bush has not changed his view of Hamas as a terrorist group that must be disarmed.

“We have great confidence in democracy and elections, McClellan said. “When people are given the chance to express themselves they tend to choose those who seek peace and those who seek to improve their quality of life, not terrorists.”

A senior administration official said: “We’re not acquiescing. We do not deal with… terrorists.” But he added: “How do you pursue this without limiting democratic choices?”

Another senior official called it a shift in emphasis, not policy. It could be reversed if Hamas-sponsored violence escalated, experts said.

Trans-Atlantic discussions are expected to continue this week with visits by British and German officials. British Prime Minister Tony Blair will meet with Bush on Tuesday.

European diplomats said a strong election showing by Hamas and a cease-fire deal could prompt reconsideration of the EU’s decision to put Hamas on its terrorist blacklist. It did so in 2003 after heavy lobbying by the United States and Israel.

‘A very complicated problem’

American officials acknowledge that Hamas’ electoral rise poses a dilemma in defining “terrorists,” and deciding what to do about millions of dollars in U.S. aid for projects in towns run by elected officials from Hamas or affiliates.

“It’s a very complicated problem. What do you do about these groups when they are both terrorist groups and entering into politics?” the senior administration official said.

Increased flexibility might put the Bush administration at odds with Israeli Prime Minister Ariel Sharon.

Though officials insist there is no change in the U.S. policy against drawing distinctions — as Europe does — between Hamas’ political and military operations, the administration may be moving in that direction, diplomats and experts say.

While asserting that the United States will not deal directly with Hamas “terrorists,” a senior Bush administration official said it may be willing to have contact with politicians “affiliated with the group.”

There is “a big difference” between people who “may be members of organizations but are not terrorists, versus terrorists, people who have blood on their hands,” McClellan said in March.

After meeting with Palestinian President Mahmoud Abbas, Bush did not publicly repeat demands the Palestinian Authority dismantle militant groups, although aides said his position was unchanged.

Supporters of engagement said it fits with Bush’s call for spreading democracy. But critics said Hamas’ political role should be curbed until it disarms and renounces terrorism.

Abbas’ announcement that he is postponing July 17 legislative elections could buy time for Washington to settle on its Hamas policy. No new date has been set for the vote. While the White House declined comment on the merits of the delay, diplomatic sources said the mood was one of quiet relief to “elation.”

This piece ran on the Reuters Wire on June 5th, 2005