By Phil Zabriskie/Jrusale

As diplomats meet at the United Nations this week to discuss the worsening financial crisis of the Palestinian Authority brought on by the Western blockade, a more pressing life-and-death situation seems to be developing on the ground.

Hamas and Fatah militiamen have clashed repeatedly in the last three weeks, including on three separate occasions in just the last two days. Early Monday morning, three men were killed in Khan Yunis during a shoot-out between the factions that followed a series of tit-for-tat kidnappings. On Tuesday morning, trouble ensued in Gaza City after Hamas gunmen approached the heavily guarded house of a Fatah official; bullets again flew, injuring nine people, including five children. That same afternoon, at the funeral of a Fatah foot soldier killed the prior morning, gunfire erupted again, injuring three more.

In short, what at first was being hailed as an almost unprecedented peaceful Arab transfer of power following democratic elections has lately looked anything but peaceful. By refusing to deal with or fund a government led by Hamas, or even allow the transfer of funds from friendly Arab neighbors, the U.S. and the European Union have added to a morass of problems that have plunged the entire Palestinian Authority into crisis and given Fatah an opportunity to claw its way back into power — principally, for now, by sparking a conflict over the control and make-up of the Palestinian security forces.

Last month, Fatah head Mahmoud Abbas, using his presidential authority, appointed an ally as the head of the Preventative Security Apparatus, which is charged with overseeing security in the West Bank and Gaza, enraging Hamas leaders who felt their new power was being undermined. The Hamas-led Interior Ministry responded by forming its own paramilitary force under the command of veteran militant Jamal Abu Samhadana (whom Israel wants dead). Thus was the stage set for this week's gun battles, which occurred the day after Abbas went to Gaza for meetings with Prime Minister Ismail Haniyeh, the leader of Hamas, in which they sought unsuccessfully to find ways to solve a financial crisis that stands to make 2006 "the worst year in the West Bank and Gaza's dismal recent economic history," according to a newly issued World Bank report.

Officials on both sides, including Abbas and Haniyeh, have appealed for calm, and as of yet there doesn't seem to be the will on either side for an all-out confrontation. But as each side continues to blame the other for all manner of ills, smaller-scale skirmishes could well become a feature of daily life in Gaza. "The factional fighting is genuine," says Nicholas Pelham, the International Crisis Group's senior Middle East analyst. "It is still at a level where it can be contained but tensions are inflamed" — particularly in Khan Yunis — "to a point where I don' t know if the leaders are going to be able to contain it."

To the casual observer, the clashes appear to be part of a full-scale ideological war between Fatah and the more militant Hamas, which refuses to recognize Israel. But in actuality, as individuals on both sides seem to agree, the conflict is more narrowly defined. A senior Fatah official in Gaza tells TIME that "this is a dispute between Hamas and the Preventive Security Forces," and Hamas spokesman Ghazi Hamad echoes that view, declaring that "there are some individuals who are making up these problems."

Many current and former PSA leaders — all Fatah members — had used their posts to establish lucrative networks and monopolies in Gaza and the West Bank, all of which was threatened by Hamas' anti-corruption campaign platform. So, says the Fatah official, "they want to take over the Palestinian Authority in Gaza. To achieve that, they need to make their own conflict with Hamas look like a conflict between Fatah as a whole and Hamas." Disorder serves their aims, but more worryingly, says the official, Abbas may believe disorder serves his aims as well, because it could undercut Hamas' assertions that it can establish order and weaken their standing.

And without funds, their standing has already suffered. The PA hasn't been able to pay its roughly 160,000 employees for two months, and frequent border closures by Israel have stanched the flow of goods and services — and money — into and out of Gaza. The U.N., the World Bank, and numerous diplomats warn that the collective and mutually sustaining tolls of the financial and security crises in Gaza and the West Bank could lead to worsened poverty, more violence, and to the collapse of the PA itself.

It is an issue that the U.S., European, Russian diplomats at the U.N. would be wise to add to their agenda this week in New York. After all, lest anyone think this is a crisis for the Palestinians alone, the World Bank warns, "destabilization of this kind, if protracted, could also lead to a deterioration of the bilateral security environment — with adverse implications for the security of Israelis."