A Palestinian security plan backed by Washington calls for consolidating President Mahmoud Abbas' forces into a nearly 50,000-member gendarmerie that can both police civilians and rein in militants who could try to block any future peace deal.
Internal cost estimates for the overhaul, $4.2 billion to $7 billion over five years, were compiled by US security officials and their Palestinian counterparts, and recently shared with Israel and foreign diplomats, who expressed doubts that donors would produce such large sums anytime soon.
Only $86 million in funding from the United States has materialized so far to help build up Abbas's forces, which were routed from the Gaza Strip in June by Hamas Islamists who receive support from Iran and oppose the peace talks.
The funding gap highlights one of the biggest hurdles facing a US push to reach a statehood agreement.
Even if a deal is reached before US President George W. Bush leaves office next January, Prime Minister Ehud Olmert has vowed not to implement it until Abbas reins in militants, both in the West Bank, where his Fatah faction dominates, as well as in the Hamas-controlled Gaza Strip.
The US Consulate in Jerusalem declined comment on the cost estimates, which a European diplomat said painted a picture of "how things might look at the end" and may be overstated.
"It shows the enormous challenge that lies ahead," a Western diplomat said of getting donors to make such large, long-term investments in Abbas's forces and creating a pension scheme to lure older commanders and fighters into retirement.
Diplomats say none of the $7.7 billion pledged to the Palestinians at a donors conference in Paris in December was earmarked for the security overhaul, though a portion could be redirected in future to meet some of the security needs.
The newly appointed US envoy for Middle East security, James Jones, is preparing a report that will assess Palestinian security needs and how to ensure any future withdrawal of Israeli troops would not create a security vacuum.
Training costs and pensions
Diplomats said the $4.2 billion to $7 billion estimate was based on the projected cost of providing Abbas's forces with the infrastructure, equipment and training they would need.
The security overhaul calls for reducing the size of Palestinian forces by about one-third. By offering retirement incentives, Abbas's government hopes to avert a backlash from Fatah's old-guard and heavily-armed clans now on the payroll.
One European diplomat compared it to decommissioning.
"It's not cheap," said another diplomat briefed on the numbers. "But the price of this end-game is not that relevant. What is important is how you get there... How many people should be paid this year? How many people should be retired this year?"
US-taxpayer money for advanced training in Jordan started arriving last fall, nearly two-and-a-half years after Washington first dispatched a team to help coordinate Palestinian security.
The first battalion -- nearly 700 US-vetted recruits -- began a four-month, $15 million course last month. The training program is projected to graduate only 2,000 of Abbas's men in 2008, Bush's timeframe for a statehood deal.
Though Middle East envoy Tony Blair declared this week that the capabilities of Abbas's forces have "significantly" improved, Israeli officials insist that they have a long way to go, citing Monday's suicide bombing in Dimona.