The international community must consider how to relate to the import of goods that are produced in the settlements, "which we consider illegal according to international law," the Norwegian Foreign Minister, Jonas Gahr Store told Haaretz on the eve of his visit to Jerusalem and Ramallah.

Store, head of the Ad Hoc Liaison Committee - a donor support group to the Palestinian Authority - said that Norway would "consider various options to demonstrate its policy in regard to the expansion of the settlements."

Store arrives in the region as part of the preparation for the forum of donor states that will take place in New York at the end of the month.

One of the central issues on the group's agenda will be Israel's policy regarding the Palestinian residents of area C, which is under full Israeli civil and security control. Norway's support of recognition of a Palestinian state, as well as the contacts it has with Hamas - including a meeting between a senior Norwegian diplomat and Hamas political leader Khaled Meshal - have caused tension between Jerusalem and Oslo.

In the interview, held in Store's Oslo office, the minister expressed severe criticism of Israel's actions in the occupied territories. Store said that Norway is very closely following the Israeli pressure against the Palestinians living in area C, especially in the south Hebron Hill.

"The idea of area C was part of the interim period. It was not meant to give Israel an opportunity to expand the settlements in 60 percent of the territories at the expense of the Palestinians who live in this area," he said.

When Norway supported the acceptance of Israel into the OECD, he added, it made it clear that it meant Israel proper, not the occupied territories and the settlements in the West Bank. "I know that your government argues that these are disputed territories," Store says. "Sorry, we believe that according to the international law, they are occupied territories."

Are you aware of the argument that the donor states, including Norway, which contributes some $120 million to the Palestinian Authority (the third largest donor after the EU and the U.S. ), is actually funding the occupation?

"I am very aware of the argument that the AHLC's money is actually financing the Israeli occupation and that Israel is the main beneficiary of the donors' money. And who do we hurt if we dissolve the AHLC? Do we have any guarantee that the Israeli government will take responsibility for the welfare and security of the Palestinian people if the PA collapses?

"Having said that, we will not keep the AHLC forever. But my position until now has been that as long as the parties say they want to reach a two-state solution, we have to support it, but within a certain limit. Once it will be clear to everyone that the donors' mechanism is perpetrating the status quo rather than contributing to peace, we will have to reconsider. We are not quite there yet.

"From a strictly humanitarian perspective, there may be poor countries in Africa that need help more than the Palestinians. But the point here is political, it is about our common vision to see the emergence of solid Palestinian institutions, which should also be in Israel's interest. The World Bank's recent report indicates the vulnerability of the PA's financial situation."

How can peace be promoted through a real process that would result in implementation of the Oslo Accords?

"The AHLC, headed by Norway, is promoting the process from the bottom up. But Norway and the AHLC cannot do much without progress in the top-down process, the political effort to solve the final status issues in the hands of the parties and the Quartet. The Oslo agreement is only the engine. In order to create momentum you must have wheels and a body. That is my deep concern. If there is no progress in the near future, we may miss the opportunity to reach the two-state solution."

Are you aware that among Israeli politicians, the Oslo Accords have a very bad reputation?

"I am aware of the fact that Israeli politicians from the right are pointing the fingers to us, as if Norway carries a responsibility for the lack of progress in the peace process that started almost 20 years ago in Oslo. But the Oslo agreement belongs to those who signed it, the parties. We did our best to facilitate the negotiations and inject some ideas. I believe that the agreement is quite good, given that this was intended to be the first step. And even today most people come back to the Oslo agreement when they envisage a process of peace. Progress or lack of progress lies with the parties.

"The Oslo Accords have a variety of opponents. In their very different ways, the Israeli right and Palestinian terror contributed to weakening the agreements, and the leaders who were in charge were not decisive enough to stop them. Today I believe the continued settlement construction is creating a growing barrier to the peace process, making the two-state solution even harder to conceive."

You have close ties with the Arab states. Are they doing enough to promote peace?

"I told Arab leaders that they must be more active in promoting the Arab peace initiative. We believe that this is a good basis for regional peace and security. But more creativity is needed, to see how peace can lead to economic activities and more security for all."

What is your position concerning a possible strike of Iranian nuclear facilities?

"We have been in contact with the Israeli government with regard to the Iranian nuclear program. We understand Israel's profound concern. We support the sanctions, but we remain very reluctant toward a military option at this stage. We are consistently defending Israel's right to defend itself against all kinds of threats and terror. Norway is a friend of Israel and will always be. But as Israeli leaders speak out against Norwegians views where they disagree, so do we [when disagreeing with Israel's views].