Mecca, Saudi Arabia ? Rival Palestinian factions signed a power-sharing accord aimed at ending months of bloodshed Thursday, agreeing that the Islamic militant group Hamas would head a new coalition government that would “respect” past peace agreements with Israel.

However, Israel and the U.S. have demanded the new government explicitly renounce violence, recognize Israel and agree to uphold past peace accords. The vague promise to respect past deals – a compromise reached after Hamas rejected pressure for more binding language – did not appear to go far enough.

U.S. and Israeli acceptance is crucial to the deal’s success. Unless they are convinced Hamas has sufficiently moderated, the West is unlikely to lift a crippling financial blockade of the Palestinian government, and it will be difficult to advance the peace process.

Shortly after Hamas won elections in January 2006, the so-called Quartet of Middle East peace mediators – the U.S., the U.N., the European Union and Russia – said future aid to a new Palestinian government led by the militant group “would be reviewed by donors against that government’s commitment to renounce violence” and recognize Israel and other agreements.

At stake is roughly $1 billion a year in frozen aid from foreign donors in addition to approximately $500 million in withheld tax revenues collected by Israel on behalf of the Palestinians.