JERUSALEM, Oct 25 (Reuters) Defence Minister Ehud Barak approved today the reduction of Israel's power supplies to the Hamas-controlled Gaza Strip in response to Palestinian rocket attacks which the Israeli military has failed to stop.

Israeli political sources said Barak's decision cleared the way for electricity cuts to begin immediately, although it was not immediately clear exactly when power would be reduced to the impoverished territory, where 1.5 million Palestinians live.

Barak, a former prime minister who heads Israel's Labour Party, gave his approval a day before Israeli and Palestinian leaders planned to meet again to try to narrow differences in preparation for a US-run conference on Palestinian statehood.

With the ruling coalition under strain over the possibility of concessions to Palestinians in the talks, the government has faced calls to demonstrate it is acting against militants.

But the United Nations has told Israel it must not inflict collective punishment by denying Palestinians in the Gaza Strip vital supplies and services. Israel pulled troops and settlers out of the territory in 2005 but still controls its borders.

Palestinian militants frequently fire short-range rockets into southern Israel from the Gaza Strip -- attacks that Israeli incursions and air strikes have not halted. Israeli forces killed at least three gunmen on the Gaza border today.

''Because this is an entity that is hostile to us there is no reason for us to supply them with electricity beyond the minimum required to prevent a crisis,'' Deputy Defence Minister Matan Vilnai told Army Radio.

According to Israeli and Palestinian officials, Gaza's population uses about 200 megawatts of electricity, of which 120 are provided directly from Israeli power lines, 17 are delivered from Egypt, and 65 are produced at a local Palestinian plant.

TIMELINE Even as both sides were trying to draft a pre-conference document addressing divisive issues such as borders and the future of Jerusalem and millions of Palestinian refugees, the question of when to implement any future peace deal was fast becoming a main point of contention, Palestinian officials said.

Announcing he would lunch with Palestinian President Mahmoud Abbas on Friday, Israeli Prime Minister Ehud Olmert said he wanted the gathering, slated for late November or December in Annapolis, Maryland, to provide an international umbrella for reviving bilateral talks on Palestinian statehood.

Looking ahead to the post-conference negotiations, Olmert said pointedly in a speech that Israel would not implement any peace arrangements agreed in those talks until Palestinians met their commitments under a stalled US-backed peace ''road map''.

Palestinian obligations under the 2003 plan include a crackdown on militants, a task made even more difficult for Abbas following Hamas's violent takeover of Gaza in June.

Olmert made no reference in his remarks to when Israel might carry out its own obligations set by the road map, such as a halt to Jewish settlement expansion in the occupied West Bank.

''Conditioning implementation (of peace deals) on road map commitments is another way for the Israelis to put security as a pretext for not implementing any agreement,'' a senior Palestinian official said about Olmert's comments.

A spokesman for Foreign Minister Tzipi Livni, who leads the Israeli negotiators, stressed Israel wanted the Palestinian leadership to curb militants: ''Everyone always talks about the gaps between us and the Palestinians,'' Mark Regev said.

''But there are another set of gaps that cannot be ignored -- the gaps between the intentions of the Palestinian leadership and their capabilities. To ignore those gaps is to ignore reality and you can't have a peace process based on ignoring reality.'' Reuters SZ VP0130