GAZA CITY, Gaza Strip - A year into Hamas' rule in the Gaza Strip, courts are meting out justice, police are arresting thieves, motorists are paying for licenses, and authorities are blocking Internet porn sites.

At the same time, Gazans are stocking up on vegetable oil - not for cooking, but to run their cars during a severe fuel shortage; an Israeli-led blockade has forced 80 percent of the people to rely on U.N. food handouts; with sanitation services collapsing, millions of gallons of raw sewage are flowing into the sea, and enemies of the regime have been silenced.

A year after Hamas militants seized power in five days of bloody fighting that included tossing rivals off high-rise rooftops, it has become clear that Israel's boycott of Gaza has not significantly weakened Hamas, whose control is deepening.

"We've only become stronger. We will not stand down. We will not go back," said Hamas official Sami Abu Zuhri.

Support from Syria and Iran helps keep the Hamas government running. Iran is said to be both financing Hamas and providing increasingly sophisticated weaponry to attack Israel.

Hamas' rule in Gaza - along with a corruption scandal that threatens to bring down Israeli Prime Minister Ehud Olmert, who was on his way to Washington yesterday - is badly damaging prospects for a U.S.-backed Mideast peace initiative.

The initiative seeks a pact by year's end between Israel and the more moderate Palestinian leadership in the West Bank.

Gaza - a tiny, fenced-in territory whose 1.4 million inhabitants are not free to come and go - has become a morass of contradictions.

Internal fighting has stopped and crime is down under Hamas rule, but the calm was partly purchased through killing and torture.

A cease-fire in Gaza that Egypt is trying to arrange could boost the U.S.-backed peace initiative, but it could also prolong Hamas' rule. Quite a bit of money seems to be entering Gaza, but there is hardly anything to buy.

Some goods are smuggled in through tunnels from Egypt, but there are acute shortages of everything from cement to baby strollers.

Gaza's children seem the most vulnerable in the bitter standoff. Between 70 percent and 90 percent are failing math in U.N.-run schools and 60 percent are failing Arabic, said John Ging, Gaza director of the U.N. agency in charge of Palestinian refugees.

Hamas is on a collision course with Israel, which still controls Gaza's borders, airspace and coastline despite having withdrawn its army and settlers from the territory three years ago.

Gaza militants launch rockets at southern Israel almost daily, and Israel targets Gaza with air strikes, land incursions and deadly missiles.

The fighting has killed more than 400 Gazans and injured thousands in the last year. On the Israeli side, 11 soldiers have died fighting inside Gaza and six civilians have been killed by shells fired into Israel.

The barrages - nearly 3,000 rockets and mortars, according to the Israeli army - have terrorized Israelis living within range, including the 110,000 residents of Ashkelon, nine miles north of Gaza.

Hamas, aware of the damage the Gaza-West Bank split has done to the Palestinians' statehood aspirations, says it wants to return to a power-sharing arrangement with Fatah - like the one dissolved last June 14 when Hamas took control of the strip.

But for Fatah's West Bank government, joining forces with Hamas could jeopardize the large amount of money it gets from the international community. And Israel has made it clear it won't hold peace talks with any government that includes Hamas, which remains sworn to the Jewish state's destruction.