(Adds U.S. plan on presidential guard, paragraphs 4, 6-7, 13)

By Adam Entous

JERICHO, West Bank, Oct 4 (Reuters) - Behind cinder-block walls on the edge of the West Bank city of Jericho, a 16-acre plot of parched earth is being transformed into new training grounds for troops loyal to Palestinian President Mahmoud Abbas.

With support from the United States and its allies, Abbas's presidential guard has been expanding as a possible counterweight to the Hamas Islamists who lead the government and have been busy building up their own "Executive Force".

Fears of an eventual showdown between the rival groups were heightened this week by the worst internal fighting since Palestinians gained a measure of self-rule in 1994. One presidential guard member was killed.

Expanding the size of the presidential guard -- by up to 70 percent under a U.S. plan -- has become a central part of American policy since the Islamist group beat Abbas's Fatah in elections and took over the government. While Fatah seeks a state alongside Israel, Hamas advocates its destruction.

Unlike the security forces that now fall under the Hamas-led government, Abbas's presidential guard has been receiving Western help, included U.S. training, European equipment and Egyptian and Jordanian weapons, Palestinian and Israeli officials say.

U.S. Secretary of State Condoleezza Rice said after meeting Abbas in the West Bank on Wednesday that they discussed the need to improve the security forces under his control.

U.S. plans call for raising close to $20 million to bolster Abbas's forces. International funds would finish the Jericho training camp and build another one in Gaza, diplomats said.

"They are getting bigger and quietly doing more," said a Western diplomat working with Abbas on the plan.

Since Hamas came to power, Abbas's presidential guard has grown to between 3,500 and 4,000 members from about 2,500, with training in both the West Bank and Gaza.

The near-term goal is to create a 6,000-man force, Western diplomats familiar with Abbas's plans said.

Hamas's new police force in Gaza has also grown. Just over 3,000 are on the payroll, but Hamas says the force now numbers 5,600.

Some Western diplomats believe a wave of killings directed at other forces seen as loyal to Fatah has tipped the balance of firepower in the Gaza Strip in favour of Hamas.

GROWING FAST

It is unclear when Abbas will get the cash to pay for the presidential guard's expansion or for the new Jericho training grounds, located between a metal factory and a riding club.

U.S. congressional restrictions could make it difficult for the United States to foot the bill. Washington may pay up to half and get European, Arab and Asian donors to provide the rest, diplomats said.

While direct foreign aid had been cut to the Hamas-led Palestinian Authority, Abbas had received at least $250 million from Arab and European donors, the bulk of which was used to pay overdue wages to government workers, diplomats said.

At the new training grounds in Jericho, a bulldozer was busy this week clearing mounds of earth and sand for barracks designed to house 500 new recruits. Several structures were standing and the surrounding walls were about half complete.

Major Abu Zaid, a top presidential guard official in Jericho, said the work was due to be completed by January.

A Western diplomat said the presidential guard recruited its own civil engineers and architects to hold down costs.

Washington has sought to keep its role in the effort low profile to avert a public backlash against Abbas -- already accused by some Hamas leaders of serving the interests of Israel's ally.

Over the summer, a team of U.S. security trainers worked secretly with presidential guard members at their existing 1.2-acre training facility in Jericho, presidential guard sources said. U.S. officials declined to comment.

American officials prodded Israel to let the presidential guard receive new arms and ammunition from Egypt and Jordan.

Now the United States wants Abbas's force to take full security control over the Palestinian side of the main Karni commercial crossing between Gaza and Israel. Washington is trying to recruit European states to send monitors.

Aides to Lieutenant-General Keith W. Dayton, the U.S. security coordinator between Israel and the Palestinians, recently toured the training grounds with diplomats from the Netherlands, hoping they would agree to help fund the facility. However, the Netherlands balked at providing funds.

"This is not the right time to build a training facility of that scale that doesn't involve the other security services," said one of the diplomats involved. He said the Netherlands would prefer to support Abbas in other ways, such as helping improve security at Karni.

(Additional reporting by Nidal al-Mughrabi in Gaza, Adel Abu Nimeh in Jericho)

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