Despite the Israeli withdrawal from Gaza, conditions in the strip are grim because Israel is dragging out negotiations about border crossings, the head of the U.N.'s Palestinian relief agency said on Wednesday.

Gaza has been largely cut off from the outside world since Israel completed a troop withdrawal last month after 38 years of occupation. The Rafah crossing into Egypt has also essentially been shut since troops left.

"It's become a bit more depressing, I would say, because there were some expectations that with the disengagement there would be some change, and change for the better," said Karen AbuZayd, head of the United National Relief and Works Agency (UNRWA).

"There has been no movement on things that have to be decided. There have been a lot of meetings and a lot of suggestions and some compromises suggested, and yet we don't have any decisions yet," she told Reuters in an interview.

U.S. Secretary of State Condoleezza Rice urged Israel on Tuesday to ease border crossings around Gaza.

She made her remarks after Middle East envoy James Wolfensohn wrote a letter that criticized Israel for delaying agreements to open the crossings, saying this could hinder a Palestinian economic revival essential to peace.

"The Israelis are partly saying it's the holidays, it's a busy holiday period for them, but there are things that we think could be done quite easily," said AbuZayd.

"The only thing that is different now is that there is no checkpoint in the middle of the Gaza strip. But now nobody is going out to work in Israel where there were at least a few thousand going out before the disengagement."

Israel says it is doing all it can to ensure the borders open as soon as possible, as long as it can ensure its security and prevent weapons and militants from entering the Gaza Strip.

AbuZayd said economic conditions for Palestinians could easily be improved if Israel agreed to projects such as the construction of a Gaza seaport.

"At least make an agreement that the port can be built because it won't be used soon, so we don't have to worry yet about the security and other sorts of things. But let that project begin; let jobs be given to people," she said.

AbuZayd said she was also concerned about the situation in the West Bank, where Israeli settlements are expanding. Israel is building a barrier there which it says will boost security.

"What's happening in the West Bank is almost overwhelmingly negative," said AbuZayd, adding that she appreciated that the Israelis had security concerns.

"But we think perhaps the reaction is disproportionate to the problem ... there are roads for the Israelis and then different roads or tunnels for Palestinians -- it's a rather frightening specter that's arising there," she said.