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Israeli economic measures criticized

JERUSALEM, Feb. 26 (JTA) – As the Palestinian intifada continues into its sixth month, international attention has shifted from the daily death toll to the tough economic measures Israel has imposed on the West Bank and Gaza Strip.

The measures include closing passages between the Palestinian-ruled territories and Israel proper, which keeps tens of thousands of Palestinians from working in Israel; travel restrictions that often prevent Palestinians from traveling between cities and villages in the West Bank; and withholding tax and customs money that Israel collects on behalf of the Palestinian Authority.

Israel says the measures are designed to prevent Palestinians from launching terror attacks and to pressure the Palestinian Authority to start clamping down on violence.

But critics in the United States and Europe say Israel is only embittering the Palestinian population and pushing the Palestinian Authority to the brink of collapse.

Recent U.N. reports indicate that Palestinian unemployment is rampant, poverty has jumped 50 percent since the violence began in late September and one-third of the Palestinian population lives below the poverty line.

The United Nations also has warned that the Palestinian Authority is on the verge of financial collapse: Palestinian Authority President Yasser Arafat claims he is unable to pay the salaries of civil servants and security forces.

On his first visit to the region this week, U.S. Secretary of State Colin Powell urged Israel to lift the blockade it has imposed on the Palestinian territories as soon as possible.

Ariel Sharon, Israel’s prime minister-elect, says he will quickly lift the sanctions – as soon as the Palestinians stop the violence. With Palestinian security forces implicated in numerous shooting and terror attacks on Israelis in recent months, Israel is saying, in essence, that it will no longer subsidize its attackers.

“Israel has no interest in a difficult situation for either the P.A. or the population at large,” says Dore Gold, foreign policy adviser to Sharon. “But if the security personnel who receive salaries from the P.A. are regularly involved in sniper attacks on Israeli civilians, it creates a very difficult situation.”

Israeli officials do not deny the complexity of the situation.

“We distinguish between the people in the Palestinian Authority – who are suffering – and the Palestinian Authority itself,” said an Israeli official, speaking on condition of anonymity. “The economic situation in the P.A. is not good, but we are not looking at the collapse of the P.A. as a system.”

According to the official, there are signs of “serious erosion” in the Palestinian Authority, although talk of institutional collapse are “exaggerated,” and Arafat is still paying his civil servants.

“We have no interest in the P.A. collapsing,” the official says. “We also intend to transfer the taxes. There is no decision in principle to hold this money, and it is not in Israel’s interest to withhold the taxes since it is not our money.”

For their part, European foreign ministers promised to provide $55 million to the Palestinian Authority, but called on the Authority to root out corruption and meet accepted accounting standards. The ministers, meeting under the auspices of the European Union, also agreed to hold an international donors conference March 7 to raise money for the Palestinians.

The issue of tax receipts is among the most problematic. Under economic accords that accompanied the peace process, Israel collects customs, valued added taxes and purchase taxes on goods imported to the Palestinian Authority through Israeli ports and airports.

Each month, Israeli finance officials calculate how much Israel has collected on behalf of the Palestinian Authority.

The Israelis then sit with Palestinian officials and offset the figure with various sums the Palestinian Authority owes Israel, primarily for utility service. Last year, Israel transferred roughly $50 million a month to the Palestinian Authority, even after the Palestinian violence began.

Israel’s Finance Ministry says the monthly sums were transferred as usual through the end of December, though the average figure declined slightly due to the slowdown in Palestinian economic activity. The last payment was made at the end of December, and a treasury official says Israel now owes about $41 million.

“The clearance procedure was delayed for technical reasons,” the official says, refusing to comment on whether Israel is withholding the money as a matter of policy.

The official also says the Palestinian Authority owes Israel about $30 million for payments of utilities such as electricity and telephone services. Israel does not want to cut the Palestinians off from these services for humanitarian reasons, but it is considering recouping the debt from the tax money it owes the Palestinians.

Nasser Tahboub, the Palestinian commissioner of indirect taxes, rejects this idea.

“There is nothing overdue,” he says of the utility payments. Tahboub also claims Israel owes about $75 million in collected taxes since the beginning of December.

According to Tahboub, the backlog of tax revenue creates two main problems for the Palestinian Authority. First, the taxes owed make up more than 60 percent of the Palestinian Authority’s monthly budget, he says.

In addition, he accuses Israel of blocking Palestinian imports through Israeli ports. This forces many businessmen to either forgo importing altogether or to smuggle goods – which further reduces tax receipts and creates a cash crunch for Palestinian Authority institutions.

“Israel talks about security, but preventing Palestinian goods from being declared in Israeli ports is not justified for any security reasons,” Tahboub says. “They also have no right to hold the taxes since it is our money – and Israel is making nice interest income off of our revenues which they hold.”

Israel does not deny the import problems, but it does dispute the cause. Yarden Vatikay, coordinator of government activities in the territories, says the Palestinians have only themselves to blame.

“The Palestinians want to point their guns at us, but they end up shooting themselves in the foot,” he says. “Certainly, there are difficulties, but it is a result of the violent situation that they have created.”

Vatikay admits that the closures are a big obstacle to Palestinian economic activity.

Yet he also notes that because of the violence, Israeli truck drivers do not enter Palestinian territories, creating additional costs for Palestinian importers who must have goods transferred at checkpoints. Constant violence at some checkpoints also delays import activity, or deters it altogether.

But do the economic sanctions work? Strategic analysts are divided.

Boaz Ganor, director of the international policy institute for counterterrorism at the Herzliya Interdisciplinary Center, said the sanctions send a strong message to both the Palestinian Authority and the Palestinian people that “you cannot have economic relations and fight at the same time.”

Ganor dismisses the warnings that the Palestinian Authority is on the verge of collapse, as well as the argument that economic measures only further radicalizes Palestinian sentiment toward Israel.

“Economic punishment may contribute to this feeling, but it is not the only reason or main reason for the Palestinians’ attitudes. The main problem is the incitement,” from Palestinian Authority-run mosques, media and schools, he says.

Israel, Ganor adds, must use “every means possible” to pressure the Palestinian Authority to change their policy. “This must be part of several short- and long-term steps to reach the point where the cost is greater than the benefit from the Palestinian point of view,” he says.

Shlomo Gazit, senior research fellow at the Jaffee Institute for Strategic Studies at Tel Aviv University, sees things differently.

“I have not seen the effectiveness of these” economic measures, says Gazit, who served three decades ago as the first Israeli coordinator of government operations in the West Bank and Gaza Strip.

The ratcheting up of economic measures against the Palestinians has been accompanied by an increase in violence, not a decrease, Gazit says.

“All of these measures are, on the one hand, aggravating bilateral relations, while increasing hatred,” he explains.

Withholding tax money is a particularly bad move, he says.

“We are collecting taxes on behalf of the Palestinians, and it is our responsibility to pass over the money,” Gazit says. “Holding the revenues is a not only a violation of an agreement; it is simply stealing.”

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