Despite continuing terrorist attacks, Israel is beginning to release frozen Palestinian tax funds to avert a humanitarian disaster in the Palestinian areas.
Given the Palestinian Authority’s record of abysmal financial management — and rampant corruption — some Israelis are questioning the wisdom of the move.
For months, Israel unsuccessfully pressured the international community to stop funding the Palestinian Authority, arguing that the money was being used to fund terrorism or would free up other P.A. funds for that purpose. This week, however, Israel promised to release some $15 million to the Palestinian Authority as a goodwill gesture and a means of improving conditions for the Palestinian population.
Facing severe international criticism for the July 23 assassination of the military leader of Hamas — in a bombing raid that also killed at least 14 Palestinian civilians — Israeli Prime Minister Ariel Sharon waived his condition that a monitoring system with U.S. participation be put in place to ensure that released funds are used correctly.
The move came after the U.S. ambassador to Israel, Daniel Kurtzer, warned that the plight of Palestinian civilians was becoming catastrophic. After the Gaza debacle, it seemed, Israel could ill afford international condemnation for reports showing, for example, a rise in malnutrition among the Palestinian population.
Yet the move also comes amid revelations, contained in official Palestinian documents seized during an Israeli invasion this spring, of the elaborate mechanisms that President Yasser Arafat and other officials used to divert money from the P.A. budget to terrorist groups leading the attack on Israel.
Among the ruses, according to translations of the seized documents, was a system under which terrorists were appointed as assistants to official Palestinian security forces so that their salaries and operational expenses could be paid from the budget.
In addition, according to reports in the Israeli media, the Palestinian Authority manipulated the dollar-to-shekel exchange rate on donor funds from abroad, siphoning off the difference — some 20 percent of the funds — as a sort of tax that could be hidden from auditors and used at Arafat’s discretion.
According to the Oslo agreements, Israel has been the trustee of customs and value added tax from Palestinian purchases in Israel or on goods imported to the Palestinian Authority through Israel.
Shortly after the intifada began in September 2000, Israel froze those assets on two grounds: Given the de facto state of war, it argued, the Palestinians might use any transferred funds for terrorist activities. In addition, given the P.A.’s financial disorder and opacity, there was almost no way of guaranteeing that the money would go to the proper accounts.
This week, however, Ohad Marani, director general of Israel’s Finance Ministry, met with new P.A. Finance Minister Salam Fayyad and promised to release an initial $15 million.
Critics blame Israeli policies for strangling the Palestinian economy and, they allege, deliberately harming the civilian population.
According to preliminary results released last week from a study commissioned by the U.S. government’s USAID, nearly one-third of young Palestinian children are chronically malnourished, more than four times the rate before the intifada began 22 months ago.
Palestinians blame Israeli restrictions imposed during the intifada.
“It is time that people pay attention to the real crisis emerging,” Palestinian official Hanan Ashrawi said. “It’s a type of collective punishment in terms of health that will have implications for generations.”
Israel maintains that the restrictions it has imposed — such as roadblocks, curfews and revoking work permits — are necessary to stop terrorists from infiltrating Israel, and note that the steps have been taken in the context of a war the Palestinians initiated.
And yet Sharon knows that the international community most likely will blame Israel, and not the Palestinian leadership, for the Palestinians’ plight.
The socioeconomic situation in the territories has deteriorated considerably in the past month, due to the lengthy closures and curfews Israel has imposed. Israel is concerned about the social consequences of the economic stalemate, which include reports of famine among the poorer strata of Palestinian society.
Decisions such as releasing the tax money and allowing 12,000 Palestinian workers to enter Israel are attempts to alleviate the economic situation.
They also may be intended to alleviate political pressures from the Labor Party, whose members increasingly are calling to leave the unity government, arguing that Sharon is not exploring potential openings toward peace.
Other Israelis, however, fear that Sharon’s decision is misguided, especially in the absence of effective oversight mechanisms for the money.
In a sharply worded editorial, The Jerusalem Post noted that just several weeks after Israel had criticized the European Union for continuing to fund Arafat despite the violence, “Israel itself now joins the list of those propping up his terrorist regime with a steady cash flow.”
Fayyad, whom Arafat appointed under heavy international pressure to reform, has worked for the International Monetary Fund in the Palestinian territories and has a good reputation.
He already has taken several measures to ensure tighter control of the state budget: Israel has insisted that financial transfers go directly to a P.A. banking account for which Fayyad is the only signatory. Yet some Israeli analysts argue that Arafat has made certain accounts off-limits even to Fayyad, preserving the Palestinian leader’s discretionary use of some funds.
Israel thus is faced with a quandary. The danger still exists that funds forwarded to legitimate causes, such as paying civil servants’ salaries, could free up other moneys for terrorist activities or rewards to suicide bombers’ families.
Yet continuing to freeze those assets also could prove damaging. Much of the shattered Palestinian economy depends on this money, which at one point made up some 70 percent of the monthly P.A. budget.
For example, the Palestinian Authority needs $35 million a month for salaries alone, according to Israeli estimates, and $58 million, according to the Palestinians. Much of the salary outlay is for the P.A.’s illegally large security services — including, as the seized P.A. documents make clear, payments to terrorists in the field.
Yet if Arafat can’t pay his policemen’s salaries, his ability to use them to restore law and order — assuming he wanted to — is limited considerably. Some fear the situation could deteriorate into total chaos.
So far, popular resistance to Israel’s renewed occupation of the West Bank, taken in response to a wave of suicide bombings in June, has been minimal. However, something happened Monday that makes some think the situation is close to a general flare-up: Nablus residents openly defied the Israeli curfew and opened shops, businesses and services.
The residents did so in response to a leaflet from Arafat’s Fatah movement urging them to ignore the curfew. Their assumption, that the army would avoid an open confrontation with the Palestinian masses, proved correct.
The last thing Israel needs right now is another international uproar after the Gaza bombing. Israel has a strong interest in relaxing the atmosphere in the territories — if it can find a way to balance that with its war on terror.
The Archive of the Jewish Telegraphic Agency includes articles published from 1923 to 2008. Archive stories reflect the journalistic standards and practices of the time they were published.
