U.S. CUTS OFF ALL AID TO PALESTINIAN AUTHORITY

by Jim Lobe

(IPS) WASHINGTON -- One week after the Palestinian Authority (PA) swore in its new Hamas-led government, the United States April 7 announced that it will suspend all direct aid to the PA while sharply increasing humanitarian assistance to the people under its control.

The move, which followed a similar announcement by the European Commission (EC) Thursday, comes as the PA, which was unable to pay its 140,000 employees last month, faces total financial collapse.

"Because the new Hamas-led Palestinian government has failed to accept the Quartet principles of non-violence, recognition of Israel, and respect for previous agreements between the parties," said State Department spokesman Sean McCormack in reference to conditions for aid to Hamas agreed in February by the U.S., the European Union (EU), Russia and the United Nations, "the United States is suspending assistance to the Palestinian government's cabinet and ministries."

McCormack also released a statement from Secretary of State Condoleezza Rice pledging to restore the assistance if the conditions are met "or a new government comes to power that accepts them."

The desire for "regime change" in the Palestinian territories was underlined by a fact sheet released by the State Department which noted that Washington will provide $42 million in assistance that "protects and promotes moderation and democratic alternatives to Hamas."

In a briefing shortly afterwards, Assistant Secretary of State for Near East Affairs, David Welch, also repeatedly stressed that, despite its sweeping parliamentary victory, Hamas won only about 45 percent of the vote.

"Fifty-five percent of those who voted in the election did not vote for Hamas," he said, adding that U.S. policymakers wanted to "give them some hope (that) their voice will be heard."

Welch also stressed continued U.S. support for PA President Mahmoud Abbas, since the Palestinian Liberation Organization (PLO) and Fatah party have endorsed the three conditions set forth by the Quartet.

The announcement, which followed a lengthy review after Hamas swept parliamentary elections in January, was not unexpected. Under U.S. law, Washington is forbidden to provide any aid to organizations that appear on the State Department's "terrorism list."

Under the new plan, the U.S. will provide a total of 245 million dollars in humanitarian aid, a 57 percent increase over what had previously been earmarked for the West Bank and Gaza, but none of which will be used for infrastructure or other projects in which PA ministries have any role.

Some observers who have been concerned that the administration would be more punitive towards the Palestinians for having voted Hamas into power praised the decision to increase the assistance.

"It shows some imagination and concern for the Palestinian people, while maintaining its policy of not dealing with an organization that is on the terrorist list," said ret. Amb. Arthur Hughes, a former deputy secretary of state for Near East Affairs under the Clinton administration.

Still, he noted, the increase will not ease the financial crisis faced by the new government. With a monthly budget of roughly $165 million, of which only $35 million is internally generated, the PA must obtain some $135 million from other sources.

Under the Oslo agreement, Israel is supposed to turn over between $50 and 60 million that it collects each month in customs receipts, duties, and other revenues on the PA's behalf. But, since the January election, Israel has put the money it has collected in an escrow account.

In addition, Israeli curbs on movements of Palestinians and commerce in and out of the territories since the January elections have further depressed the local economy. Israeli and international banks worried that their business with a Hamas-led PA may make them liable for prosecution under U.S. and EU anti-terrorism laws are closing their doors to Palestinian businesses and the PA, which also announced this week that the previous Fatah-led government had accumulated more than one billion dollars in debt to private banks.

The PA has also relied on some 70 million dollars a month in direct assistance, almost all of it from the EU and its member states. That money is now almost certain to be suspended or redirected into humanitarian aid channeled through private contractors and non-governmental organizations (NGOs).

Hamas leaders have suggested that they could make up the difference with aid donations from friendly Arab states, Iran, and wealthy Arab philanthropists, but concrete commitments have yet to materialize, according to U.S. officials. Some Arab leaders, such as Egypt's Hosni Mubarak, have joined western appeals for Hamas to meet the Quartet's three conditions.

U.S. and other western leaders have expressed concern that the PA's financial collapse could result in chaos in the Palestinian territories, particularly if tens of thousands of members of its disparate security forces go unpaid for several months. This is also reported to be a concern of top Israeli security officials close to the prime minister-elect, Ehud Ohlmert.

Hamas, which came to power in what many observers characterized as the Arab world's freest and fairest elections ever, is considered almost certain to blame any deterioration in the territories on the aid embargo, possibly triggering a backlash against the West and those Palestinian parties that it supports against Hamas.

As a result, many analysts here believe that the EU, Israel's new government, and the George W. Bush administration are prepared to be more flexible in dealing with Hamas than this week's announcements suggest.

Indeed, the Bush administration this week successfully sought amendments to pending legislation to prohibit all bilateral aid to a Hamas-led PA that would permit it to provide such aid if "it was important to the national security interests of the United States."

Under the State Department aid plan, Washington will increase its contribution to the UN Relief and Works Agency from $100 million to $130 million. It also plans to increase food aid to the Palestinian territories from 10 million dollars to $60 million and to increase "democracy"-related aid, including "alternatives to Hamas" from $30 million to $42 million.

At the same time, it will suspend or cancel 45 million dollars in direct assistance to the PA and 130 million dollars in infrastructure projects in which PA ministries play some role.