Palestinian Says Ban Could Lead to Chaos

By Scott Wilson
Washington Post Foreign Service
Tuesday, May 9, 2006

GAZA CITY, May 8 -- The Palestinian prime minister, Ismail Haniyeh, warned Monday on the eve of a key international donors meeting that the Palestinian Authority, cut off from most foreign aid since his Hamas movement took office five weeks ago, could founder unless new money arrives.

"If the siege continues, the whole authority will be facing collapse," Haniyeh said in an interview in his office here. "And if there is a collapse, there will be chaos in the region."

Haniyeh spoke as envoys from the United States, the European Union, Russia and the United Nations, a group of Middle East peace interlocutors known as the quartet, prepared to meet Tuesday in New York to discuss funding for the Palestinian Authority under the leadership of Hamas, which won legislative elections in January and now controls the government ministries.

Nearly half of the authority's roughly $2 billion annual budget is funded with foreign donations. The government has been unable to pay salaries for 150,000 civil servants and security personnel for the past two months because of cuts in foreign aid and Israel's decision to stop the transfer of roughly $55 million in tax and custom revenue it collects monthly on the Palestinians' behalf.

Visible across the Palestinian territories, the economic squeeze is most acute in Gaza, home to 1.3 million Palestinians. In Gaza's gold market Monday, Nahed al-Zayim stared at the wedding ring her husband, a Palestinian police officer, gave her six years ago. She had placed it on a glass counter offering it for sale, joining several other wives of public employees who had not been paid in two months.

A European Commission assessment prepared in advance of the meeting of the quartet estimated that Palestinian civil service employees have accrued $340 million in debt since the aid suspension began.

Her head covered by a black scarf, Zayim said she needed the proceeds from her ring to buy diapers and milk supplements for her three children, including Hazem, 4, who tugged at her tunic in the afternoon bustle. "This is the last one, we have no more," Zayim, 28, said of her ring.

The United States classifies Hamas as a terrorist organization. In addition to cutting off aid, the Bush administration is threatening international banks with sanctions under anti-terrorist laws if they handle accounts or money transfers for the Palestinian Authority. Haniyeh said this has made it impossible to collect new financial pledges.

"We are asking the quartet to reconsider its position and deal with the Palestinian government," Haniyeh said. "We did not come here through a military coup."

"All we ask of the American administration is that it doesn't use the suffering of the Palestinian people as material for political blackmail," he said.

Hamas, known formally as the Islamic Resistance Movement, advocates the creation of a Palestinian state across territory that includes Israel. As a condition for aid, the quartet has demanded that Hamas recognize Israel's right to exist, renounce violence and honor previous agreements with the Jewish state. Haniyeh, 43, said his government would not meet those demands.

A full collapse of the Palestinian Authority would mean an end to the semiautonomous Palestinian government that was established by the 1993 Oslo peace accords and could bring on a larger political and financial role for Israel in the Palestinian territories, which it occupied in the 1967 Middle East war. That could complicate the agenda of Israel's new government, which is preparing to evacuate isolated Jewish settlements in parts of the West Bank.

"Nobody needs the collapse of the Palestinian Authority," a senior Israeli security official said in a recent briefing, speaking on condition of anonymity. "When I say nobody, I mean nobody."

In a report sent Monday to quartet members, the World Bank said its prediction in mid-March that aid cuts and other economic sanctions would lead to a 30 percent drop in the average personal income of Palestinians this year was "too rosy."

The World Bank report states that the Palestinian government may be able to count only on its domestic income of roughly $25 million a month. As a result, it warns, "the PA is unlikely to be able to provide basic services or maintain law and order."

In the southern Gaza city of Khan Younis, the military wings of the rival Fatah and Hamas movements clashed Monday before dawn, leaving two Fatah gunmen and another from Hamas dead. Four rockets landed in southern Israel without causing injuries. Israeli artillery shelled northern Gaza in retaliation; Haniyeh spoke against the distant thumping of Israeli guns.

The World Bank report said international donors could pay the salaries of Palestinian public employees through an existing account known as the Emergency Services Support Program, which could be audited by a third party.

But the United States and European governments have resisted doing that. An assessment by the European Commission said that "the looming crisis is not the result of the suspension of aid -- nor will the crisis be averted by a resumption of direct aid."

The situation will be alleviated only by Israel's release of tax revenue and the opening of the main cargo crossing, the assessment states. Israel has kept it closed for most of the year, citing security.

The aid cutoffs appear to be increasing anti-U.S. sentiment here. "The problem is the West, not us," said Mustafa Hasoona, 33, a pharmacist. "If they don't respect democracy, they shouldn't call for it," he said, noting that Hamas rose to power in elections long advocated by the United States.

He flipped through a tattered notebook on his counter, its pages filled with names of customers and the sums they owe him. Many of them are taking half-doses of medications, he said, and mothers are diluting iron supplements for infants to make them last longer.

"We are with this government we elected," Hasoona said. "I voted for it."

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