Thursday, February 02, 2006

US pressures Israel to renew funds transfers to Palestinians


Sources in Washington told “Globes” that the Bush administration is pressuring Israel to renew the transfer of VAT and tax payments to the Palestinian Authority. Acting Prime Minister Ehud Olmert yesterday suspended the transfers in the wake of Hamas’s victory in the Palestinian elections last week.

In response to claims by Israeli representatives that US President George W. Bush had personally declared that the US would completely halt all aid the Palestinian Authority if Hamas does not forego terrorism and recognize Israel’s right to exist, the US said transfers at this time were to a transition government, not a Hamas government.

US diplomats said the US wanted to strengthen the hand of Palestinian Authority President Mahmoud Abbas (Abu-Mazen), and prevent the total collapse of Palestinian institutions.

Although Israeli diplomats cannot openly say so, the US knows very well that the resumption of transfers to the Palestinians shortly after Israel decided to suspend them would be perceived as a capitulation by Olmert, and would make him appear to be a puppet of the US at the height of an election campaign. Although official Washington naturally does not explicitly say this, Olmert is the Bush administration’s preferred candidate as Israel’s next prime minister.
Israel is due to transfer approximately $55 million to the Palestinian Authority.

Yesterday, in response a question, State Department spokesman Sean McCormack said that the administration was “working” with the Israelis on the suspension of tax transfers to the Palestinian Authority. He said contacts with Israel were being conducted through the US Embassy in Tel Aviv and the Israeli Embassy in Washington, but that Secretary of State Condoleezza Rice was not yet involved.

“We made it very clear (to the Israelis)… that the governments and organizations were looking for ways to support the Palestinian transitional government,” said McCormack. “…What should be done during the transition period (in other words, until a new Palestinian government) in order to meet the needs of the Palestinian Authority, which is supposed to continue to govern, ensure public law and order, and provide services to the Palestinian people?”

McCormack said the Palestinian transition government had given the international community some assurance, in exchange for which the international community agreed to meet its commitments to the transition government.

In an updated report on the Palestinian economy yesterday, the World Bank said, “The fiscal basis for the existence of the Palestinian Authority is being eroded,” as a result of what it called “undocumented” government expenses and a sharp rise in the number of new public employees.
Palestinian Authority representatives yesterday discussed with World Bank representatives about the possibility that the Palestinian Authority would be allowed to use money in a trust fund set up by donor states, in the event that the Palestinian Authority finds itself cash-strapped.

The World Bank has been administering the so-called reform fund since 2004. In December 2005, the World Bank did not transfer $60 million from this trust fund to the Palestinian Authority, on the grounds that the Palestinian Authority did not implement the financial and economic reforms that were a condition for aid.

If the 12 donor countries participating in the reform fund give the go-ahead, the World Bank can be lenient and transfer to the money to the Palestinian Authority, without the conditions being fulfilled.

The UN yesterday warned the donor countries that Gaza was facing severe economic and humanitarian problems caused by the closure of the Almuntar/Karny crossing into Israel. A UN Office for the Coordination of Humanitarian Affairs (OCHA) claims that the closure was causing the destruction of agricultural exports worth $500,000 a day, and was delaying the import of medicines and medical equipment.