Hamas Is Facing a Money Crisis; Aid May Be Cut
By STEVEN ERLANGER
The New York Times
January 28, 2006
JERUSALEM, Jan. 27 — Hamas leaders, savoring their landslide victory in Palestinian elections, faced an array of threats on Friday: a huge government deficit, a likely cutoff of most aid, international ostracism and the rage of defeated and armed Fatah militants.
Of the many questions that the Hamas victory presents, the need to pay basic bills and salaries to Palestinians is perhaps the most pressing. The Palestinian Authority is functionally bankrupt, with a deficit of $69 million for January alone.
That will be an urgent question when the United States, the European Union, Russia and the United Nations, known as the quartet, meet in London on Monday to discuss the Palestinian vote, especially if, as some American officials fear, Hamas turns to Iran to make up some of the difference.
"They don't have enough to get through the end of the month," a knowledgeable Western diplomat said. "The United States and the European Union both consider Hamas a terrorist organization, and we don't provide money to terrorist organizations or members of terrorist organizations."
In Washington, President Bush said "aid packages won't go forward" for the Palestinian Authority if Hamas did not renounce violence or its commitment to destroy Israel.
"That's their decision to make," he said on CBS News. "But we won't be providing help to a government that wants to destroy our ally and friend."
Meanwhile, in the southern Gaza town of Khan Yunis, Hamas supporters clashed with Fatah gunmen and the Palestinian security forces in two separate incidents, leaving six people wounded, according to witnesses and medical workers. [Page A9.]
In Davos, Switzerland, James D. Wolfensohn, the quartet's envoy to the Middle East, spoke of the Palestinians' financial problems, saying there was not enough money to pay the salaries of 135,000 Palestinian civil servants, including some 58,000 members of the security forces, which he said could lead to further chaos.
Because Hamas has not yet formed a government, the Palestinian president, Mahmoud Abbas, has asked American help to persuade the Persian Gulf countries to provide more aid now, and to ensure that Israel delivers the $40 million to $50 million owed to the Palestinian Authority from tax and customs receipts, which Israel collects on behalf of the Palestinians.
Israel has made it clear that it will not deal with a Palestinian Authority run by Hamas and has said some of those who have won election are wanted for suspected involvement in anti-Israel violence. Most of them are in semi-seclusion, and fear arrest if they try to travel to Ramallah, the site of the Palestinian parliament in the West Bank.
Also in Davos, Joseph Bachar, director general of Israel's Finance Ministry, raised the question of whether Israel would continue to transfer the tax and customs receipts to an authority run by Hamas, which does not recognize the existence of Israel.
The departing Palestinian economy minister, Mazen Sinokrot, said the 135,000 civil servants were the main breadwinners for 30 percent of Palestinian families. "If these salaries do not come in, this is a message for violence," he said.
Israeli officials suggested that Ehud Olmert, Israel's acting prime minister, would agree to release this month's money anyway, since a Hamas government has not been formed, but questioned whether Israel would agree to give any money to Hamas in the future. "We don't want to punish the Palestinian people," an official said. "But we don't have any illusions about Hamas."
Mahmoud Zahar, a top Hamas official, said in an interview in Gaza that he was not worried about the lack of money from the West.
"All the money from Europe and American went into the pockets of corrupt men," Mr. Zahar said, citing Palestinian security chiefs as a leading example. "The leaders of these services became multimillionaires. We are going to reform these services. This is our mission."
The current financial crunch has little to do with Hamas. The Palestinian Authority last summer broke its promises to the World Bank and the donor countries and significantly raised salaries to public employees, a number swollen by the effort to absorb armed young men into the security forces. All its $1 billion in revenues is now taken up by salaries, according to the World Bank, leaving an expected budget deficit for 2006 of $600 million to $700 million; only about $320 million of that would have been covered by foreign contributions from the United States, Europe and Arab countries.
The plan assumed a Fatah victory in the elections and the formation of a new, more technocratic government. Donor countries and the World Bank were working on a restructuring program for the Palestinian Authority that would cover its large financial debt for the next few years in return for serious reforms and job-creation programs.
But the victory by Hamas has exploded all those assumptions.
Direct payments from the United States are banned by American law, and many European nations have said they will not continue to aid the Palestinian Authority until Hamas agrees to recognize Israel and disavow violence, which Hamas has said it will never do.
American and European officials are also banned from talking to Hamas officials, elected or otherwise. Once a group is on the American terrorist list, as Hamas is, it is difficult to get off; it takes more than pledges or statements, a Western diplomat said.
The development minister for the new German government, Heidemarie Wieczorek-Zeul, said Friday that German aid to the Palestinians depended on Hamas's renouncing violence and recognizing Israel.
Chancellor Angela Merkel is scheduled to make a first official visit to the region next week, and her spokesman, Ulrich Wilhelm, said Friday: "The recognition of Israel's right to security and to exist remains an irrevocable cornerstone of German foreign policy." Ms. Merkel will meet Mr. Abbas but no Hamas official.
Hamas candidates and officials have played down the problem, saying they will appeal to the Arab and Muslim world, which already gives large amounts of aid to Hamas and its charitable and educational organizations — some of which, Israel says, moves seamlessly to finance its military operations.
Hamas already gets aid from Iran, Israeli and American officials say, and it is possible that Iran may be willing to provide larger sums to the Palestinian Authority. But Israeli and Western diplomats say Hamas, as a Palestinian branch of the Sunni Muslim Brotherhood, could also be wary of becoming overly dependent on Shiite Iran.
Former President Jimmy Carter, who led a team of election observers for the Palestinian voting, said in an interview on Friday that the United States and Europe should redirect their relief aid to United Nations organizations and nongovernmental organizations to skirt legal restrictions.
"The donor community can deal with it successfully," Mr. Carter said. "I would hope the world community can collectively tide the Palestinians over." He urged support for what he said Mr. Wolfensohn was describing to him as a $500 million appeal.
"It may well be that Hamas can change," Mr. Carter said, remembering his presidency, when the Palestine Liberation Organization under Yasir Arafat finally agreed to recognize the existence of Israel and to forswear terrorism. "It's a mistake to abandon optimism completely."
He urged Israel and the world: "Don't drive the Palestinians away from rationality. Don't force them into assuming arms as the only way to achieve their legitimate goals. Give them some encouragement and the benefit of the doubt."
But it will be politically difficult to do that. Senator Joseph R. Biden Jr., Democrat of Delaware, said he had spoken to the Europeans and Mr. Wolfensohn about the fiscal crunch. "But the fact of the matter is, you cannot pour millions and hundreds of millions of dollars into a group that, in fact, calls for the destruction of an ally, or for any country, for that matter," Mr. Biden said.
The Western diplomat said: "We're discussing a lot of complicated questions. But even before the election, the Palestinian Authority's fiscal house was in disarray, with a huge deficit every month."
It will be worse still, he said, if the Israelis stop cash transfers and there is a halt in direct aid from the West and the World Bank.
The New York Times
January 28, 2006
JERUSALEM, Jan. 27 — Hamas leaders, savoring their landslide victory in Palestinian elections, faced an array of threats on Friday: a huge government deficit, a likely cutoff of most aid, international ostracism and the rage of defeated and armed Fatah militants.
Of the many questions that the Hamas victory presents, the need to pay basic bills and salaries to Palestinians is perhaps the most pressing. The Palestinian Authority is functionally bankrupt, with a deficit of $69 million for January alone.
That will be an urgent question when the United States, the European Union, Russia and the United Nations, known as the quartet, meet in London on Monday to discuss the Palestinian vote, especially if, as some American officials fear, Hamas turns to Iran to make up some of the difference.
"They don't have enough to get through the end of the month," a knowledgeable Western diplomat said. "The United States and the European Union both consider Hamas a terrorist organization, and we don't provide money to terrorist organizations or members of terrorist organizations."
In Washington, President Bush said "aid packages won't go forward" for the Palestinian Authority if Hamas did not renounce violence or its commitment to destroy Israel.
"That's their decision to make," he said on CBS News. "But we won't be providing help to a government that wants to destroy our ally and friend."
Meanwhile, in the southern Gaza town of Khan Yunis, Hamas supporters clashed with Fatah gunmen and the Palestinian security forces in two separate incidents, leaving six people wounded, according to witnesses and medical workers. [Page A9.]
In Davos, Switzerland, James D. Wolfensohn, the quartet's envoy to the Middle East, spoke of the Palestinians' financial problems, saying there was not enough money to pay the salaries of 135,000 Palestinian civil servants, including some 58,000 members of the security forces, which he said could lead to further chaos.
Because Hamas has not yet formed a government, the Palestinian president, Mahmoud Abbas, has asked American help to persuade the Persian Gulf countries to provide more aid now, and to ensure that Israel delivers the $40 million to $50 million owed to the Palestinian Authority from tax and customs receipts, which Israel collects on behalf of the Palestinians.
Israel has made it clear that it will not deal with a Palestinian Authority run by Hamas and has said some of those who have won election are wanted for suspected involvement in anti-Israel violence. Most of them are in semi-seclusion, and fear arrest if they try to travel to Ramallah, the site of the Palestinian parliament in the West Bank.
Also in Davos, Joseph Bachar, director general of Israel's Finance Ministry, raised the question of whether Israel would continue to transfer the tax and customs receipts to an authority run by Hamas, which does not recognize the existence of Israel.
The departing Palestinian economy minister, Mazen Sinokrot, said the 135,000 civil servants were the main breadwinners for 30 percent of Palestinian families. "If these salaries do not come in, this is a message for violence," he said.
Israeli officials suggested that Ehud Olmert, Israel's acting prime minister, would agree to release this month's money anyway, since a Hamas government has not been formed, but questioned whether Israel would agree to give any money to Hamas in the future. "We don't want to punish the Palestinian people," an official said. "But we don't have any illusions about Hamas."
Mahmoud Zahar, a top Hamas official, said in an interview in Gaza that he was not worried about the lack of money from the West.
"All the money from Europe and American went into the pockets of corrupt men," Mr. Zahar said, citing Palestinian security chiefs as a leading example. "The leaders of these services became multimillionaires. We are going to reform these services. This is our mission."
The current financial crunch has little to do with Hamas. The Palestinian Authority last summer broke its promises to the World Bank and the donor countries and significantly raised salaries to public employees, a number swollen by the effort to absorb armed young men into the security forces. All its $1 billion in revenues is now taken up by salaries, according to the World Bank, leaving an expected budget deficit for 2006 of $600 million to $700 million; only about $320 million of that would have been covered by foreign contributions from the United States, Europe and Arab countries.
The plan assumed a Fatah victory in the elections and the formation of a new, more technocratic government. Donor countries and the World Bank were working on a restructuring program for the Palestinian Authority that would cover its large financial debt for the next few years in return for serious reforms and job-creation programs.
But the victory by Hamas has exploded all those assumptions.
Direct payments from the United States are banned by American law, and many European nations have said they will not continue to aid the Palestinian Authority until Hamas agrees to recognize Israel and disavow violence, which Hamas has said it will never do.
American and European officials are also banned from talking to Hamas officials, elected or otherwise. Once a group is on the American terrorist list, as Hamas is, it is difficult to get off; it takes more than pledges or statements, a Western diplomat said.
The development minister for the new German government, Heidemarie Wieczorek-Zeul, said Friday that German aid to the Palestinians depended on Hamas's renouncing violence and recognizing Israel.
Chancellor Angela Merkel is scheduled to make a first official visit to the region next week, and her spokesman, Ulrich Wilhelm, said Friday: "The recognition of Israel's right to security and to exist remains an irrevocable cornerstone of German foreign policy." Ms. Merkel will meet Mr. Abbas but no Hamas official.
Hamas candidates and officials have played down the problem, saying they will appeal to the Arab and Muslim world, which already gives large amounts of aid to Hamas and its charitable and educational organizations — some of which, Israel says, moves seamlessly to finance its military operations.
Hamas already gets aid from Iran, Israeli and American officials say, and it is possible that Iran may be willing to provide larger sums to the Palestinian Authority. But Israeli and Western diplomats say Hamas, as a Palestinian branch of the Sunni Muslim Brotherhood, could also be wary of becoming overly dependent on Shiite Iran.
Former President Jimmy Carter, who led a team of election observers for the Palestinian voting, said in an interview on Friday that the United States and Europe should redirect their relief aid to United Nations organizations and nongovernmental organizations to skirt legal restrictions.
"The donor community can deal with it successfully," Mr. Carter said. "I would hope the world community can collectively tide the Palestinians over." He urged support for what he said Mr. Wolfensohn was describing to him as a $500 million appeal.
"It may well be that Hamas can change," Mr. Carter said, remembering his presidency, when the Palestine Liberation Organization under Yasir Arafat finally agreed to recognize the existence of Israel and to forswear terrorism. "It's a mistake to abandon optimism completely."
He urged Israel and the world: "Don't drive the Palestinians away from rationality. Don't force them into assuming arms as the only way to achieve their legitimate goals. Give them some encouragement and the benefit of the doubt."
But it will be politically difficult to do that. Senator Joseph R. Biden Jr., Democrat of Delaware, said he had spoken to the Europeans and Mr. Wolfensohn about the fiscal crunch. "But the fact of the matter is, you cannot pour millions and hundreds of millions of dollars into a group that, in fact, calls for the destruction of an ally, or for any country, for that matter," Mr. Biden said.
The Western diplomat said: "We're discussing a lot of complicated questions. But even before the election, the Palestinian Authority's fiscal house was in disarray, with a huge deficit every month."
It will be worse still, he said, if the Israelis stop cash transfers and there is a halt in direct aid from the West and the World Bank.
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