[Mb-civic] Israeli Cabinet Freezes Funds - Washington Post

[William Swiggard]

Israeli Cabinet Freezes Funds
Palestinians Say Squeeze on Hamas Could Cause Crisis

By Scott Wilson
Washington Post Foreign Service
Monday, February 20, 2006; A01

JERUSALEM, Feb. 19 -- The Israeli cabinet agreed Sunday to immediately 
freeze monthly tax and customs payments that it collects on behalf of 
the Palestinian Authority, a day after the radical Islamic group Hamas 
took control of the Palestinian parliament. The move drew dire warnings 
from Palestinian officials who said the government would likely not be 
able to pay salaries to thousands of employees at the end of the month.

The cabinet's decision was part of a package of measures approved. Not 
included were some of the more harsh options recommended by Israel's 
national security ministries, including barring Palestinians in the Gaza 
Strip with work permits from entering Israel for jobs. But together, the 
measures threaten to collapse the nearly bankrupt Palestinian 
government, which Israel's acting prime minister, Ehud Olmert, said 
Sunday "is -- in practice -- becoming a terrorist authority."

Israel's decision puts it at odds with a group of Middle East peace 
interlocutors known as the quartet: the United States, the European 
Union, Russia and the United Nations. The group had recommended that 
Israel continue the transfers, an arrangement established under the 1993 
Oslo accords, until Hamas forms the new cabinet. That is scheduled to 
happen in the next five weeks.

The money Israel froze accounts for about half of the government's 
payroll. The Palestinian Authority has 150,000 employees and trainees, 
almost half of whom are members of the security services. In recent 
days, angry government employees in Gaza have demonstrated over unpaid 
salaries from the previous month.

Israeli officials said the decision to withhold the roughly $55 million 
in monthly customs and tax revenue is designed to squeeze Hamas leaders. 
On Sunday, Hamas formally nominated Ismail Haniyeh, a popular party 
leader in Gaza, as prime minister.

The Palestinian Authority is also past due on millions of dollars in 
electricity and fuel bills owed to Israeli utility companies, 
threatening the power supply to the West Bank and Gaza. Jihad Wazir, the 
acting Palestinian finance minister, said in an interview, "We're one 
bounced check away from a major humanitarian crisis."

"This is our money, so what they've done is illegal," Wazir said. 
"Israel really jumped the gun, I suspect for political reasons, and it 
will severely affect our ability to pay salaries."

Israel has demanded that Hamas, designated a terrorist organization by 
the United States and the European Union, renounce violence, recognize 
the Jewish state and abide by agreements backed in the past by the 
defeated Fatah movement. Palestinian leader Mahmoud Abbas, Fatah's 
leader and the authority's president, echoed those calls in a speech 
Saturday to the new parliament, which is dominated by a Hamas majority.

But Abbas stopped short of requiring Hamas, formally known as the 
Islamic Resistance Movement, to meet those demands as a condition for 
forming the new cabinet. Israeli officials had hoped he would deliver 
that ultimatum before Israel's cabinet convened to consider 
recommendations from agencies responsible for Israel's defense, 
intelligence and diplomacy.

"Israel will not compromise with terrorism and will continue to fight it 
with full force," Olmert said. "However, there is no intention of 
harming the humanitarian needs of the Palestinian population."

Olmert, who became leader of the centrist Kadima party after Prime 
Minister Ariel Sharon's stroke last month, is facing sharp criticism 
from political rivals before the March 28 elections. The hawkish Likud 
party has accused him of failing to predict Hamas's victory and 
mishandling the aftermath, although the charges appear to have had no 
measurable effect on Kadima's large lead in public opinion polls.

Olmert initially froze the January transfer payment after Hamas's 
victory, but reversed the decision under international pressure not to 
harm the Palestinian Authority before the Islamic movement entered 
parliament. His cabinet decided Sunday to ask international donors, who 
contribute about $1 billion a year to the Palestinian Authority, to 
cease funding once the Hamas-led cabinet is approved.

Severely weakened by corruption, the Palestinian Authority recorded a 
$67 million deficit in January even with the transfer. The money comes 
from value-added taxes and customs fees collected on goods and services 
in the territories.

Wazir said Abbas sent a letter last week to Paul Wolfowitz, president of 
the World Bank, seeking $48 million for the Palestinian Authority that 
was frozen last year after the government failed to implement several 
promised reforms.

The letter, Wazir said, offers a detailed response to charges made 
recently by the Palestinian attorney general that $700 million had been 
stolen from the Palestinian Authority in the past decade. Abbas wrote 
that those cases involve corruption uncovered before 2002, when a 
reform-oriented cabinet was installed by the late Palestinian leader 
Yasser Arafat under international pressure.

"It would not cover all of our salaries or the past-due utility costs," 
Wazir said of the $48 million. "But it would hopefully prevent a collapse."

Hamas leaders have refused demands to moderate their political program 
and renounce an armed campaign that has included scores of suicide 
bombings in recent years. Hamas leaders reject the two-state solution 
envisioned by the U.S.-backed peace plan known as the "road map," 
although some of them have said a long-term truce with Israel might be 
possible if it leaves all territory it occupied in the 1967 Middle East war.

Haniyeh, 46, the prime minister-designate, is a relative moderate inside 
Hamas. He favored participating in the first parliamentary elections 
established by the Oslo accords, but Hamas boycotted the 1996 balloting. 
He was born in a Gaza refugee camp and was deported by Israel, along 
with hundreds of other Hamas members, to Lebanon in the early 1990s. A 
former Hamas student leader, Haniyeh was close to party founder Ahmed 
Yassin, who was assassinated by Israel in 2004.

During a news conference Sunday at his home in Gaza, Haniyeh called the 
Israeli cabinet decision an attempt "to force the Palestinians down to 
their knees."

"We've handled challenges in the past and we will be able to stand up to 
future challenges as well," Haniyeh said.

But Fatah leaders expressed concern Sunday that Israel's response would 
harden Hamas's position.

"This decision will be counterproductive and it will backfire," said 
Saeb Erekat, a Fatah legislator and the chief Palestinian negotiator. 
"We still don't know how Hamas will officially respond to the 
president's speech, and Israel should wait until then. Let the speech 
run its course."

Israeli security officials recommended several measures that would have 
effectively isolated Gaza. Israeli officials said the cabinet rejected 
those options out of a belief that contributing to the deteriorating 
social conditions in the territories would strengthen Hamas politically.

As part of its response, the cabinet restated a prohibition against 
Hamas members, including legislators, from traveling between Gaza and 
the West Bank. In addition, the cabinet decided to block future military 
aid to the Palestinian Authority, something Abbas said Saturday was 
vital in helping him restore order in the territories.

During a meeting with Russian President Vladimir Putin last year, Sharon 
agreed in principle to allow some Russian military supplies, mostly 
armored vehicles and a few helicopters, to arrive in the Palestinian 
territories provided the aid was coordinated with Israel. Those efforts 
will now be frozen.

Olmert said that Israel "will not hold contacts with the administration 
in which Hamas plays any part -- small, large or permanent," a pledge 
that was not part of the official cabinet decision. But there have been 
no high-level contacts between Israeli and Palestinian officials since 
October, when Sharon and Abbas canceled their first summit since 
Israel's withdrawal of settlers and troops from Gaza.

Erekat said the only discussions taking place are in committees 
organized last year to address issues of Palestinian fugitives, 
prisoners and the Israeli withdrawal from Palestinian cities. He said he 
hoped those groups would continue to meet.

http://www.washingtonpost.com/wp-dyn/content/article/2006/02/19/AR2006021900712.html?nav=hcmodule
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