RUTHFULLY YOURS

http://www.familysecuritymatters.org/publications/id.10126/pub_detail.asp

On Thursday, August 4^th, Arab League foreign ministers and representatives from Jordan, Egypt, Saudi Arabia, Morocco, Lebanon and Qatar announced that they would support the plan of the Palestinian Authority (PA) to seek a seat for a Palestinian state at the UN General Assembly (UNGA).

So what kind of state exactly would the UNGA be endorsing? The 1933 Montevideo Convention on the Rights and Duties of States defines a “state” as an entity with a permanent population; a defined territory; a government; and a capacity to enter into relations with the other states – none of which the Palestinian state scheduled to be declared by the UNGA in September would possess.

That state would have two incompatible presidents, two rival prime ministers pursuing incompatible policies, a constitution whose central provisions are being violated by both Hamas and the Palestinian Authority, no functioning legislature (elected on Jan. 25, 2006, for a term of four years, the Palestinian Legislative Council has enacted no laws, and has conducted no meetings since 2007), no ability to hold national elections, a population not entirely under its control, questionable borders that would involve annexing territory under the control of another state (Israel), and no clear plan to resolve any of these conflicts.

As Daniel Greenfield writes in FrontPageMagazine: “The Palestinian Authority can’t pay its own bills. It can’t even fund its own army, yet insists on having one. It can’t generate its own electricity, provide its own water or even hold elections. If that’s not the definition of being unready for statehood – what is?” Nevertheless, assuming such a “state” is declared, both Israel and the United States have made it clear that unity talks between the PA and Hamas and the PA’s unilateral UN bid for statehood could have serious financial and political consequences.

First and foremost, both acts would, in theory, render the Oslo Accords obsolete thereby ending any and all obligations Israel agreed to in their signing. Abrogating the Accords would not only terminate the basis upon which the PA itself was established and release Israel from cooperating with the Palestinians on numerous issues especially security, but such a declaration could open the door to annexation and the extension of Israeli sovereignty over several major cities and towns on the West Bank, notably Ariel, Ma’aleh Adumim and the Gush Etzion bloc should Israel wish to do so.

From a security perspective, should the Accords be abrogated and Israeli security forces be withdrawn, Palestinian officials are well aware that Hamas is waiting in the wings for its opportunity to take over the West Bank, as it did in Gaza, and the Palestinians are not overly anxious to commit collective suicide through a third intifada that could quickly spiral out of control in favor of the Islamists.

Nor does the economic horizon appear to be any better. Well over two hundred NGOs operate in the West Bank and Gaza, and thirty per cent of the Palestinian GDP comes from foreign aid, making Palestinians the largest per capita recipients of foreign aid in the world. According to World Bank estimates, the PA received $525M in international aid in the first half of 2010, $1.4B in 2009 and $1.8B in 2008 making foreign aid the principal funding source for economic growth in the Palestinian territories. These billions of dollars in foreign aid could be jeopardized should the UNGA approve a Palestinian state outside the Oslo framework.

Few states can claim to have failed before they are even declared, but the Palestinian Authority may be about to create one of them. Part of the problem the PA faces relates to the multitude of programs and services in Gaza and the West Bank provided by the UN Relief and Works Agency (UNRWA), the vast majority of whose funding is derived from foreign aid. UNRWA defines “refugees” much more broadly that any other NGO globally. Its vast definition includes not only those Palestinians who fled their homes in 1948 – then numbering about 750,000 – but their children, grandchildren and great-grandchildren as well, who now number 4.8 million in Gaza, Jordan, Lebanon, Syria and the West Bank. Up to this point, Palestinian leaders have had a vested interest in continuing to perpetrate the myth of the promised Palestinian right of return to Israel, but if foreign aid to UNRWA dries up because of the UN bid, the PA would be hard-pressed to pay for the vast educational, social, healthcare and relief services the agency now provides to its West Bank and Gaza “refugees” and this could have serious political consequences.

Complicating these matters, the PA has also reached its borrowing limit. It carries a $585M deficit, is dependent on foreign aid to sustain its infrastructures, is the largest employer on the West Bank, and pays the salaries of approximately 150,000 civil servants and military personnel. During June and July, in a foretaste of what may come, those salaries were cut in half and the prognosis looks even worse in the run up to September if they choose to proceed with their UN statehood initiative. Palestinian banks and the private sector have lent the PA more than $1B and they are loath to lend more. Reports from credible media sources have noted that some ministries have already lost electricity due to their inability to pay their bills. In July, the PA ordered a reduction in the price of bread, leading to bakery strikes, and September will bring additional bills for educational fees and school supplies. In some areas, garbage is said to be piling up in the streets. In a country of less than four million, the economic repercussions of a massive loss in foreign aid revenues could be staggering not to mention the political fallout that could come in its wake.

Objecting to any reconciliation deal between the PA and Hamas, Israel is already withholding $105M in value added taxes and customs duties on goods imported into the West Bank and Gaza Strip that enter through Israeli ports and are collected by Israel on behalf of the Palestinian Authority. Almost two-thirds of PA net income – about $1.5B per year – comes from such taxes.

The U.S. Congress is also threatening to cut off aid should the PA reconcile with Hamas and move forward on its statehood initiative. In fiscal year 2011, U.S. foreign aid to the PA reached $550M, but that aid may now be in jeopardy. On July 7^th, the House passed a resolution opposing the statehood initiative by a 407-6 margin. House leaders followed up the resolution with a letter sent directly to PA President Mahmoud Abbas to “warn of the severe consequences” of continuing the UN initiative.

In addition, 87% of Palestinian exports now go to Israel, making the Palestinian economy dependent on good relations with its neighbor – a relationship that is deteriorating by the day. Over and above this, one-seventh of the total Palestinian workforce (constituting one-quarter of the total Palestinian payroll) work in Israeli West Bank towns and cities, which the PA has, at least for now, sought to ban.

Nor is the possible loss of Western foreign aid, the PA’s only dilemma. Its chief Arab benefactors (most notably Saudi Arabia) have failed to meet their own multi-billion dollar commitments to economic aid this year. Arab donors pledged $971M to the Palestinian Authority in 2011, but the year is more than half over and only $330M has been delivered. While Saudi Arabia did announce a $30M donation to the PA recently, that is far cry from the billions it promised. It is more concerned with shoring up its anti-Iran Sunni alliance with Jordan than pouring more funds into a dysfunctional Palestinian state that would be politically and economically problematic. The Saudis have therefore saved Jordan from bankruptcy and infused the country with an estimated $1B in July alone on the condition that Jordan accepts Saudi policies instead of bowing to Washington’s demands that are based on the delusion of a democratic Arab Spring. In this regional Sunni-Shiite power struggle between Iran, Saudi Arabia and Turkey, the PA’s economic woes seem to have taken a back seat to Arab power politics, and the PA is becoming more trouble and costing more treasure than it’s worth.

Compounding Palestinian concerns, a recent Palestinian Media Watch report just presented to the U.S. Congress documents showing that, in May 2011, the PA paid just over $5M in salaries to Palestinians in Israeli jails, including thousands of convicted terrorists with Israeli blood on their hands. Last year, the U.S. provided $225M to the general Palestinian budget from which these salaries continue to be paid. As this represents a flagrant violation of U.S. anti-terrorism laws, Congress is now reviewing its options, and PA actions in September, as well as its pending pact with Hamas may tip the scales in favor of those in Congress seeking to terminate foreign aid.

And the U.S. Congress is not alone in its threat. Aid funds from Britain and the European Union are also being used for similar purposes, and it’s causing a major uproar in the House of Commons. It was disclosed recently that the PA, which receives £86M of British aid a year, has authorized payments of almost £5M to the families of “martyrs”, and another £3 million to 5,500 Palestinian prisoners held in Israeli jails. According to the official Palestinian daily newspaper Al-Hayat Al-Jadida, payments to the families of “martyrs” (the definition of which includes suicide bombers) totaled 3.5% of the PA budget.

And finally, since 1998, more than $500M in judgments have been won against the PA by the families of victims of Palestinian attacks. PA Prime Minister Fayyad has urged the U.S. administration to impose a presidential waiver that would protect the PA from having its bank accounts frozen in the United States, but that waiver depends very much on PA actions over the next thirty days.

The second Intifada (2000-2004) led to one of the deepest recessions the Palestinian economy has experienced in its short history. According to the October 2004 World Bank Assessment, GDP per capita shrunk by thirty-five percent from its pre-Intifada numbers. After four years of conflict, the Report noted that average Palestinian incomes declined by more than a third and one-quarter of the work force was unemployed with nearly half of Palestinians living below the poverty line. Palestinian leadership knows it has much more to lose this time around, both economically and politically, if it proceeds with the statehood plan, joins with Hamas, and if a 3^rd Intifada breaks out – as Israel expects.

Abbas has placed himself into an impossible position. He  knows he can’t make peace with Israel and negotiate a two-state solution that would recognize its legitimacy given the dynamics of Palestinian politics, no matter what the terms of the agreement or where the final borders might be drawn. But he also knows that he can’t afford to lose the massive financial aid pouring in from the U.S. and European Union without causing economic ruin, political chaos or worse. He faces a Hobbesian choice. The best he can hope for is to upgrade Palestinian status from observer to non-member state, but that is a far cry from the statehood he promised and the Palestinian ‘street’ may see it as a betrayal. If so, even a booming economy may not save him.