Congress is considering taking punitive measures against the Palestinian Authority or closing the Palestinian Liberation Organization's mission in Washington should it go ahead with plans to seek full membership at the United Nations Security Council next Friday.
The Americans were frustrated that years of financial aid, currently comprising 600 million dollars annually, intended to promote peace negotiations and stability did not yield many material results.
At the discussions, which took place at the House of Committee on Foreign Affairs, some experts called to cut the aid, while others warned it might undermine the Palestinian-Israeli security cooperation, and would thereby undermine Israeli security.
The discussions were undoubtedly the harbinger of a larger debate that will ensue following the UN General Assembly in New-York next week.
Representative Russ Carnahan (D-Mo) said that the Congress and the administration must send a strong message to Palestinian President Mahmoud Abbas that the UN bid is counterproductive.
"[We must] send the strongest-possible message to President Abbas that his efforts are in no one's interest, including those of his own people," said Carnahan, adding, "We should reexamine how and whether we continue to offer assistance to the PA."
But Elliott Abrams, senior fellow for Middle Eastern studies at the Council on Foreign Relations and a former Bush administration official, who testified before the committee, warned that cutting off the PA might be dangerous for the United States.
"Cutting off the PA is a very difficult thing to do. The entire Palestinian Authority is not to blame for what the PLO-Fatah crew is planning in New York. I think the collapse of the PA would not be in our interest or, for that matter, Israel's or Jordan's. It might actually benefit Hamas and other terrorist groups."
Abrams suggested the United States wait and see how things work out at the General Assembly, but suggested the PLO office in Washington be closed.
"It's the PLO that is doing this. The collapse of the PA institutions, particularly security institutions, could, I think, play into the hands of Hamas. Closing the PLO office, though, I think, would not."
Another idea proposed by Abrams was to reevaluate U.S. aid to the United Nations Relief and Works Agency.
"We are the most generous donor, and what UNRWA does is perpetuate this refugee problem", he said. "It started at 750,000 dollars, now it's five million dollars. Every other post-World War II refugee problem is gone. This one keeps getting larger, thanks to UNRWA."
Abrams' final proposal was to take a hard position toward the PLO and PA corruption.
"This is not a criticism of Palestinian Prime Minister Salam Fayyad, for whom I have the highest regard," he stressed. "But he's surrounded by the old Fatah-PLO corrupt crew. For example, since 2006, the Palestine Investment Fund, which is worth about $1 billion, has been taken away from him, from his authority. There are plenty of allegations about things like self-dealing by the members of that board."
Corruption within the Palestinian Investment Fund
Dr. Jonathan Schanzer, vice president of research at the Foundation for Defense of Democracies and the former terrorism finance analyst at the U.S. Department of Treasury, argued that despite the fact that the Palestinian government lead by Fayyad was lauded for its transparency, Abbas was still managing to abuse his power.
Schanzer said Fayyad has been "sidelined" by Abbas. "Abbas has consolidated power, and he is now abusing it."
Schanzer explained that Abbas is at the center of corruption within the Palestine Investment Fund (PIF).
"The PIF was created in 2002 to function as a transparent sovereign wealth fund to benefit the Palestinian people. In recent years, however, Abbas has changed the charter, installed his own choices for board members, placed the PIF under his full control and neglected to have it audited."
"The PA also borrows from this fund, currently worth at least $1 billion, when it cannot pay salaries. In return for the money borrowed, Abbas has been repaying the PIF with land slated for businesses that enrich his own inner circle."
"One former official charges that $1.3 billion has gone missing from the fund. Another claims that exposing the PIF would reveal corruption at the highest levels of the PA. And the fact that Hamas recently took full control over the PIF's assets in Gaza now adds to the concern," Schanzer continued.
Schanzer also called for an investigation on the Palestinian Authority's "troubling financial relationship with Hamas" and the reports that Abbas' sons, Yaser and Tareq, have accumulated wealth since their father took office in 2005.
"Congress should challenge the corrupt system created by Mahmoud Abbas. This includes, one, stricter oversight of the presidential waiver process that releases Palestinian funds each year, two, oversight of the PIF including a full audit, three, conducting an inquiry into the wealth of Mahmoud Abbas and his sons, Yaser and Tareq, to determine whether U.S. funds have contributed to their holdings, [and] four, demanding an immediate resolution to the matter of the electric power plant in Gaza - U.S. taxpayers should not be indirectly financing Hamas."
Schanzer recommended the United States takes two additional steps: scrutinizing Abbas' presidential budget, and finding ways to increase the role of Fayyad, "who has been marginalized by Abbas in recent years," he said.
Obama Administration criticized for moving slowly
The Obama Administration became a subject of criticism during the hearing. Chairwoman of the Foreign Affairs Committee, Rep. Ileana Ros-Lehtinen, said, "Regrettably, the administration has been slow to take action."
Ros-Lehtinen said it took "weeks of uncertainty and drift" for the administration to pledge to veto a UN Security Council resolution for a Palestinian state.
By waiting for the "11th hour" to make this announcement, the administration "wasted a critical opportunity to prevent the problem from building," she said. "This sits in stark contrast to the decisiveness that the Truman administration displayed with respect to Israel."
Elliot Abrams said the current problem "does stem, in part, from a gigantic mistake the administration made at the very beginning. It believed that by distancing us from Israel, it would increase our influence on the Palestinians and the Israelis. In fact, it has diminished our influence with the Palestinians and the Israelis."
Dr. Jonathan Schanzer agreed the administration handled the current situation poorly.
Rep. Howard Berman reminded the committee members of the House Resolution 268 which said that the House affirms that Palestinian efforts to circumvent direct negotiations and pursue recognition of statehood, prior to agreement with Israel, will harm U.S.-Palestinian relations and will have serious implications for U.S. assistance programs for the Palestinians and the Palestinian Authority.
"The Palestinians have been forewarned", Berman said. "We should not shrink from this pledge of just two months ago. It is not too late for President Abbas to abandon his flawed UN strategy, [and] engage directly with the Israelis. For the sake of peace and for the sake of his relations with Palestinians' most important benefactor, the United States of America, I urge him to do so."