Washington Blocking Direct Donations to Palestinians

Several initiatives by donor states to bypass the Hamas government and get money directly to the Palestinians are being thwarted by the U.S.

The British government, in partnership with the European Commission and the Arab League, suggested last week that donor states' money and the taxes that Israel collects for the Palestinian Authority be transferred directly to the Palestinians through the Holst Fund. The money is intended for basic services and wages of vital workers, and could prevent the collapse of the health, education and welfare systems in the territories.

However, the United States objected to the plan and blocked it, with the encouragement of senior Israeli officials. This was one of the reasons for Quartet envoy James Wolfensohn's resignation on Sunday.

The Holst Fund was founded in 1994, after the Oslo Accord was signed. It is managed by the World Bank. The British suggested that the funds be transferred to the account of a commercial bank that is not under the PA's supervision. Withdrawals from this account would be possible only for specific Palestinian needs approved by the donor states. The expenses would be supervised by an independent, reputable organization.

But at a meeting of the donor states' representatives in London last week, it transpired that contrary to recent media reports, the Americans are preventing the transfer of funds for vital services via foreign foundations and nongovernmental organizations. Consequently, no move has been taken so far to create a mechanism bypassing Hamas.

The leaders of the Quartet (which consists of the U.S., European Union, United Nations and Russia) are expected to take up the differences between the EU and UN organizations, on one hand, and the U.S., on the other, at a meeting with UN Secretary General Kofi Annan next Tuesday.

The U.S. has also prevented the transfer of Arab League funds directly to Palestinians' accounts.

The Arab League has raised $71 million and wishes to deposit some NIS 2,000 directly into the bank account of each PA worker, to enable the continued operation of vital services for another few weeks. However, the Arab Bank, which holds some 30,000 accounts of PA workers, refrained from making the transfer after Washington warned bank heads that the U.S. would see this move as assistance to Hamas.

Other banks followed suit and also refused to transfer the funds to the workers' accounts.

A Western diplomat familiar with the matter yesterday accused Deputy National Security Adviser Elliot Abrams and Assistant Secretary of State David Welch of recklessly trying to engineer the collapse of the PA's systems. The two assume that this would lead to the collapse of the Hamas government and to Fatah's regaining control, the diplomat said.

Outgoing Defense Minister Shaul Mofaz and his senior advisor, Amos Gilad, have encouraged the U.S. to foil any initiative to transfer funds for vital services in the territories.

However, incoming defense minister Amir Peretz promised at a meeting with PA Chairman Mahmoud Abbas before the elections to work to prevent a humanitarian crisis in the PA if he became cabinet member. And Shimon Peres, the designated vice premier and minister for developing the Negev and the Galilee, also objects to a complete withholding of funds; he supports financing vital services in the territories through Abbas' office.