Palestinian Drive to Pursue Statehood at UN May Aggravate Economic Plight
Palestinian Statehood Bid at UN May Increase Troubles
Abbas Momani/AFP/Getty Images
Palestinian residents of the West Bank village of Deir Qadis protest against the expansion of nearby settlements in the Israeli-occupied West Bank.
Palestinian residents of the West Bank village of Deir Qadis protest against the expansion of nearby settlements in the Israeli-occupied West Bank. Photographer: Abbas Momani/AFP/Getty Images
July 14 (Bloomberg) -- Former U.K. Prime Minister Tony Blair discusses Israeli-Palestinian peace efforts and the outlook for renewing talks before the United Nations considers a resolution on Palestinian statehood in September. Blair, a representative of the so-called Quartet of the U.S., the European Union, the United Nations and Russia, speaks from Jerusalem with Francine Lacqua on Bloomberg Television's "On the Move." He also comments on the European debt crisis and the phone-hacking scandal surrounding News Corp.'s News International. (Source: Bloomberg)
Palestinians, mired in a financial crisis that forced an emergency 50 percent cut in public salaries, may find that pursuing statehood at the United Nations next month puts them in a worse condition.
Israel, which opposes the UN bid without a return first to peace talks, collects about $1.2 billion in fees each year for the Palestinian Authority. It has withheld the money in the past during disputes and to pressure the Palestinians. Both the U.S. House and Senate have called on President Barack Obama to reduce the Palestinians’ annual $500 million in foreign aid if they proceed at the UN’s September meeting.
“Even if statehood is declared and receives broad acceptance at the UN, it’s not clear that it can be implemented over the objections of Israel and the U.S.,” said Jane Kinninmont, a senior research fellow at the Chatham House research institute in London. “There could be a real problem if people have high expectations” of what the UN effort will achieve.
Palestinians are seeking UN recognition because they say 20 years of negotiating has led to a stalemate and they see little hope of a breakthrough with Israeli Prime Minister Benjamin Netanyahu. The latest peace talks fell apart within a month of starting last year. Palestinians plan to ask the UN for membership Sept. 20.
End Oslo
Palestinian Authority Prime Minister Salam Fayyad is wrapping up a two-year program of strengthening the courts, roads, schools and other institutions that would form the basis of a Palestinian state, a process the International Monetary Fund says has largely succeeded. That effort may be short- circuited, though, by fallout from whatever occurs at the UN.
While unwilling to specify what steps Israel will take to respond, Foreign Minister Avigdor Liberman said at a July 17 news conference in Jerusalem that forcing a vote at the UN would be “the end of the Oslo Accords,” referring to the 1993 interim agreements that created the Palestinian Authority and have governed its relations with Israel ever since.
These include giving Palestinians limited self-rule over most of the West Bank and Gaza Strip, enabling the movement of commercial goods through roads and ports Israel administers, collecting customs fees and cooperating at border stations -- Israel controls all but one.
Israel ending cooperation “would create a vicious circle of violence, a curse that could spill over into the Palestinian streets and the entire area,” said Samir Abdullah, the former Palestinian planning minister who runs an economic research group in the West Bank city of Ramallah and supports the statehood bid. “It’s not in the interest of either side.”
Not a Stunt
Palestinian Authority President Mahmoud Abbas said he wouldn’t continue the U.S.-brokered discussions unless Netanyahu extended a 10-month freeze on settlement construction, a condition the Israeli leader rejected.
Israeli Defense Minister Ehud Barak approved construction of 277 new housing units last week in the West Bank settlement of Ariel, his office said today.
Since 1993, the number of Jews who moved to the areas occupied by Israel in the 1967 war doubled to about 500,000, living amid some 2.5 million Palestinians. Another 1.5 million Palestinians live in Gaza.
“Our quest for recognition as a state should not be seen as a stunt,” Abbas said in a May column published in the New York Times. “Negotiations remain our first option, but due to their failure we are now compelled to turn to the international community to assist us.”
Financial Crisis
Israeli Finance Minister Yuval Steinitz delayed transfer of the custom fees in May -- almost $100 million for the month -- until Palestinian officials offered proof the money wouldn’t go to the Islamic Hamas movement, which controls Gaza and is considered a terrorist organization by Israel, the U.S. and European Union.
Two months later, Fayyad announced that the authority was in a financial crisis and he would have to slash June paychecks by 50 percent for 151,000 civil-service employees. In a July 3 news conference at his office in Ramallah, Fayyad singled out Arab donors as the key missing link, saying only Oman, Algeria and the United Arab Emirates had fulfilled foreign-aid commitments.
‘Deep and Rooted’
Since then, Saudi Arabia sent $30.8 million to help bridge the gap, representing two months of its total annual pledge. That enabled the authority to pay full salaries for July so that families wouldn’t have to reduce their holiday spending during the holy month of Ramadan, according to Fayyad, who said budget cuts would have to be found elsewhere. The Saudi contribution leaves about $228 million from Arab sources still uncollected and the rest of the June salaries still unpaid, according to the prime minister’s figures.
The economic problems “are so deep and rooted that it will be very difficult to overcome them in the near future,” said Nasser Abdel Kareem, an economist at Birzeit University in the West Bank. “Government spending is the core of the Palestinian economy. Without it, the economy is close to collapse.”
Roughly a quarter of the authority’s $3.7 billion annual budget comes from the U.S., Arab and other foreign aid, according to Accountant-General Yousef Zummor. About 44 percent of revenue that makes up the rest of the budget comes from the fees the authority needs Israel’s cooperation to receive.
Clearing Roadblocks
Before the latest crisis, the Washington-based IMF praised Fayyad’s institution-building program and said in an April 6 report that the Palestinian Authority is capable of running the economy of an independent state. Though Palestinians have few natural resources and no independent access to ports, growth in the West Bank and Gaza Strip reached 9 percent in 2010, the IMF said in the report. Unemployment in the West Bank was 17.2 percent in 2010 and 37.8 percent in Gaza, according to the Palestinian Central Bureau of Statistics.
Economic expansion would be even stronger if Israel removed more of the roadblocks and other barriers to trade that slow the movement of goods both for internal consumption and export, Abdullah says. Netanyahu has cleared many of the heaviest- traveled routes and says he wants to promote economic growth in the West Bank within the bounds of security considerations.
Israel captured the West Bank, Gaza and east Jerusalem in the 1967 Middle East war from Jordan and Egypt. While ceding much of its power with the Oslo agreements, Israel maintained authority over roads, airspace and borders. Hamas seized control of Gaza in 2007, taking charge of the southern border with Egypt, though Israel operates a sea blockade of the territory and allows only limited exports.
“Running businesses under military occupation isn’t easy, so it’s not a big surprise that the drop in donor aid is crippling us,” said Mukhemer Abu Sada, a political scientist at Al-Azhar University in Gaza City.
Hilme Mustafa, a driver for the Palestinian Ministry of Civilian Affairs and father of 10, was hit by the economic crisis last month when his electricity was shut off because he couldn’t pay the bill with half his June salary. Mustafa, 41, who lives in the hilltop village of Beit Liqya, said he felt let down because international supporters of Palestinian statehood aren’t backing up their words with money.
“They promised aid and a better economy for us, but they haven’t delivered it,” he said.
To contact the reporters on this story: Jonathan Ferziger in Tel Aviv at jferziger@bloomberg.net; Fadwa Hodali in Cairo at fhodali@bloomberg.net
To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net
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