U.S. Digs In on Withholding Aid to Hamas Government

By STEVEN R. WEISMAN

New York Times

February 17, 2006

WASHINGTON, Feb. 16 The Bush administration is struggling to maintain a united front with its European and Arab allies to stick to a warning to cut off financial aid to the Palestinian Authority if Hamas does not renounce its anti-Israel positions, American officials said Thursday.

A trip to the Middle East next week by Secretary of State Condoleezza Rice is intended in part to make sure that Saudi Arabia and other Arab nations do not try to make up the difference if the West cuts off its portion of the $1 billion a year of outside assistance that has kept the Palestinian Authority afloat.

American officials said the United States had conveyed similar concerns to the Europeans, who fear turmoil in Gaza and the West Bank if aid is cut off and tens of thousands of Palestinians, including armed security forces, are thrown out of work.

The next step for the administration, a senior State Department official said, is to "convince everyone that now that we've set the goal, we have to apply pressure and see it through. But we're going through a period of uncertainty and we're going to have to learn to live with it."

The Hamas-dominated Palestinian Legislative Council is to be installed Saturday in Ramallah, but American and European officials say the decision on aid will not be made until an actual government is formed and its manifesto becomes clear. That could be weeks or months away, some officials said.

The American and European diplomats said there was no open break over the demands being made of Hamas. Rather, they said, what has emerged is an underlying difference in approach. They spoke on condition of anonymity because they are not authorized to speak on the record about the difficulties of maintaining unity on this issue.

A call for Hamas to renounce its past positions came last month from the United States and its partners in the so-called Quartet Russia, the United Nations and the European Union which has overseen Middle East negotiations since 2002.

But there was no explicit vow in their statement to cut off aid, only a suggestion that individual donors would "review" their assistance if Hamas did not renounce violence, recognize Israel and accept existing agreements with Israel, including the pledge to negotiate establishment of a Palestinian state living at peace with Israel.

Where the American administration is issuing warnings, the European Union hopes for a solution that would avert a confrontation with the West. On Thursday, for example, Javier Solana, the top foreign policy envoy of the European Union, said in Ramallah, the provisional Palestinian capital: "I wish to underline that the European Union will not abandon the Palestinian people. We have never done so and we never will."

Once a Hamas-led government takes power, he added, "we will see what is its composition and program. Further decisions will be taken accordingly, on means and ways that allow the E.U. to continue supporting the people."

But in an interview last week the German foreign minister, Frank-Walter Steinmeier, when asked what the Europeans should do about the issue, said it was first up to the Israelis to decide how to deal with a Hamas-led government.

Israel has said that it will cut off the delivery of vital tax and customs payments that it now collects for the Palestinian Authority, though it let one payment go through earlier this month.

What this kind of talk means, European and American officials say, is that many European donors would be likely to send the Palestinian Authority money through programs of the United Nations or nongovernment organizations, or perhaps to ministries like water or sanitation if they were run by technocrats not affiliated with Hamas.

The United States, on the other hand, has if anything hardened its position, partly because of growing pressure in Congress. Not only has the administration warned that it would cut off aid; it has demanded that the Palestinians return $50 million in American aid for reconstruction projects run by Palestinian ministries this year, if Hamas takes power and does not change its ways.

Secretary Rice repeated this week that the Bush administration did not wish to damage the welfare of Palestinians and would continue food and subsistence aid, presumably including aid to the United Nations Relief and Works Agency for Palestine Refugees, which gets about $85 million a year from the United States.

According to the latest World Bank figures, international contributions to the Palestinian Authority amount to a little more than $1 billion a year. Most of this goes to relief for the poor and to reconstruction projects. If Europeans continue making payments to the Palestinians, they are likely to be in these areas.

But the Palestinian Authority operating budget is about $1.9 billion a year, and it is $750 million in the red. Currently Europeans make up about half of that deficit; the rest is covered by deferral of payments, bank loans and sales of assets.

The Palestinian Authority employs about 140,000 people, including 58,000 security personnel. Some Europeans say throwing them out of work would be analogous to dismantling the Iraqi Army after the invasion in 2003, sending into the street armed men who might then join radical militias.

"For us, it's going to be very difficult to sit by and not to do anything if the Palestinian people seem to be suffering from a blockade," said a European official. "Unless this situation is managed, we're going to have a problem. It's clear that Europeans don't want chaos in the Palestinian territories."