U.S. and Europe Halt Aid to Palestinian Government

By STEVEN R. WEISMAN and CRAIG S. SMITH

New York Times

April 8, 2006

WASHINGTON, April 7 The United States and the European Union announced Friday that they would halt payments to the Hamas-led Palestinian government but that aid would flow to Palestinians through the United Nations and other independent organizations.

"The new Palestinian government must take responsibility for the consequences of its policies," said Secretary of State Condoleezza Rice, citing the failure of the Hamas-led government to meet donors' demands that it recognize Israel, renounce violence and respect previous Israeli-Palestinian agreements.

The United States cutoff would affect $400 million of aid that has not yet been expended. Of that sum, however, about $100 million would be redirected to the United Nations and other non-Palestinian groups to spend for basic human needs like food, health and schools.

The total for these "humanitarian" programs would rise to $245 million because of the redirected funds. But that left $300 million in aid owed to the Palestinians suspended pending further review.

State Department officials said they were suspending $300 million partly because there were not enough organizations in the West Bank and Gaza to carry out programs. Officials said no American money would be given to the executive branch of government led by the Palestinian president, Mahmoud Abbas, who has criticized the Hamas leadership for failing to reach out to Israel.

The decision on Mr. Abbas was a surprise, because American officials had earlier said that they were looking for ways to circumvent Hamas and support him directly. While the American officials gave no reason for the decision, they indicated that he had not established control over security forces and border crossings to justify giving him aid. Supporters of Israel in Congress told the administration they would object to money going to Mr. Abbas.

Asked if Mr. Abbas might eventually receive American aid for these purposes, C. David Welch, the assistant secretary of state for the Middle East, said: "Not now. But I don't rule it out, and I don't rule it in."

Mr. Welch said that, mirroring the American actions, the "broad trend" of European governments had been "supportive of the direction that we are going in" of cutting off aid to day-to-day Palestinian operations but letting money flow for "humanitarian" purposes.

The European Union's foreign ministers were to meet Monday in Luxembourg to discuss how to carry out their cutoff, but a spokeswoman said Friday that the outlines of what it would do were already clear.

"We are not authorizing any payments that go to the Palestinian Authority or through the Palestinian Authority," said Emma Udwin, the spokeswoman for the European Union's executive branch. The foreign ministers may try to funnel payments to individual ministries not under Hamas control, however.

The European Union has been the Palestinian Authority's largest donor since the government was created under the 1993 Oslo peace accords. It has been warning since Hamas won Palestinian elections earlier this year that the Palestinian Authority would lose that aid unless the Hamas-led government renounced violence, recognized Israel and accept past peace agreements.

Hamas advocates the violent destruction of the Jewish state, but that briefly came into question after the Palestinian foreign minister, Mahmoud Zahar, discussed the issue in general in an interview published Friday in The Times of London. "Let us speak about what is the meaning of the two-state solution," he said. "We will ask them what is their concept concerning the two-state solution."

Later Friday, the Palestinian prime minister, Ismail Haniya, insisted that Hamas had not changed its position. "That is not correct," he said in the town of Khan Younis in the Gaza Strip, Reuters reported. "Where did you hear that?"

He criticized the Europeans' cutoff of aid, saying they were "punishing the Palestinian people" for their democratic choice.

Explaining the European decision, officials in Brussels said the European Union had stopped all direct aid to the Palestinian government and payment of public employees' salaries with European Union funds through the World Bank. Aid is to continue to flow through international and nongovernmental organizations.

The European Union began providing direct budgetary assistance to the Palestinian Authority in 2000 after Israel, trying to isolate Yasir Arafat, froze monthly transfers of tax and customs receipts collected on behalf of the Palestinians under an economic protocol signed in 1994.

Europe's direct payments, which totaled more than $200 million from 2000 to 2002, led to the establishment of a World Bank-monitored trust fund, which is now used by most international donors to disburse money to the fledgling Palestinian government in return for its willingness to meet certain standards of improved fiscal governance.

European Union members provided about $600 million in aid to the Palestinians last year. More than half came from the European Union's budget and the remainder from individual member states.

Israel is withholding about $50 million in monthly tax and customs receipts to the Palestinian Authority.

The Palestinian Authority has said that it needs at least $150 million a month to cover salaries and operations. Last month's salaries for 140,000 Palestinian Authority employees have not yet been paid.

Steven R. Weisman reported from Washington for this article, and Craig S. Smith from Paris.