Within days of Palestinians announcing they would join the International Criminal Court (ICC), Israeli Prime Minister Benjamin Netanyahu announced his country would stop transferring customs revenue to the Palestinian Authority. The punitive move was expected to lead to a crisis for the Palestinian leadership as government services would collapse across the West Bank without the funds. But the Palestinian Authority had an unexpected back-up plan. The Arab League has agreed to provide emergency funds to cover the VAT-taxes frozen by Israel. This Arab League safety net will help the Palestinians avoid the expected temporary bankruptcy and allow them to move forward with pressing for war crimes at the ICC. In fact, financial support from the Arab League was a key component, along with joining the ICC, of long-term strategy to pressure Israel into negotiations.
Negotiating a safety net
Joining the ICC was regarded as the Palestinians’s “nuclear option,” a last-ditch measure to pressure Israel to end the occupation of the West Bank, Gaza and East Jerusalem and recognize the establishment of a Palestinian state. Secretary General of the United Nations Ban Ki-Moon said this week the Palestinian application to join the ICC would be ratified on April 1, 2015. From that time on, the Palestinians would be eligible to pursue legal action against Israel.
Yet in the meantime the Palestinian Authority is pressed with the loss of VAT tax revenues. VAT taxes are earned by the Palestinian Authority and collected by Israel. Timely transfers of the VAT-taxes are essential to keeping economic and social stability in the West Bank. They constitute 70-percent of the Palestinian Authority’s revenue and finance the bulk of salaries and public services in the West Bank such as hospitals and schools. The funds for December 2014 were scheduled to arrive during the first week of January. Palestinian leaders say Israel has sent no direct communication to their government regarding the suspension of VAT taxes.
However, in mid-September when terms for a ceasefire and reconstruction in Gaza were being brokered following the summer war with Israel, the Palestinian Authority held talks with the Arab League to secure a financial commitment with the expectation Israel would withhold transferring revenue as a punitive measure in the near future.
In a December meeting with the Arab League, the Palestinians received a commitment of direct support of $100 million a month for each month Israel withheld transferring VAT taxes. All 22 foreign minsters of member countries to the Arab League attended the December meeting. It was held in Cairo three weeks before Jordan submitted a United Nations Security Council Resolution to end Israel’s occupation and days before Palestinian leaders discussed their United Nations plans with Secretary of State John Kerry in London.
“There is an agreement with the Arab countries that they will have a safety net, funds that will be available to us. Funds of around $100 million a month that will help with the Israelis and any other countries that could threaten to withhold funds,” explains Palestinian Liberation Organization’s Negotiations Affairs Department spokesperson Ashraf Khatib.
Prior to the December 2014 commitment from the Arab League, Khatib also said Arab leaders pledged support to the Palestinian Authority during the Arab Summit in Kuwait in March of that same year.
In the past the Arab League has stepped in to provide emergency funds for the Palestinian government when VAT taxes were frozen by Israel. However those funds were solicited after Israel had already stopped the monetary transfers following the 2012 United Nations bid for non-member observer status. For four months Israel refused to turn over around $150 million per month. Instability sprung up across the occupied Palestinian territory as the West Bank’s largest demonstrations in nearly a decade took hold against rising prices. Drivers unions organized strikes and all public employees stopped receiving their paychecks until Israel ended the tax embargo in March 2013.
At that time the funds from the Arab League did not arrive regularly, and Saudi Arabia was the only country in to fulfill their total financial commitment. Even Israel quietly disbursed frozen tax funds to the Palestinian government, in December 2012 and January 2013, to advert crisis. Still that year the Arab League offered $430 million in donations to the Palestinian government, amounting to $200 million more than they gave the Palestinian Authority the next year in 2014, according to State Department data compiled by the Congressional Research Service.
“We know that the Israelis will use every dirty trick in the book”
After the 2012 statehood bid Palestinians hoped for a more formalized process for the Arab League to offer temporary financial responsibility in the wake of another tax freeze. Those financial arrangements finally crystallized at the close of the summer war in Gaza. “The events pushed for that, also going to the Security Council pushed for that,” noted Khatib who said the Palestinian government does expect more actions to be taken by Israel in the coming weeks.
“We know that the Israelis will use every dirty trick in the book. They can put Palestinian leaders in Israeli prisons they way they have done with Palestinian ministers. They can humiliate Palestinians at Israeli checkpoints, like they did with the Palestinian prime minister,” said Khatib, relating an incident where Prime Minister Rami Hamdallah was detained at an Israeli crossing.
Yet other relations between Israeli and Palestinian officials have progressed normally over the past week. There has been no change to the status of security coordination, or suspension of permits into Jerusalem from the West Bank. “Things are still on-going, things are not disconnected,” said Khatib.
Still Israel has alluded to countering a Palestinian lawsuit in the ICC with war crimes charges of their own. “The ones who should be afraid of legal proceedings are the leaders of the PA [Palestinian Authority] who, in the framework of the unity government with Hamas, are collaborating with a professed terrorist organization,” said the Israeli Ministry of Foreign Affairs in a statement on Sunday. “Hamas, like the Islamic State, commits war crimes such as shooting at civilians from within population centers,” the release continued.
The future of U.S. aid to the Palestinian Authority
Meanwhile in Washington Congress is discussing following Israel’s lead, and is debating suspending bilateral support to the Palestinian Authority. Like Israel they also temporarily froze support to the Palestinians after the 2012 UN statehood bid. In 2013 with the aid freeze, the U.S. ended the year giving the Palestinian Authority $437 million, meaning the aid was delayed but not cut out from the budget, according to the Congressional Research Service.
If Congress decides to follow Netanyahu in cutting aid, the Palestinian Authority would stand to lose $8 million in January in direct funds from the U.S. (one twelfth of 2015’s anticipated budget), and $127 million from Israel, or a combined $135 million. However, if the Arab League comes through on their promise, the Palestinian authority will only suffer a net loss of a $35 million. Of course any changes to the Palestinian Authority’s cash flow will have consequences for the government, but this loss will not be enough to shut it down or defer its strategy at the ICC. Even more, the Palestinian Liberation Organization, the international representatives of the Palestinians, are not funded by the VAT-taxes and will continue as normal despite the revenue loss.
“We strongly oppose actions taken by both parties,” said State Department Spokesperson Jen Psaki on Monday in regard to the Palestinian bid to join the ICC and Israel’s freezing of VAT-taxes. “Hard as it is, all sides need to find a way to work constructively and cooperatively together to lower tensions, reject violence, and find a path forward. This action is entirely counterproductive and does nothing to further the aspirations of the Palestinian people for a sovereign and independent state,” she said.
Parallel long-term strategies
Khatib says the Palestinian plan to make up for the anticipated loss of VAT-tax revenue and the move at the ICC are both parallel long-term strategies. He explains the Palestinian leadership has spent the past two years in preparation of filing charges against Israel in the ICC and that teams of international law experts have been hired to assemble portfolios for two possible cases against Israel. Khatib said no decision has yet been made on which case will be presented to the court, but the possibilities include potential war crimes committed in Gaza in 2014 and violations to the Fourth Geneva Convention in the West Bank. The dossiers cite evidence reported by the United Nations, from their investigations into crimes against humanity in Gaza and the 2004 International Court of Justice ruling on Israel’s separation wall, said Khatib.
Palestinian leaders have yet to release a timetable of when they will seek charges against Israel, but the general strategy is that submitting a complaint with the ICC will compel the international community to create new parameters for negotiations rooted in the framework of international law. The goal of these negotiations from the Palestinian perspective remains the creation of a Palestinian state based on pre-June 1967 lines with East Jerusalem as its capital, an end to the Israeli occupation, and the right of return for Palestinian refugees based on return and compensation.
“Basically what we have been calling for is what the international community has been calling for over the past 25 years. We did not reinvent the wheel,” said Khatib, relating the Palestinian leadership sees joining the ICC as “the most important way for us to go forward” in pursuit of two principles: “protection for Palestinian people and a mechanism with international participation to end the conflict.”