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Palestinian Authority financial crisis deepens as Trump’s ‘deal of the century’ looms

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The Palestinian Authority is in crisis, and its worst financial emergency in years is making headlines across the globe.

Largely sustained by donor funding, the Palestinian government has suffered major blows over the past year after the US, its biggest donor, gutted all of its aid projects and slashed funding for UNRWA and other agencies.

In February the PA was dealt with another potentially fatal blow. Israel refused to release the full amount of VAT tax — totally $190 million –it collects for the PA on imports bound for the occupied territory.

The Israelis had decided to enforce a $10 million per month deduction, meant to represent the amount paid by the PA in the form of pensions to the families of political prisoners and Palestinians killed by Israel. It’s a recurring issue that has been a thorn in the side of the PA for years.

But despite its dire need for the tax revenues, which make up more than 60% of the PA’s budget, the PA has refused to accept the “incomplete” revenues.

Its reasons were twofold: first, it was a symbolic gesture. The issue of prisoners and “martyrs” is one of the most sensitive in Palestinian society.

Thousands of Palestinians have been imprisoned by Israel, or have relatives who have been. Similarly, thousands have relatives who have been killed by Israel over the years. As a result, countless families rely on their pension from the PA to survive.

“Abbas is in a very difficult place. This tax issue is having a huge financial strain on PA,” Palestine Policy Fellow at Al-Shabaka, Dr. Yara Hawari, told Mondoweiss.

“But it’s very difficult for Abbas to back down on this, because prisoners are such an important part of public opinion in Palestine. It will be really difficult for him now to turn around and accept the deal,” Hawari added.

On the other hand, PA officials have expressed fears that if they capitulate to the Israel’s demands, it will pave the way for the Israeli government to use “financial blackmail” whenever they want something out of the PA in the future.

Haaretz reported that in one private meeting between Abbas and his officials, the President expressed concerns that if he were accept the post-deduction tax transfers “then Israel will exploit every opportunity to make more unilateral deductions. That’s why there will be no such situation and Israel will have to reverse its decision and return the money in full.”

And while Abbas’ government has employed a series of austerity measures over the past few months and managed to secure emergency funding from the Arab League, analysts like Hawari say those are only short-term solutions.

Widespread salary cuts to public servants, coupled with already high rates of poverty and unemployment, few prospects of free and democratic presidential elections, and the unveiling of the widely unpopular American “deal of the century” around the corner, will only exacerbate the already dire situation of Abbas and the PA.

“The collapse of the PA is definitely something we could see happening, especially if this financial and political situation worsens,” Hawari said.

‘Israel needs the PA’

In the midst of the crisis, top Israeli government officials have held several meetings to discuss plans of action in the case of escalation.

Israeli media has reported several instances of meetings between Prime Minister Benjamin Netanyahu and his Finance Minister Moshe Kalon to discuss what would happen if the situation spiraled into a full blown collapse of the PA’s financial systems.

A crippled Palestinian economy, analysts say, could lead to widespread protests in the occupied West Bank, which would mean a destabilized security situation for Israel.

While Dr. Hawari told Mondoweiss that she doesn’t foresee and major civil protests happening in the West Bank, Netanyahu is still sitting in a tough position, almost equal to that of Abbas.

“At this point, Netanyahu can’t back down from this,” she said, “he has election promises that he has to keep. All eyes are on him to be a strongman as he forms his new government.”

But at the same time, Hawari says its in Netanyahu’s best interest to maintain a stable Palestinian security force, who are of course funded by the PA and the tax revenues it receives.

“Israel relies very much on the Palestinian security mechanism and coordination with the PA.”

Human rights advocate and Palestine political analyst Dawoud Yousef expressed similar sentiments to Mondoweiss, saying that Israel “will never let the PA collapse.”

“I think it would take a really extreme turn of events for them to allow that,” he said.

The establishment of the PA in the 1990’s, Yousef said, gave the Israeli a way to “outsource the occupation.”

“Prior to the PA, Israel was expected to at least have a hand in providing basic services to the occupied population as is stipulated under international,” he noted.

“But with the PA, and especially Abbas’ PA, they were able to almost wash their hands of providing services to the bulk of the Palestinian population,” Yousef continued.

With the survival of the PA in “the interest of all of the powers that be”, Hawari anticipates that if the Abbas’ government doesn’t soon succumb to increasing political pressure from Israel, surrounding Arab countries, and the US, a “huge bailout” could be on the horizon.

“These leaders will be too concerned about a potential power struggle that could ensue if the PA were to collapse,” Hawari said. “So I think there will have to be a bailout if that scenario is to be avoided.”

What would happen if the PA collapses?

While both Hawari and Yousef agree that it is extremely unlikely that Israel and regional powers would allow the situation to escalate to the point of the PA imploding, Mondoweiss posed the question to both analysts: what if if the situation worsens beyond repair?

“When we talk about the dissolution of PA, we can talk about an idealistic, controlled scenario where Palestinians themselves are the ones deciding to dissolve the PA, to consolidate the PLO, and thinking of a better national strategy,” Hawari said.

But that scenario, she said, is highly unlikely.

“While I’m confident that Israel would never let it get that far, a collapse of the PA, along with the Kushner plan, could very much result in annexation in parts of Area C of the West Bank,” Yousef told Mondoweiss.

The idea of annexation was brought to the forefront during the most recent Israeli election cycle, with Netanyahu making promises of “extending Israeli sovereignty to Judea and Samaria.”

Though top Israeli security officials have repeatedly warned against annexation, Hawari believes that now, more than ever, Netanyahu is “beholden” to his increasingly right-wing base.

“Trump has essentially already given Netanyahu the greenlight on annexation,” Hawari told Mondoweiss.

When asked what potential annexation could look like, both Yousef and Hawari noted that it’s not going to happen at once.

“It’s not going to be dramatic, it’s going to happen in a gradual way, with a series of small measures over time that culminate in annexation,” Hawari said.

American pressure continues

The most likely scenario to come out of the current crisis, Hawari and Yousef say, is an increasing pressure on the PA to, essentially, do what they are told — as evidenced by the American foreign policy in the region over the past year, the EU’s attempts to convince PA leaders to accept some form of partial tax revenues, and most recently, the US-led “economic workshop” to be held in Bahrain next month.

“The Americans are trying back the Palestinians into a corner,” Yousef told Mondoweiss. “These two things overlap: the PA doing what the Americans want and doing what the Israelis want.”

By dangling large-scale financial investments and the prospect of economic prosperity in the face of the Palestinians through the Bahrain conference, the Americans are using the PA’s financial crisis to pressure them into accepting Kushner’s peace plan.

With regional superpowers Saudi Arabia and the UAE already on board with the June conference, the pressure will continue to mount on the PA, who have pledged to boycott any American-led negotiations, which they say are “dead on arrival.”

“The deal of the century is going to be telling if and when it’s released,” Hawari told Mondoweiss.

“The Palestinian political leadership is going to have to make some really tough decisions, and it’s only going to get harder to continue to maintain its legitimacy under the current circumstances.”

While Hawari doesn’t anticipate any US peace proposal to include much in terms of justice for the Palestinians, she expressed hope that the unveiling of Kushner’s plan would force European powers to get off the sidelines and play a more direct role in presenting fair and just solutions to the conflict.

“At this point in the game, the EU shouldn’t be given a free pass in their role in all of this,” she told Mondoweiss. “I don’t think the ‘sit and wait to see what happens’ policy is a smart one.”

“Now is the time to forget about Oslo, and prioritize Palestinian rights over trying to develop a peace framework.”

Correction: A previous version of this article referred to Dr. Yara Hawari incorrectly as Dr. Yara Harawi.

Yumna Patel

Yumna Patel is the Palestine correspondent for Mondoweiss.

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30 Responses

  1. Citizen on May 23, 2019, 3:25 pm

    What is the issue ever other than who pays for the PA to act as Israel’s security force and also for the care of Palesitinans under Israeli occupation? Why should Israel do anything since it gets all the benefits and pays none of the costs of these things?

  2. brent on May 23, 2019, 11:44 pm

    An initiative by Abbas, a counteroffer, could be a way forward from the conundrum of tax monies. Reframe the issue so to speak. A possible declaration stating acts of violence outside the framework of the government would henceforth not find compensation. Such an initiative could also be a trial run for responding to Trump’s initiative and would reverberate positively in Europe, America and Israel.

    • Nathan on May 24, 2019, 3:27 pm

      brent – An initiative by Abbas? A counteroffer? There is no such thing in the Palestinian political thinking. If the Palestinian side makes a counteroffer, they run the risk that their counteroffer might be accepted. In such a case, the Palestinian side will have obligated itself. The Palestinians will always answer “no” to any proposal, and they will never offer a counteroffer. In their thinking, the proposal of the other side is never good enough, but it is a commitment (of the other side). Eventually, the other side makes a further proposal, and again the answer will be “no” (and the new commitment of the other side has been noted).

      Changing the subject (but it’s really the same line of thought), the Palestinians expect Israel to recognize a Palestinian state in the West Bank with Jerusalem as its capital, but they have no intention of declaring that this would be the end of conflict. In their political thinking, Israel is committed to allow for Palestinian statehood with Jerusalem as its capital, but they haven’t committed to anything.

      • eljay on May 24, 2019, 4:19 pm

        || Nathan: … In [the Palestinians’] thinking, the proposal of the other side is never good enough …

        … the Palestinians expect Israel to recognize a Palestinian state in the West Bank with Jerusalem as its capital, but they have no intention of declaring that this would be the end of conflict. In their political thinking, Israel is committed to allow for Palestinian statehood with Jerusalem as its capital, but they haven’t committed to anything. ||

        If the Palestinians were to commit to…
        – two sovereign, secular and democratic states of and for their respective citizens, immigrants, expats and refugees, equally;
        – dividing Jerusalem equitably between the two states; and
        – limited RoR and full reparations,
        …would that be the end of conflict for Israel?

        Or does Israel have any intention of declaring anything “good enough” that doesn’t guarantee Jewish supremacism in/and a religion-supremacist “Jewish State” in as much as possible of (geographic) Palestine?

      • Mooser on May 24, 2019, 4:20 pm

        “Nathan” shows “brent” why the main thing standing in the way of those ‘good reverberations’ is, what do you know, Zionism.

      • bcg on May 24, 2019, 5:12 pm

        @Nathan: Well, Israel can test your theory simply by making an offer: a Palestinian state roughly along the 67 lines, including Gaza, with parts of Jerusalem as its capital. Then when the Palestinians rejected it (according to your theory) the whole world would see – a clear P.R. victory for Israel. No?

      • mondonut on May 24, 2019, 7:47 pm

        bcg Well, Israel can test your theory simply by making an offer :

        Israel has been there, done that.

        https://www.jns.org/erekat-olmert-offered-abbas-more-than-the-entire-west-bank/

      • eljay on May 24, 2019, 9:45 pm

        || mondonut: bcg Well, Israel can test your theory simply by making an offer :

        Israel has been there, done that.

        https://www.jns.org/erekat-olmert-offered-abbas-more-than-the-entire-west-bank/ ||

        Yup, and it did it in typical Zionist fashion:
        https://www.haaretz.com/1.5206111

        … In an interview with Arabic Radio As-Shams, Erekat stated that the Palestinians had never rejected Olmerts offer outright, but rather submitted queries alongside their own offer to the Bush administration.

        We submitted our proposal while Olmert became embroiled in scandals, and while elections were taking place in the United States, Erekat said …

        Erekat said he traveled to Washington D.C. a few months after Obama entered office in order to continue negotiations with the proposals submitted by Olmert and the Palestinians as starting points, but that Netanyahu threw out the proposals upon assuming premiership of Israel. …

      • mondonut on May 24, 2019, 11:04 pm

        @eljay , Yup, and it did it in typical Zionist fashion:

        In typical Zionist fashion, the offer was made. And in typical Palestinian fashion they failed to say yes. And that is the only takeaway, the best offer the Palestinians had, or will ever have, was on the table and all the had to do was say yes. And they failed to.

        https://www.timesofisrael.com/abbas-admits-he-rejected-2008-peace-offer-from-olmert/

      • MHughes976 on May 25, 2019, 6:03 am

        If someone says ‘I offered what was fair in the past but it was considered inadequate’ that is no reason not to keep on making the fair offer and explaining why it was, despite objections, fair. It’s not a sign of good faith if I withdraw an offer simply because it has not been accepted.

      • eljay on May 25, 2019, 9:17 am

        || mondonut: … In typical Zionist fashion, the offer was made. And in typical Palestinian fashion they failed to say yes. … ||

        Sounds like a verbal offer was made with no written commitment to back it up. Very Zionist.

        The Palestinians were right not to accept it unconditionally. Which is why, as Erekat pointed out, they made counter-proposals and were prepared to continue negotiations.

        But “Netanyahu threw out the proposals”. Very Zionist.

      • mondonut on May 25, 2019, 11:32 am

        @eljay The Palestinians were right not to accept it unconditionally.

        No, they were not. They had the best offer they ever had, or ever will have, and they failed to say yes. Written offer or not, a copy of the map or not. If they really wanted a state, they could have had one, all the had to do was say yes.

      • eljay on May 25, 2019, 1:26 pm

        || mon donut: @eljay The Palestinians were right not to accept it unconditionally.

        No, they were not. … ||

        Yes, they were, especially given the Zionist penchant for moving goal-posts.

      • Jon66 on May 25, 2019, 2:20 pm

        Hughes,
        “It’s not a sign of good faith if I withdraw an offer simply because it has not been accepted.”
        I think that withdrawing an offer that has been rejected is fairly standard. If you offer to buy a house, a car, or do a job for someone and they say no, you are under no obligation to convince them. The person making the offer must make decisions based upon and the rejection and sometimes the offer is gone.

      • echinococcus on May 25, 2019, 4:58 pm

        The Zionist nut again. Who else…

        “They [presumably meaning some Palestinian individuals] had the best offer they ever had…”

        Well, that’s really big news, then. Do you have any proof that there was any kind of “offer”? Like a signed official document?
        Of course not. So why should anyone believe a [….] Zionist, again? Affabulating with not as much as a piece of signed paper…

      • wondering jew on May 25, 2019, 5:53 pm

        there is little question in my mind that if kadima had won elections in 2009, 2013, 2015 and 2019 that the PLO and Israel would have concluded a treaty. Offers made by Olmert when he was about to leave office are real offers, but the expectation of accept it or reject it is unrealistic. that’s not how negotiations have ever taken place anywhere at any time. negotiations take time and back and forth. and olmert’s hurry was not “normal”. and in fact the idea of grabbing an offer that will be rejected by israeli voters in a matter of months is not realistic. abbas would have been left hanging out to dry. olmert and kadima did not have the juice to push a peace treaty through against a public that would have rejected it.

        the PLO would be making historic concessions regarding refugees if nothing else and such a decision would cost them dearly in the hearts of almost all Palestinians, so such an agreement cannot be done without time and a wide berth. this element of time did not exist because olmert’s concessions were not something that the majority of israelis would have accepted. most would oppose it. the hard core opposers would be quite vocal, so olmert or livni would have been making concessions that were opposed by the israeli public.

        a one sided blame on abbas is misplaced and the context of israeli elections must be considered. at this point we are quite far from the olmert offer and it really is off the table and that’s how history has moved on. and the implication is that the two state solution will not occur and the only other solution seems to be one state. which will not happen soon. but that is the implication.

      • mondonut on May 25, 2019, 6:56 pm

        @echinococcus Do you have any proof that there was any kind of “offer”?

        Olmert says there was an offer.
        Abbas says there was an offer.
        Saeb Erekat says there was an offer.
        The Palestine Papers referenced the offer.
        The Jerusalem Post has published the offer.
        The Guardian has published the offer.
        Al Jazeera has published the offer.

      • echinococcus on May 25, 2019, 10:31 pm

        The Zionut insists on confirming that there is no proof to document the lie of
        any kind of “offer”. Like a signed official document.
        Of course not. So why should anyone believe a [….] Zionist, yet again?

        A list of goddam Zionists and their traitorous lackeys “say” … yarright. It’s their job to lie.
        Affabulating with not as much as a piece of signed paper…

      • oldgeezer on May 26, 2019, 12:12 am

        @mondonut

        Shorter mondonut: No.

        No proof as there were no offers.

        Don’t ask me dig up proof. I doubt your honesty intellectually or otherwise and can’t be bothered to appease racist scum like zionists.

        At the start of ever round of (risible) talks…..

        The Palestinians are expected to hold to all agreements and offers made.

        The Israeli government argues that it has never made an offer so all things are on the table to the benefit of them.

        Spare me the crap propaganda. I’ll settle for some good stuff but the zionist crap smells too much.

      • mondonut on May 26, 2019, 9:50 am

        echinococcus, A list of goddam Zionists…

        Abbas, Erekat and Al Jazeera are Zionist?
        Are you one of those Flat Earth geniuses?

      • echinococcus on May 26, 2019, 11:17 am

        The Nut is a regular Zionist, all right.

        Can’t even quote a six-word phrase. Three is the maximum the brain can manage, eh?

        The phrase is, again:
        “goddam Zionists and their traitorous lackeys”

      • MHughes976 on May 26, 2019, 12:28 pm

        There’s truth in what you say, Jon. Perhaps I was asking the word ‘simply’ to do too much work, since I agree that rejection of offer + something else can justify withdrawal of an offer made. You might think that the thing you had wanted had deteriorated or that it was no longer so important to you or that it was not important to demonstrate for all to see that you were being fair and not trying to gain an unjust advantage. But I’d put it to you that whatever the value of ‘peace’ was to Israel In years past it hasn’t really changed and that ex hypothesi – your hypothesis – Israel still wants it just as much. The public demonstration of objective good faith still matters. So I think that the claims about missed opportunities in the past don’t amount to much unless a clear and present statement of what a fair and final dispensation would be like is there for the world to hear.

    • Jon66 on May 26, 2019, 3:32 pm

      Hughes,
      Thoughtful as always.
      I agree that it would be nice to see further negotiations and a peaceful resolution. But it’s like a divorced couple. Small issues that people who trust each other can work out become impossible when the historical baggage is too dense. Neither side is willing to take a risk. When I negotiate something the first two questions are, 1) are you the person empowered to make the final decision and 2) are you prepared to make that decision today if we reach an acceptable decision. I don’t know if either side has that power at this time.
      If negotiations resume you may see an Israeli proposal, but until Abbas is willing to sit at the table again I don’t see why Israel will negotiate against herself.

    • annie on May 26, 2019, 4:21 pm

      An initiative by Abbas? A counteroffer? There is no such thing in the Palestinian political thinking. If the Palestinian side makes a counteroffer, they run the risk that their counteroffer might be accepted. In such a case, the Palestinian side will have obligated itself. The Palestinians will always answer “no” to any proposal, and they will never offer a counteroffer.

      nathan has described Israel’s position to a T as demonstrated by the release of the Palestine Papers in January 2011, transcripts of 10 years of negotiation. but disingenuous as he is, he’s attributing Israel’s position to Palestine.

      Later that same year, the quartet requested both sides to put in proposals, Palestine did, promptly, Israel refused. https://mondoweiss.net/2011/12/europe-asks-wheres-israels-proposal/

      those are just 2 examples refuting nathan’s deceptive historical revisionism.

      • oldgeezer on May 26, 2019, 8:33 pm

        A very clear cut case of the usual zionist projection. The only question I have is whether they are that corrupted that they realize what they are doing and consider it moral for their (note their) greater good or whether they’ve been so indoctrinated and subject to military censorship that they are that clueless as to the actual historical events.

        In the final analysis it really doesn’t matter as to the question of who holds the moral highground and has legitimate grievances. The answer to that is the Palestinians of course.

      • annie on May 27, 2019, 10:38 pm

        whether they are that corrupted that they realize what they are doing….or whether they’ve been so indoctrinated..

        not for a second do i believe nathan is so indoctrinated that he’s clueless as to actual historical events. but even if he was, it’s no excuse.

  3. Mooser on May 25, 2019, 1:49 pm

    . “They had the best offer they ever had, or ever will have”

    You bet, “mondonut”. The increasing commitment of Jews to Zionism, religious unity under the Modern Orthodox, strict endogamy and burgeoning population will only make us more powerful in the future.

  4. Ossinev on May 26, 2019, 7:50 am

    @mondonut
    “If they really wanted a state, they could have had one, all the had to do was say yes”

    Ah there you are Mondonut jumping straight across to another thread to avoid addressing a very embarassing contradiction.

    Still waiting for your response to the Likud Party Charter declaration that there will never be a Palestinian State and how that impacts on the Palestinians efforts to “achieve” a state.

    Come on at least give it a shot. And remember no Trumpish tantrums.

    • mondonut on May 26, 2019, 9:59 am

      @Ossinev , Ah there you are Mondonut jumping straight across to another thread

      I do not know what thread you think I was jumping, BCG proposed making the offer and his question was answered. As for Likud, Olmert was not Likud, so it is hardly relevant. And if it were, Likud is subject to elections, if the Israeli electorate sees a genuine opportunity for peace they can bring in the party to make it happen.

      The Hamas charter on the other hand is all about eliminating Israel, and they are not subject to elections.

  5. Ossinev on May 26, 2019, 12:40 pm

    @mondonut.

    Well at least you gave it a shot – somewhat negated by the tiresome “whataboutery” at the end of you comment.

    I know that Olmert was Kadima not Likud.He was “done” for corruption. The Yahoo is doing everything in his power to avoid being done for corruption including licking up to right wing Pseudo Nazi Israeli parties and real live foreign Nazi politicians.

    Olmert did make an offer which outlined the basis of two states. This basically in a non Zionist world would have involved presenting maps and showing details. He never did – I wonder why. And Abbas quite logically and responsibly rejected his “offer”.

    What current Israeli parties/leading politicians have are currently arguing for a ” two state “solution?
    https://www.brookings.edu/blog/order-from-chaos/2019/04/10/did-israelis-just-vote-to-end-the-two-state-solution/

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