Palestinian cash crisis opens a
window By Victor Kotsev
On Monday, news broke that Israel had
sought a bridge loan of US$1 billion from the
International Monetary Fund, on behalf of the
Palestinian Authority (PA), "to help prevent its
financial collapse". According to the Israeli
daily Ha'aretz, the IMF rejected the request,
"saying it did not want to set a precedent of a
state taking a loan on behalf of a non-state
entity".
Subsequent reports had the amount
corrected at $100 million, but while the
difference is noteworthy, it pales in comparison
with how significant the precedent is by itself.
This is a major development, observers
both among the Palestinians and the Israelis told
Asia Times Online, although its precise
significance is hard to gauge at this point. It
could be, for example, that the PA, which has
experienced a worsening
financial crisis for over
a year, is truly on the verge of financial
collapse; this possibility brings up alarming
scenarios involving chaos and violence.
Alternatively, it could be that the
Israeli request at the IMF is a
confidence-building measure of sorts, a step
designed to both create a sense of urgency and to
demonstrate that Israelis and Palestinians can
work together, including by sharing considerable
financial responsibilities. At a time when the
relationship between Israel and the PA is chilly
and the Palestinians are plagued by systemic
economic and financial deficiencies, this step
involves a sizeable financial liability for Israel
and demonstrates goodwill very clearly.
Among a long list of outstanding issues
between Jerusalem and Ramallah, the administration
of Palestinian President Mahmoud Abbas has time
and again refused to return to the negotiating
table without preconditions, while Israel has
continued to expand its settlements in the West
Bank at a steady pace. Last year, Abbas made an
abortive unilateral bid for recognition of
Palestine as a state at the United Nations,
drawing severe Israeli and American condemnation
and diplomatic flak. He is even rumored to be
preparing a similar bid this year. [1]
However, this most recent development is
clearly the result of a process that is
antithetical to unilateral action, and the amount
of intrigue on both sides in recent days suggests
that something important is in the works. It comes
in the wake of a brief but intense flare-up of
violence between Israel and Gaza militants a
couple of weeks ago, and also amid increasing
signs that the intra-Palestinian reconciliation
process (which Israel sees as a threat) is frozen.
On Monday, the militant movement Hamas, which has
ruled the Gaza Strip since a brief civil war with
Abbas's forces in 2007 (and refuses to accept
Israel's existence), suspended voter registration
there, postponing a key step in the planned
reconciliation. [2]
"From what I hear
around the area, once again the reconciliation
talks between Fatah and Hamas have re-entered the
freezer," Dr Gershon Baskin, the veteran
negotiator and scholar of the Israeli-Palestinian
conflict, wrote last month in the Jersualem Post.
"…The Palestinian unity talks probably fell apart
now because of US pressure on President Abbas to
give one last chance to negotiations with Israel."
[3]
Although many analysts believe that
negotiations between Israelis and Palestinians are
unlikely to progress very far at this stage, they
could boost the chances of US President Barack
Obama to get re-elected in November, and also
could temporarily take some steam off of the
Israeli-Iranian confrontation over the Iranian
nuclear program. Hence, Obama's team has been
working hard to restart the talks.
In
addition, the outcome of the Egyptian presidential
elections strengthened their common enemy Hamas
(an offshoot of the Egyptian Muslim Brotherhood),
and this arguably pushed Israel and the PA closer
together.
Hamas's regional standing, in
fact, has improved greatly in recent times, and
this justifiably worries both the Israeli prime
minister and the Palestinian president. Rumor has
it that Jordan, where Hamas's leader Khaled Meshal
received a warm welcome last week, might be the
militant organization's next base. [4]
Some of Abbas's recent actions and
statements suggest that he is ready for a
compromise. Over the last weeks, his forces
launched a massive crackdown on crime, corruption
and ideological dissent in the West Bank,
confiscating over 100 weapons and eliciting lavish
praise from Israel. [5]
Furthermore, last
month the Palestinian president reportedly told
France's president Francois Hollande that he would
meet Israeli Prime Minister Benjamin Netanyahu in
exchange for concessions such as the release of
Palestinian prisoners and Israel's permission of
an arms transfer to the Palestinian security
forces. Although the Palestinians subsequently
clarified that such a meeting would not constitute
a resumption of the peace negotiations, the offer
nevertheless set a precedent for a compromise in
the future.
The internal political
maneuvering, both among Israelis and Palestinians,
has gone into overdrive in the last days, and this
may be an additional sign that an important
diplomatic development is in the works. The
chairman of the largest party in the Israeli unity
government (and former leader of the opposition),
Shaul Mofaz, threatened to break up the coalition
on Tuesday, days after a high-level meeting
between him and Abbas in Ramallah was cancelled.
Ostensibly, Mofaz's quarrel with Netanyahu was
over a domestic issue, and his meeting with Abbas
was cancelled over internal Palestinian opposition
to it, but persistent rumors link the two
intrigues. [6]
Mofaz has long advocated
negotiations between Israelis and Palestinians,
even presenting his own peace plan three years ago
(at a time when Netanyahu was reluctant to even
utter the phrase "two states for two peoples"). He
claims that the peace process is one of his top
priorities, and while his attempts to shuttle
between Abbas and the Israeli prime minister can
be interpreted as jostling for limelight in
domestic politics, it is conceivable that he is
serious on his mission. Even the distraction his
spats with both sides provide could be a cover for
a deeper and less public negotiations process.
On the Palestinian side, it is important
to note that the joint application to the IMF was
brokered by Palestinian Prime Minister Salam
Fayyad, a technocrat who is nevertheless seen as a
potential political opponent of Abbas down the
road. Fayyad reportedly used his longstanding
personal connections to the governor of the Bank
of Israel, Stanley Fischer, to seal the agreement.
According to some reports, Mofaz's meeting
with Abbas was scuttled by Palestinian officials
who were unhappy to have been left out of the
loop.
There is, moreover, another major
reason why the failed cooperation attempt with the
IMF might bode well for the Israeli-Palestinian
peace process. The diplomatic impasse is a major
contributing factor to the very real financial
crisis in the West Bank (basic services are now at
risk, as Palestinian banks refuse to extend
further lines of credit to the government).
Israel, furthermore, is rightly worried that a
financial collapse of the PA would lead to chaos
and violence.
The Palestinian economy
suffers from diverse problems that deserve a
longer discussion - the reader is advised to
consult a separate article by Gershon Baskin
titled "Encountering Peace: The economics of
Palestine", which is by no means exhaustive [7] -
but most of these are ultimately linked to the
realities of the occupation. Even the issue of
Gulf donors not meeting their pledges (which
reportedly caused many of the gaps in the budget
of the PA over the last year) can arguably be
remedied by a successful restart of the peace
negotiations.
As a prominent Palestinian
businessman and intellectual told the Asia Times
Online, the Palestinian Authority has been in a
permanent state of financial crisis since its
inception, and if the foreign donors wanted it to
survive, it would. The Gulf countries, to many
Palestinians, are just a proxy for US foreign
policy.
Consequently, while the atmosphere
is hardly ripe for a final status agreement
between Israelis and Palestinians, a resumption of
the peace negotiations could well follow a bold
move such as their joint application to the IMF.
The greatest danger is that this peace process
would be hijacked and turned into political
theater subordinate to other agendas (such as
related to the American election or the crisis
over the Iranian nuclear program). This has
happened in the past, just as moments of
opportunity have collapsed into prolonged episodes
of violence and destruction.
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