U.S. Foreign Aid to the Palestinians

U.S. Foreign Aid to the Palestinians Jim Zanotti Specialist in Middle Eastern Affairs October 7November 9, 2011 Congressional Research Service 7-5700 www.crs.gov RS22967 CRS Report for Congress Prepared for Members and Committees of Congress U.S. Foreign Aid to the Palestinians Summary Since the establishment of limited Palestinian self-rule in the West Bank and Gaza Strip in the mid-1990s, the U.S. government has committed over $4 billion in bilateral assistance to the Palestinians, who are among the world’s largest per capita recipients of international foreign aid. Successive Administrations have requested aid for the Palestinians to support at least three major U.S. policy priorities of interest to Congress: • Combating, neutralizing, and preventing terrorism against Israel from the Islamist group Hamas and other militant organizations. • Creating a virtuous cycle of stability and prosperity in the West Bank that inclines Palestinians—including those in the Hamas-controlled Gaza Strip— toward peaceful coexistence with Israel and prepares them for self-governance. • Meeting humanitarian needs and preventing further destabilization, particularly in the Gaza Strip. Since June 2007, these U.S. policy priorities have crystallized around the factional and geographical split between the Fatah-led Palestinian Authority (PA) in the West Bank and Hamas in the Gaza Strip. Some U.S. lawmakers have taken action since August 2011 to delay the obligation of certain types of some already-appropriated FY2011 U.S. aid to the Palestinians, largely due to Palestinian efforts to seek greater international support of Palestinian statehood outside of negotiations with Israel. Palestine Liberation Organization (PLO) Chairman and Palestinian Authority (PA) President President Mahmoud Abbas submitted an application for Palestinian state membership in the United Nations on September 23, 2011, and the Security Council is expected to vote on the matter in the fall of 2011. Additionally, a May 2011 agreement between Fatah and Hamas has raised concerns among some Members of Congress about continuing U.S. budgetary and security assistance to a PA government that could be subject to the approval of a U.S.-designated Foreign Terrorist Organization (Hamas) that claims to reserve the right to violently oppose Israel’s existence. Prospects for implementation of the agreement remain unclear. From FY2008 to the present, annual U.S. bilateral assistance to the West Bank and Gaza Strip has averaged over $600 million, including annual averages of over $200 million in direct budgetary assistance and over $100 million in non-lethal security assistance for the PA in the West Bank. Additionally, the United States is the largest single-state donor to the U.N. Relief and Works Agency for Palestine Refugees in the Near East (UNRWA). However, whether UNRWA’s role is beneficial remains a polarizing question, particularly with respect to its presence in Hamascontrolled Gaza. Because of congressional concerns that, among other things, funds might be diverted to Palestinian terrorist groups, U.S. aid is subject to a host of vetting and oversight requirements and legislative restrictions. U.S. assistance to the Palestinians is given alongside assistance from other international donors, and U.S. policymakers routinely call for greater or more timely assistance from Arab governments in line with their pledges. Even if the immediate objectives of U.S. assistance programs for the Palestinians are met, lack of progress toward a politically legitimate and peaceful two-state solution could undermine the utility of U.S. aid in helping the Palestinians become more cohesive, stable, and self-reliant over the long term. Congressional Research Service U.S. Foreign Aid to the Palestinians Contents Introduction: Issues for Congress .................................................................................................... 1 Palestinian U.N. Initiatives and Possible Fatah-Hamas Consensus—Effects on FY2011 and FY2012 Aid.............................................................................................................. 2 Congressional Holds on FY2011 Aid ........................................................................................ 3 FY2012 Aid and Request........................................................................................................... 4 Recent Historical Background ......................................................................................................... 6 Major Conditions, Limitations, and Restrictions on Aid ................................................................. 7 Types of U.S. Bilateral Aid to the Palestinians................................................................................ 9 Economic Support Fund Project Assistance.............................................................................. 9 Types of Funding Programs ................................................................................................ 9 Vetting Requirements and Procedures............................................................................... 10 Direct Assistance to the Palestinian Authority......................................................................... 11 U.S. Security Assistance to the Palestinian Authority ............................................................. 12 U.S. Contributions to UNRWA...................................................................................................... 14 Overview ................................................................................................................................. 14 Issues for Congress.................................................................................................................. 16 Vetting of UNRWA Contributions..................................................................................... 16 Legislation......................................................................................................................... 18 Issues for Congress in Determining Future Aid............................................................................. 19 Hamas and a “Unity Government”? ........................................................................................ 19 Questions Regarding a Two-State Solution ............................................................................. 20 The Gaza Situation .................................................................................................................. 21 Strengthening the PA in the West Bank ................................................................................... 22 Economic Development and International Donor Assistance ................................................. 22 Conclusion ..................................................................................................................................... 25 Figures Figure 1. West Bank and Gaza Strip Gross Domestic Product (GDP) Per Capita: 19992009 ............................................................................................................................................ 24 Tables Table 1. Proposed Spending Plan for FY2012 Bilateral Assistance ................................................ 5 Table 2. U.S. Bilateral Assistance to the Palestinians, FY2005-FY2012 ........................................ 9 Table 3. Historical U.S. Government Contributions to UNRWA .................................................. 15 Contacts Author Contact Information........................................................................................................... 25 Congressional Research Service U.S. Foreign Aid to the Palestinians Introduction: Issues for Congress U.S. aid to the Palestinians is intended to promote at least three major U.S. policy priorities of interest to Congress: • Combating, neutralizing, and preventing terrorism against Israel from the Islamist group Hamas and other militant organizations. • Creating a virtuous cycle of stability and prosperity in the West Bank that inclines Palestinians—including those in the Hamas-controlled Gaza Strip— toward peaceful coexistence with Israel and prepares them for self-governance. • Meeting humanitarian needs and preventing further destabilization, particularly in the Gaza Strip. Since June 2007, these U.S. policy priorities have crystallized around the geographical and factional split between 1. West Bank/Fatah: the U.S.- and Western-supported Palestinian Authority (PA) in the West Bank led by President Mahmoud Abbas (who also leads the secular nationalist Fatah faction) and Prime Minister Salam Fayyad (a political independent and former international technocrat); and 2. Gaza Strip/Hamas: the regime led by Hamas in Gaza, which receives support from Iran and Syria along with substantial non-state support and has been designated a Foreign Terrorist Organization (FTO), a Specially Designated Terrorist (SDT), and a Specially Designated Global Terrorist (SDGT) by the U.S. government.1 From FY2008 to the present, annual U.S. bilateral assistance to the West Bank and Gaza Strip has averaged over $600 million, including annual averages of over $200 million in direct budgetary assistance and over $100 million in non-lethal security assistance for the PA in the West Bank. The remainder—approximately $300 million on average per year—is dedicated to project assistance for the West Bank and Gaza through U.S. government grants to non-governmental organizations (NGOs). Much of this assistance is in direct support of PA Prime Minister Salam Fayyad’s security, governance, development, and reform programs aimed at building Palestinian institutions in advance of statehood. The post-2007 annual average of U.S. bilateral assistance is substantially greater than the approximate annual average of $170 million from 2000-2007 and $70 million from 1994-1999. Despite more robust levels of assistance, the absence of IsraeliPalestinian peace, Palestinian pursuit of international support of statehood (see below), and Hamas’s heightened role in Palestinian politics could make effective implementation of lasting aid projects difficult. Because of congressional concerns that, among other things, U.S. funds might be diverted to Palestinian terrorist groups, this aid is subject to a host of vetting and oversight requirements and legislative restrictions (see “Major Conditions, Limitations, and Restrictions on Aid” below). U.S. assistance to the Palestinians is given alongside assistance from other international donors, and 1 For more information on Hamas and these terrorist designations, see CRS Report R41514, Hamas: Background and Issues for Congress, by Jim Zanotti. Congressional Research Service 1 U.S. Foreign Aid to the Palestinians U.S. policymakers routinely call for greater or more timely assistance from Arab governments in line with their pledges. Additional U.S. humanitarian assistance for Palestinian refugees in Gaza and elsewhere continues through contributions to the U.N. Relief and Works Agency for Palestine Refugees in the Near East (UNRWA). U.S. contributions to UNRWA, which have totaled approximately $4 billion since UNRWA’s inception in 1950, have averaged over $200 million annually since 2007. Palestinian U.N. Initiatives and Possible Fatah-Hamas Consensus—Effects on FY2011 and FY2012 Aid Palestine Liberation Organization (PLO) and PA officials are pursuing action in the United Nations aimed at solidifying international support for Palestinian statehood. On September 23, 2011, Mahmoud Abbas, who serves as PLO Chairmanchairman as well as PA Presidentpresident, presented an application to the U.N. Secretary-General for Palestinian U.N. membership. The Security Council is expected to vote sometime in the fall of 2011 on whether to recommend Abbas’s application for membership to the General Assembly. On May 4, 2011, in Cairo, Egypt, Abbas and Hamas political bureau chief Khaled Meshaal signed a Fatah-Hamas PA consensus agreement brokered by Egypt intended to bridge the Palestinian geographical and factional divide and to clear the way for PA presidential and parliamentary elections in a year’s time. Reports indicate that Fatah and Hamas have agreed in principle to allow a “technocratic” PA government—presumably run by ministers without formal party affiliations—until such time as elections can be held. However, as of early October 2011, FatahHamas disagreement over the possible continuation of Salam Fayyad as PA prime minister (Fatah supports it, Hamas opposes it) has delayed the formation of a consensus government and caused some observers to doubt its likelihood. For information on legal conditions on U.S. aid to a PA power-sharing government, see “Major Conditions, Limitations, and Restrictions on Aid,” below. Both the U.N. action and the prospect of greater Hamas say in PA governance have fueled concerns among many Members of Congress over continuing various types of aid to the Palestinians. Both the House (H.Res. 268) and Senate (S.Res. 185) passed resolutions in the summer of 2011 questioning the continuation of U.S. aid to a PA government that includes Hamas,2 and to the PA or to Palestinians in general in the event the PLO appeals—outside of negotiations with Israel—to the United Nations, other international bodies or forums, and/or foreign governments for recognition of statehood or similar diplomatic support.3 2 H.Res. 268 passed on July 7, 2011, by a vote of 407-6, and S.Res. 185 passed on June 28, 2011, by unanimous consent. Both resolutions’ ninth “resolved” clauses support “the position taken by Secretary of State Hillary Clinton on April 22, 2009, that the United States ‘will not deal with or in any way fund a Palestinian government that includes Hamas unless and until Hamas has renounced violence, recognized Israel and agreed to follow the previous obligations of the Palestinian Authority.’” 3 The eighth “resolved” clause in H.Res. 268 “affirms that Palestinian efforts to circumvent direct negotiations and pursue recognition of statehood prior to agreement with Israel will harm United States-Palestinian relations and will have serious implications for the United States assistance programs for the Palestinians and the Palestinians [sic] Authority.” The eighth “resolved” clause in S.Res. 185 reads that the Senate would “consider restrictions on aid to the (continued...) Congressional Research Service 2 U.S. Foreign Aid to the Palestinians If the PLO is even partly successful in its ongoing effort to gain U.N. and other international support for Palestinian statehood (—such as its parallel bid for fullsuccessful bid in October for membership in UNESCO, the U.N. Educational, Scientific, and Cultural Organization), —one might conclude that it would be encouraged to continue with this approach and either discard or call into question the traditional traditional “Oslo peace process” approach involving U.S.-supported negotiations with Israel. In that event, Congress would likely face a dilemma. If Congress continues to appropriate U.S. aid to the Palestinians as-is, the PLO might not have sufficient incentive to consider modifying its new new approach to the peace process. The PLO might perceive that it has enhanced its leverage with both the United States and Israel and thus become emboldened to act with less regard for U.S. positions. Alternatively, if Congress elects to reduce or discontinue assistance, U.S. influence over future Palestinian policies and internal developments may decline. Such an approach may also increase PA reliance on aid either from European or from Gulf Arab sources, and might amplify Iran’s influence by weakening the PA relative to Hamas.4 The underlying political agendas of these sources could significantly diverge from U.S. interests with regard to issues such as maintaining Israel’s security and promoting democratic values and civil liberties. Moreover, if possible cuts in U.S. aid contribute to an environment in which Israel-PA security cooperation erodes, the result could be an increased level of Israeli-Palestinian or regional violence and the further degradation of prospects for a negotiated two-state solution. Following the Palestinians’ admission to UNESCO, Israel’s cabinet placed a halt in November 2011—pending further internal consultations—on the transfer of taxes and customs payments that constitute over half the PA’s budget. This Israeli decision has been criticized by the United States and other international actors amid concerns regarding legality and the potential political consequences, and some observers believe it is likely to be reversed shortly. For further discussion of the For further discussion of the implications of withholding or changing U.S. aid to the Palestinians in connection with action at the United Nations, see CRS Report R42022, Palestinian Initiatives for 2011 at the United Nations Nations, by Jim Zanotti and Marjorie Ann Browne. Congressional Holds on FY2011 Aid Various Members of congressional committees with jurisdiction over the authorization and appropriation of U.S. aid to the Palestinians reportedly have anhave placed informal holdshold on the obligation of the following two tranches the following tranche of already-appropriated FY2011 assistance following an August 18 congressional notifications by the Obama Administration: • $192.2 million in Economic Support Fund (ESF) project assistance for the West Bank and Gaza to be distributed through NGOs;5 and • Until late October/early November 2011, $147.6 million in International Narcotics Control and Law Enforcement (INCLE) non-lethal assistance for PA security forces.6 Media reports and statements from Member offices indicate that Congresswoman Kay Granger, Chairwoman of the House Appropriations Subcommittee on State, Foreign Operations, and Related Programs; and Congresswoman Ileana Ros-Lehtinen, Chairwoman of the House Foreign Affairs Committee have each placed holds on at least some portion of one or both tranches listed above.7 Senator Richard Lugar, Ranking Member of the Senate Foreign Relations Committee, security forces had also been subject to a hold.6 (...continued) Palestinian Authority should it persist in efforts to circumvent direct negotiations by turning to the United Nations or other international bodies.” 4 Testimony of Jonathan Schanzer (of the Foundation for Defense of Democracies), September 14, 2011, House Foreign Affairs Committee hearing on U.S. aid to Palestinians. 5 U.S. Agency for International Development FY2011 Congressional Notification #133, August 18, 2011. 6 State Department FY2011 Congressional Notification, August 18, 2011. 7 Mary Beth Sheridan, “Wasting no time in blocking Palestinian aid,” washingtonpost.com/blogs/checkpointwashington, October 4, 2011. According to this report, Congresswoman Granger’s hold does not apply to INCLE (continued...) Congressional Research Service 3 U.S. Foreign Aid to the Palestinians had placed a hold on both tranches, but the hold was lifted in early October 2011.8 According to reports, the current holds on Congressional Research Service 3 U.S. Foreign Aid to the Palestinians Media reports and statements from Member offices indicate that Representative Kay Granger, chairwoman of the House Appropriations Subcommittee on State, Foreign Operations, and Related Programs; and Representative Ileana Ros-Lehtinen, chairwoman of the House Foreign Affairs Committee, have placed a hold on these funds.7 According to reports, the current holds on U.S. FY2011 assistance to the Palestinians are at least partly attributable to Members’ uncertainty regarding the advisability of providing aid to the PA when it and the PLO are taking action in international forums to boost support for Palestinian statehood outside of negotiations with Israel. It is unclear how long congressional holds on FY2011 assistance to the Palestiniansthe congressional hold might last. Congressional holds on foreign aid are not legally binding on the Administration. However, since the late 1970s/early 1980s, the Administration has generally deferred to holds placed by Members of pertinent committees as part of a process by which the executive branch consults with Congress to provide it with information or otherwise address committees’ concerns prior to obligating funds subject to a hold. In 2007 and 2008, CongresswomanRepresentative Nita Lowey, then Chairwomanchairwoman of the House Appropriations Subcommittee on State, Foreign Operations, and Related Programs, exercised holds partly in order to shape the conditions under which the United States could provide budgetary and security assistance to the West Bank-based PA following Hamas’s takeover of Gaza and its dismissal from the PA government.98 Although the Administration also notified Congress on August 18 of its intent to obligate the final $50 million of the total FY2011 authorized amount of $200 million in direct budgetary assistance for the PA, this amount is not subject to a hold.109 The New York Times reported in September 2011 that Israeli Prime Minister Binyamin Netanyahu “urged dozens of members of Congress visiting Israel [in August] not to object to the aid,” at the Administration’s request.1110 FY2012 Aid and Request Aid to the Palestinians for FY2012 has been authorized to continue at 98.5% of FY2011 levels pursuant to the Continuing Appropriations Act, 2012 (P.L. 112-36) through November 18, 2011 (unless otherwise superseded). The Obama Administration has requested $400.4 in Economic million in Economic Support Fund money (including $200 million for direct budgetary assistance to the PA) and $113 million in INCLE funds for security assistance (see Table 1 below). Draft legislation for FY2012 appropriations approved by the House Appropriations Subcommittee for State, Foreign Operations, and Related Programs in July 2011 would condition any direct budgetary assistance to the Palestinian Authority on the Secretary of State’s certification that the PA is “not attempting to establish or seek recognition at the United Nations of a Palestinian state outside of an agreement negotiated between Israel and the Palestinians.”12 Draft legislation for (...continued) security assistance. 8 CRS correspondence with Senate Foreign Relations Committee staffer, October 6, 2011. 9 7 Mary Beth Sheridan, “Wasting no time in blocking Palestinian aid,” washingtonpost.com/blogs/checkpointwashington, October 4, 2011. According to this report, Congresswoman Granger’s hold does not apply to INCLE security assistance. 8 “Splits Between U.S. and Europe Over Aid to Palestinians,” International Herald Tribune, February 22, 2007; “Appropriator Wants Palestinian Authority Aid on Hold Until Accountability in Place,” CQTodayCQ Today, March 4, 2008. 109 U.S. Agency for International Development FY2011 Congressional Notification #133, August 18, 2011; Presidential Determination 2011-14, August 30, 2011, http://www.whitehouse.gov/the-press-office/2011/08/30/presidentialmemorandum-waiver-restriction-providing-funds-palestinian-a 11. 10 Jennifer Steinhauer and Steven Lee Myers, “House Republicans Discover a Growing Bond with Netanyahu,” New York Times, September 21, 2011. 12 Draft legislation at subheading “Economic Support Funds,” fifth proviso, available at http://appropriations.house.gov/UploadedFiles/FY12-SFOPS-07-25_xml.pdf. Congressional Research Service 4 U.S. Foreign Aid to the Palestinians Congressional Research Service 4 U.S. Foreign Aid to the Palestinians outside of an agreement negotiated between Israel and the Palestinians.”11 Draft legislation for FY2012 approved in September 2011 by the Senate Appropriations Committee (S. 1601, the Department of State, Foreign Operations, and Related Programs Appropriations Bill, 2012) would prohibit direct budgetary assistance to the PA if “Palestine becomes a member or non-member state of the United Nations outside of an agreement negotiated between Israel and the Palestinians,” but would also give the Secretary of State authority to waive the prohibition for national security reasons. S. 1601 also would require the Secretary of State to “submit to the Committees on Appropriations specific recommendations on appropriate actions to be taken with respect to the Palestine Liberation Organization’s status in the United States, especially about the closing of its office, if Palestine seeks to become a member or non-member state of the United Nations outside an agreement negotiated between Israel and the Palestinians.” Table 1. Proposed Spending Plan for FY2012 Bilateral Assistance Amount Purpose Economic Support Fund ($400.4 million total) $200 million Direct budgetary assistance to Palestinian Authority (PA) in West Bank $200.4 million Assistance for the West Bank and Gaza (through USAID)a • $20 million – governance, rule of law, civil society • $79.7 million – health, education, social services • $53.2 million – economic development • $47.5 million – humanitarian assistance International Narcotics Control and Law Enforcement ($113 million total) $77 million Training, non-lethal equipment, and garrisoning assistance to PA security forces in the West Bank, supporting efforts by the U.S. Security Coordinator $36 million Assistance for PA Ministry of Interior and for the justice sector (prosecutors and criminal investigators) to improve performance, efficiency, and interinstitutional cooperation Rule-of-law infrastructure, including courthouses, police stations, and prisons Source: U.S. State Department, FY2012 Congressional Budget Justification for Foreign Operations (Annex: Regional Perspectives), available at http://www.state.gov/documents/organization/158268.pdf. Notes: All amounts are approximate. a. See footnote 1918. 11 Draft legislation at subheading “Economic Support Funds,” fifth proviso, available at http://appropriations.house.gov/UploadedFiles/FY12-SFOPS-07-25_xml.pdf. Congressional Research Service 5 U.S. Foreign Aid to the Palestinians Recent Historical Background Since the establishment of limited Palestinian self-rule in the West Bank and Gaza Strip in the mid-1990s, the U.S. government has committed more than $4 billion in bilateral assistance to the Palestinians in the West Bank and Gaza,1312 who are among the largest per capita recipients of foreign aid worldwide.1413 This assistance has focused on the further development of the Palestinian economic, social services, and civil society sectors; and on strengthening the processes, governance, and security-providing capacities of Palestinian Authority (PA) institutions, through partnerships with U.S. and Palestinian organizations. Following the death of Yasser Arafat in 2004 and his succession by Mahmoud Abbas as PA Presidentpresident in 2005, Congress and the Bush Administration increased U.S. assistance to the Palestinians. However, when the 2006 Hamas victory in Palestinian Legislative Council elections reversed the renewed sense of U.S. optimism in elected Palestinian leadership, U.S. assistance was restructured and reduced. The United States halted direct foreign aid to the PA but continued providing humanitarian and project assistance to the Palestinian people through international and non-governmental organizations (NGOs). The ban on direct assistance continued during the brief tenure of a Hamas-led power-sharing government (February to June 2007). During that time, the United States and the other members of the international Quartet (the United Nations, the European Union, and Russia) unsuccessfully demanded that Hamas accept the Quartet principles—recognition of Israel’s right to exist, renunciation of violence, and acceptance of previous Israeli-Palestinian agreements. Subsequent events altered the situation dramatically. In June 2007, Hamas forcibly took control of the Gaza Strip. PA President and Fatah head Mahmoud Abbas, calling the move a “coup,” dissolved the power-sharing government and tasked the politically independent technocrat Salam Fayyad to serve as prime minister and organize a new PA “caretaker” government in the West Bank. Within days, the United States lifted its economic and political embargo on the PA. The Bush Administration and Congress then boosted U.S. aid levels in hopes of fostering an economic and security climate conducive to peaceful coexistence between Israel and a future Palestinian state. The revival of Israeli-Palestinian negotiations for a final-status agreement in conjunction with the Annapolis Conference of November 2007 provided further impetus for U.S. economic support of the institutional and societal building blocks deemed crucial for Palestinian self-governance. The Obama Administration has advocated a similar approach. Attempts by both Administrations to broker an Israeli-Palestinian negotiating process that yields a substantive and lasting resolution of core issues in dispute by the parties (borders, security, refugees, the status of Jerusalem, settlements, and water rights) have thus far proven unsuccessful. Prospects for negotiations may be even dimmer for the near term given heightened Israeli security concerns in the context of region-wide political uncertainty and the effort by the PA and Palestine 1312 Prior to the establishment of limited Palestinian self-rule in the West Bank and Gaza, approximately $170 million in U.S. developmental and humanitarian assistance (not including contributions to UNRWA) were obligated for Palestinians in the West Bank and Gaza from 1975-1993, mainly through non-governmental organizations. CRS Report 93-689 F, West Bank/Gaza Strip: U.S. Foreign Assistance, by Clyde R. Mark, July 27, 1993, available on request to Jim Zanotti. 1413 See U.N. Development Programme 2007/08 Human Development Report, Table 18: Flows of Aid, Private Capital and Debt, available at http://hdr.undp.org/en/media/HDR_20072008_EN_Complete.pdf. Congressional Research Service 6 U.S. Foreign Aid to the Palestinians Liberation Organization (PLO) to pursue widespread international recognition of Palestinian statehood, particularly the PLO’s application for United Nations membership that it filed in September 2011. Major Conditions, Limitations, and Restrictions on Aid Annual appropriations legislation routinely contains the following conditions, limitations, and restrictions on U.S. aid to Palestinians:1514 • Hamas: No aid is permitted for Hamas or Hamas-controlled entities. • Power-Sharing PA Government: No aid is permitted for a power-sharing PA government that includes Hamas as a member unless the President certifies that the PA government, including all ministers, has accepted the following two principles embodied in Section 620K of the Palestinian Anti-Terrorism Act of 2006 (PATA), P.L. 109-446: (1) recognition of “the Jewish state of Israel’s right to exist” and (2) acceptance of previous Israeli-Palestinian agreements (the “Section 620K principles”). If the PA government is “Hamas-controlled,” PATA applies additional conditions, limitations, and restrictions on aid. Under PATA, in the event Hamas participation in a PA government precludes ministries from receiving aid, the PA Presidentpresident and judiciary (if not Hamas-controlled) may under under certain conditions receive aid pursuant to a presidential waiver for national security purposes. It is unclear whether a “technocratic” government of the type anticipated under the May 2011 Fatah-Hamas power-sharing arrangement—whose ministers are not formally aligned with Hamas—would come under the legal definition of a “power-sharing PA government that includes Hamas as a member” or a “Hamascontrolled” PA government and thus trigger these additional conditions on U.S. aid. Under PATA, the Palestinian Legislative Council (PLC) is considered to be part of the PA, but the legal consequences if the PLC were to reconvene with the majority Hamas won in 2006 are still unclear.1615 • PLO and Palestinian Broadcasting Corporation (PBC): No aid is permitted for the PLO or for the PBC. • Palestinian State: No aid is permitted for a future Palestinian state unless the Secretary of State certifies that the governing entity of the state 15. 14 Conditions, limitations, and restrictions for FY2012 are contained in the Consolidated Appropriations Act, 2010, P.L. 111-117, Secs. 7034-7040, as these provisions’ application has been extended pursuant to the Full-Year Continuing Appropriations Act, 2011 (P.L. 112-10), and the Continuing Appropriations Act, 2012 (P.L. 112-36). 1615 Although a Hamas-majority PLC could technically pass legislation controlling various functions of the PA government, a document summarizing a May 16, 2011, 3D Security Initiative briefing for a congressional staff audience stated that the PLC would not likely play an activist role—absent widespread consensus across factions— given the interim nature of the power-sharing agreement as a placeholder anticipating PA presidential and legislative elections. Congressional Research Service 7 U.S. Foreign Aid to the Palestinians 31. has demonstrated a firm commitment to peaceful coexistence with the State of of Israel; 42. is taking appropriate measures to counter terrorism and terrorist financing in the the West Bank and Gaza in cooperation with Israel and others; and 53. is working with other countries in the region to vigorously pursue efforts to establish a just, lasting, and comprehensive peace in the Middle East that will enable Israel and an independent Palestinian state to exist within the context of of full and normal relationships. This restriction does not apply to aid meant to reform the Palestinian governing entity so that it might meet the three conditions outlined above. Additionally, the President is permitted to waive this restriction for national security purposes. • PA Personnel in Gaza: No aid is permitted for PA personnel located in Gaza. Although the PA does pay salaries to individuals located in Gaza, USAID says that U.S. direct budgetary assistance to the PA goes toward paying off the PA’s commercial debts (see “Direct Assistance to the Palestinian Authority” below). • Vetting, Monitoring, and Evaluation: As discussed throughout this report, for U.S. aid programs for the Palestinians, annual appropriations legislation routinely requires executive branch reports and certifications, as well as internal and Government Accountability Office (GAO) audits. These requirements are aimed at preventing U.S. aid from benefitting Palestinian terrorists or abetting corruption, ensuring the amenability of Palestinian society and institutions to aid programs, assessing the programs’ effectiveness, and monitoring intervening variables (such as aid from international actors).17 1716 16 P.L. 111-117, Secs. 7039-7040, 7042(f). GAO audits are available on the following U.S. aid programs to the Palestinians: (1) Economic Support Fund, including direct assistance to the PA and project assistance (audit for FY2008-FY2009 accessible at http://www.gao.gov/new.items/d10623r.pdf), (2) security assistance to the PA through the International Narcotics Control and Law Enforcement account (http://www.gao.gov/new.items/d10505.pdf), and (3) contributions to UNRWA through the Migration and Refugee Assistance and Emergency Refugee and Migration Assistance accounts (http://www.gao.gov/new.items/d09622.pdf). Congressional Research Service 8 U.S. Foreign Aid to the Palestinians Types of U.S. Bilateral Aid to the Palestinians Table 2. U.S. Bilateral Assistance to the Palestinians, FY2005-FY2012 (regular and supplemental appropriations; current year $ in millions) Account FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012a ESF 224.4 148.5 50.0 389.5 776.0 400.4 400.4 400.4 P.L. 480 Title II (Food Aid) 6.0 4.4 19.488 - 20.715 - - - INCLEb - - - 25.0 184.0 100.0 150.0 113.0 Total 230.4 153.243 69.488 414.5 980.715 500.4 550.4 513.4 Sources: U.S. State Department, USAID. Notes: All amounts are approximate; for purposes of this table and this report, “bilateral assistance” does not include U.S. contributions to UNRWA or other international organizations from the Migration and Refugee Assistance (MRA) or Emergency Refugee and Migration Assistance (ERMA) accounts, regardless of how the term is defined in legislation. a. Amounts stated for FY2012 have been requested but not yet appropriated. b. INCLE stands for International Narcotics Control and Law Enforcement. INCLE figures do not include $86.362 million of FY2006 ESF funds reprogrammed into the INCLE account by President Bush in January 2007 (see “Direct Assistance to the Palestinian Authority” below). Economic Support Fund Project Assistance Types of Funding Programs Most aid to the Palestinians is appropriated through the Economic Support Fund (ESF) account and provided by USAID (and, to a far lesser degree, the State Department18Department17) to U.S. nongovernmental organizations (NGOs) operating in the West Bank and the Gaza Strip.1918 Funds are allocated in this program for projects in sectors such as humanitarian assistance, economic development, democratic reform, improving water access and other infrastructure, health care, education, and vocational training (currently most, if not all, funds for the Gaza Strip are dedicated to humanitarian assistance and economic recovery needs).2019 See Table 1 above for the Obama Administration’s proposed spending plan for FY2012 ESF West Bank/Gaza assistance. 1817 For example, see the State Department’s Middle East Partnership Initiative (MEPI) West Bank/Gaza website at http://mepi.state.gov/med-region/west-bank-and-gaza.html. 1918 The State Department’s FY2012 Congressional Budget Justification for Foreign Operations (Annex: Regional Perspectives), p. 571, available at http://www.state.gov/documents/organization/158268.pdf, stated that “The United States will continue to respond to humanitarian needs in Gaza as they arise, through emergency assistance to the most vulnerable populations through nongovernmental organizations not controlled by Hamas or other foreign terrorist organizations. All assistance programs for Gaza, consistent with legislative requirements, will work through vetted local, U.S., or international nongovernmental organizations to meet U.S. objectives and follow established safeguards that will ensure funding is only used where, how, and by whom it is intended. The United States will similarly continue to work with the Government of Israel to try to develop an effective crossings protocol that improves the flow of humanitarian, recovery, and commercial goods into and out of Gaza without compromising Israel’s security.” 2019 For further detail on the types of projects funded, see GAO, Foreign Assistance: U.S. Assistance to the West Bank (continued...) Congressional Research Service 9 U.S. Foreign Aid to the Palestinians Vetting Requirements and Procedures USAID subjects its programs worldwide to vetting requirements to ensure the proper use of funds appropriated through its accounts. USAID’s West Bank and Gaza program is subject to a specialized vetting process (for non-U.S. organizations) and to yearly audits intended to ensure that funds are not diverted to Hamas or other organizations classified as terrorist groups by the U.S. government.2120 This vetting process has become more rigorous in recent years in response to allegations that U.S. economic assistance was indirectly supporting Palestinian terrorist groups, and following an internal audit in which USAID concluded it could not “reasonably ensure” that its money would not wind up in terrorist hands.2221 A February 2009 statement from USAID described its revamped vetting procedures as follows: All NGOs applying for grants from USAID are required to certify, before award of the grant will be made, that they do not provide material support to terrorists.... Before making an award of either a contract or a grant to a local NGO, the USAID West Bank/Gaza Mission checks the organization and its principal officers, directors and other key personnel against lists maintained by the Office of Foreign Assets Control (OFAC) within the U.S. Department of Treasury. The Mission also checks these organizations and individuals through law enforcement and intelligence community systems accessed by USAID’s Office of Security. At present, the Mission collects additional information up front in addition to the individual’s full [four-part] name, such as a government issued photo-ID number and the individual’s date and place of birth.... [USAID’s] West Bank/Gaza program possess[es] the most comprehensive partner vetting system for foreign assistance throughout the U.S. Government.2322 A May 2009 Government Accountability Office (GAO) report found that USAID had strengthened its antiterrorism policies and procedures in response to recommendations GAO had made in a 2006 report.2423 (...continued) and Gaza for Fiscal Years 2008 and 2009, May 14, 2010, available at http://www.gao.gov/new.items/d10623r.pdf. 2120 P.L. 111-117, Sec. 7039(b) sets forth the legal requirements for vetting: “Prior to the obligation of funds appropriated by this Act under the heading ‘Economic Support Fund’ for assistance for the West Bank and Gaza, the Secretary of State shall take all appropriate steps to ensure that such assistance is not provided to or through any individual, private or government entity, or educational institution that the Secretary knows or has reason to believe advocates, plans, sponsors, engages in, or has engaged in, terrorist activity nor, with respect to private entities or educational institutions, those that have as a principal officer of the entity’s governing board or governing board of trustees any individual that has been determined to be involved in, or advocating terrorist activity or determined to be a member of a designated foreign terrorist organization: Provided, That the Secretary of State shall, as appropriate, establish procedures specifying the steps to be taken in carrying out this subsection and shall terminate assistance to any individual, entity, or educational institution which the Secretary has determined to be involved in or advocating terrorist activity.” 2221 “Audit: Terrorists Got U.S. Aid; Agency’s Screening Called Inadequate,” Chicago Tribune, November 16, 2007; Testimony of Henrietta Fore, USAID Administrator and Director of U.S. Foreign Assistance, House Appropriations Subcommittee on State, Foreign Operations, and Related Programs Holds Hearing on the Fiscal 2009 Budget for the U.S. Agency for International Development, February 27, 2008. 2322 Statement issued by USAID to CRS on February 5, 2009. USAID does not subject U.S. organizations to vetting due to U.S. privacy law concerns. See GAO, Measures to Prevent Inadvertent Payments to Terrorists Under Palestinian Aid Programs Have Been Strengthened, but Some Weaknesses Remain, GAO Foreign Assistance Report 09-622, May 2009, available at http://www.gao.gov/new.items/d09622.pdf. 2423 See GAO, Measures to Prevent Inadvertent Payments to Terrorists…, op. cit. A schematic detailing USAID’s vetting process is found on page 42 of the report. GAO did recommend in the report that USAID take steps to ensure that it and its primary contractors use the same rigor at the subcontractor level that they employed in requiring (continued...) Congressional Research Service 10 U.S. Foreign Aid to the Palestinians Direct Assistance to the Palestinian Authority Budgetary assistance is a major part of the U.S. strategy to support the PA in the West Bank, although some Members of Congress expect better governance and more vigilant action from the PA toward peace with Israel in return.2524 According to annual foreign operations appropriations laws, congressionally approved funds for the West Bank and Gaza Strip cannot be given directly to the PA unless the President submits a waiver to Congress stating that doing so is in the interest of national security, and the Secretary of State certifies that there is a single PA treasury account, civil service roster, and payroll.2625 Annual appropriations legislation also routinely caps direct U.S. budgetary assistance to the PA (the cap for FY2011 is $200 million under P.L. 112-10, the Department of Defense and Continuing Appropriations Act, 2011) and places conditions on aid to any power-sharing PA government “of which Hamas is a member” (for further discussion, see “Hamas and a “Unity Government”?” below). Even after money is transferred to the PA’s treasury account, the United States retains prior approval of any transactions from that account, along with a three-year power of audit over those funds.2726 During the final year of President George W. Bush’s Administration, President Bush issued waivers providing $300 million in direct budgetary assistance to the PA. President Barack Obama has followed the precedent Bush established by authorizing a total of $500 million in direct budgetary assistance during his first two years in office, as follows: • In July 2009, $200 million in ESF money were transferred to the PA in the wake of a presidential waiver issued by President Obama.2827 • In November 2009, $75 million in budgetary assistance were provided to the PA under the July presidential waiver as an advance on FY2010 ESF funds, pursuant to a continuing resolution (later appropriated pursuant to P.L. 111-117). • In April 2010, another $75 million in budgetary assistance from the ESF account were provided to the PA via presidential waiver.2928 (...continued) antiterrorism clauses and certifications during their contracting process. 2524 Ileana Ros-Lehtinen, Chairwoman of the House Foreign Affairs Committee, voiced significant concern over the Administration’s provision of direct budgetary assistance to the PA when serving as Ranking Member in November 2010: “It is deeply disturbing that the Administration is continuing to bail out the Palestinian leadership when they continue to fail to meet their commitments, under international agreements and requirements outlined in U.S. law, including dismantling the Palestinian terrorist infrastructure, combating corruption, stopping anti-Israel and antiSemitic incitement, and recognizing Israel’s right to exist as a Jewish state.” House Foreign Affairs Committee website: “Ros-Lehtinen Opposes Latest U.S. ‘Bailout’ Installment for Palestinian Authority,” November 11, 2010, available at http://republicans.foreignaffairs.house.gov/press_display.asp?id=1630. 2625 See P.L. 111-117, Sec. 7040 (“Limitation on Assistance for the Palestinian Authority”). In the event of a presidential waiver, Sec. 7040 requires the President to submit a report to the Committees on Appropriations “detailing the justification for the waiver, the purposes for which the funds will be spent, and the accounting procedures in place to ensure that the funds are properly disbursed. The report shall also detail the steps the Palestinian Authority has taken to arrest terrorists, confiscate weapons and dismantle the terrorist infrastructure.” 2726 Congressional briefing with State Department and USAID officials, July 9, 2009. 2827 Presidential Determination No. 2009-23. 2928 Presidential Memorandum 2010-06, available at http://www.whitehouse.gov/the-press-office/presidentialdetermination-waiver-restriction-providing-funds-palestinian-authority. Congressional Research Service 11 U.S. Foreign Aid to the Palestinians • In November 2010, $150 million in budgetary assistance were provided to the PA via presidential waiver as an advance on FY2011 ESF funds, pursuant to the Continuing Appropriations Act, 2011 (P.L. 111-242).3029 As discussed above, the Obama Administration notified its intent in August 2011 to provide an additional $50 million in ESF funds in budgetary assistance for FY2011 via presidential waiver. Direct U.S. budgetary assistance to the PA goes toward paying off its commercial debt, as the following USAID congressional notification language says: Cash transfer funds will be used to service debt to commercial suppliers and commercial banks. Debt to commercial banks will be debt originally incurred for purchases from commercial suppliers. Each of the payees will have been vetted in accordance with USAID West Bank and Gaza existing procedures as a precondition to the transfer of funds by the PA for such payments. Funds may also be used to pay for upcoming purchases from commercial suppliers or reimbursements of recent purchases from the same. The funds will not be used to pay PA salaries. If the PA is unable to meet its budgetary obligations, the progress made in improving security and promoting economic growth could be severely undermined, which could have significant and lasting negative consequences for USG efforts to support regional stability and secure a lasting peace between Israel and the Palestinians.3130 U.S. Security Assistance to the Palestinian Authority As mentioned above, aid has been given to train, reform, advise, house, and provide non-lethal equipment for PA civil security forces in the West Bank loyal to President Abbas in an effort both to counter militants from organizations such as Hamas and Palestinian Islamic Jihad, and to establish the rule of law for an expected Palestinian state. A small amount of training assistance also has been provided to strengthen and reform the PA criminal justice sector. This assistance has come from the International Narcotics Control and Law Enforcement (INCLE) account—to which a total of $545.4 million has been appropriated or reprogrammed for use in the West Bank since 2007. The Obama Administration has requested an additional $113 million in FY2012 INCLE funding (see Table 1 above). Since Hamas gained control of the Gaza Strip, the office of the U.S. Security Coordinator (USSC) for Israel and the Palestinian Authority (a three-star U.S. general, supported by U.S. and allied staff and military officers from the United Kingdom, Canada, and seven other countries) has worked in coordination with the State Department’s Bureau of International Narcotics and Law Enforcement Affairs (INL) to help train roughly 1,000 PA Presidential Guard and 3,700 PA National Security Forces (NSF) troops at the International Police Training Center near Amman, Jordan. The USSC and INL reportedly plan to help organize and train a total of approximately 6,000 troops, including 10 500-man NSF battalions (approximately 8 of which have already been trained or begun training). At a July 12, 2011, hearing before the House Foreign Affairs Subcommittee on the Middle East and South Asia, Lieutenant General Michael Moeller, the current USSC, outlined some changes in emphasis for the USSC/INL program as FY2012 nears: 3029 Presidential Determination 2011-1, available at http://www.whitehouse.gov/the-press-office/2010/10/07/presidentialmemorandum-providing-funds-palestinian-authority. 3130 USAID FY2011 Congressional Notification #133, August 18, 2011. Congressional Research Service 12 U.S. Foreign Aid to the Palestinians This year, we will transition the program into the next phase of our campaign plan: Building institutional capacity. This new phase is less resource intensive as we move away from primarily providing the Palestinian security forces with equipment and infrastructure toward an increasingly direct “advise and assist” role. In this phase, we will help the PASF develop indigenous readiness, training, and logistics programs and the capability to maintain/sustain their force structure readiness and infrastructure. Additionally, the USSC will continue to support other US rule of law programs that assist the Palestinians to improve the performance of the Justice and Corrections Sectors. The USSC/INL security assistance program exists alongside other assistance and training programs reportedly provided to Palestinian security forces and intelligence organizations by the European Union and various countries, including probable covert U.S. assistance programs.3231 By most accounts, the PA forces receiving training have shown increased professionalism and have helped substantially improve law and order and lower the profile of terrorist organizations in West Bank cities. However, the aspiration to coordinate international security assistance efforts and to consolidate the various PA security forces under unified civilian control that is accountable to rule of law and to human rights norms remains largely unfulfilled. PA forces have come under criticism for the political targeting of Hamas—in collaboration with Israel and the United States—through massive shutdowns and forced leadership changes to West Bank charities with alleged ties to Hamas members and through reportedly arbitrary detentions of Hamas members and supporters.3332 Some Palestinians and outside observers also assert that the effectiveness and credibility of PA operations are undermined by Israeli restrictions—including curfews, checkpoints, no-go zones, and limitations on international arms and equipment transfers—as well as by Israel’s own security operations in the West Bank34Bank33 and the blockade and closure of crossings around Gaza. Israel claims that its continuing operations in the West Bank are necessary in order to reduce the threat of terrorism. It is unclear how concerns about the effectiveness of the PA security might evolve if anti-Israel protests in the West Bank increase in frequency and intensity amid the region-wide political unrest and heightened Israeli-Palestinian tension—sparked by failed negotiating efforts, 3231 See, e.g., Ian Cobain, “CIA working with Palestinian security agents,” guardian.co.uk, December 17, 2009; Yezid Sayigh, “‘Fixing Broken Windows’: Security Sector Reform in Palestine, Lebanon and Yemen,” Carnegie Endowment for International Peace, October 2009, available at http://www.carnegieendowment.org/files/ security_sector_reform.pdf. 3332 See, e.g., Nathan Thrall, “Our Man in Palestine,” New York Review of Books, October 14, 2010, available at http://www.nybooks.com/articles/archives/2010/oct/14/our-man-palestine/. For further discussion of human rights concerns surrounding PA security forces in the West Bank and Hamas in Gaza, see CRS Report R40664, U.S. Security Assistance to the Palestinian Authority, by Jim Zanotti; Human Rights Watch, Internal Fight: Palestinian Abuses in Gaza and the West Bank, July 29, 2008, available at http://www.hrw.org/en/reports/2008/07/29/internal-fight-0. 3433 See International Crisis Group, Squaring the Circle: Palestinian Security Reform Under Occupation, Middle East Report No. 98, September 7, 2010, available at http://www.crisisgroup.org/~/media/Files/ Middle%20East%20North%20Africa/Israel%20Palestine/98%20Squaring%20the%20Circle%20— %20Palestinian%20Security%20Reform%20under%20Occupation.ashx; International Crisis Group, Ruling Palestine II: The West Bank Model? Middle East Report No. 79, July 17, 2008, available at http://www.crisisgroup.org/library/ documents/middle_east___north_africa/arab_israeli_conflict/79_ruling_palestine_ii___the_west_bank_model.pdf. These operations underscore the fact that the Israeli-Palestinian agreements that authorized the creation of Palestinian security forces in the 1990s in areas of limited Palestinian self-rule contained clauses that preserved Israel’s prerogative to conduct operations in those areas for purposes of its own security. Congressional Research Service 13 U.S. Foreign Aid to the Palestinians a possible U.N. action on Palestinian statehood in September 2011, and periodic outbursts of violence. How the May 2011 Fatah-Hamas agreement may affect the activities of PA security forces in the West Bank is unclear, although it is possible that these activities will remain largely unchanged until either PA presidential and legislative elections can be held or Fatah and Hamas can agree on security coordination for both the West Bank and Gaza. The likelihood of either contingency occurring is seriously questioned by many observers. U.S. Contributions to UNRWA Overview The United States is the largest single-state donor to UNRWA, which provides food, shelter, medical care, and education for many of the original refugees from the 1948 Arab-Israeli war and their descendants—now comprising approximately 4.8 million Palestinians in Jordan, Syria, Lebanon, the West Bank, and Gaza. U.S. contributions to UNRWA—separate from U.S. bilateral aid to the West Bank and Gaza—come from the Migration and Refugee Assistance (MRA) account and the Emergency Refugee and Migration Assistance (ERMA) account. Since UNRWA’s inception in 1950, the United States has provided the agency with approximately $4 billion in contributions (see Table 3 below). Other refugees worldwide fall under the mandate of the U.N. High Commissioner for Refugees (UNHCR). The budget for UNRWA’s core activities (general fund) in 2011 was $568 million, funded mainly by Western governments, international organizations, and private donors.3534 UNRWA also creates special emergency funds for pressing humanitarian needs. U.S. contributions (which are made from the Migration and Refugee Assistance (MRA) and Emergency Refugee and Migration Assistance (ERMA) accounts managed by the State Department’s Bureau of Population, Refugees, and Migration (PRM)) totaled $249.4 million for FY2011 ($145.6 million for the general fund, $103.8 million for emergency funds and special projects), and totaled $238 million for FY2010 ($125 million and $113 million, respectively). According to the Obama Administration’s request, approximately $232 million in total contributions are expected for FY2012. 3534 According to statistics from UNRWA’s website accessed in 2010, U.S. contributions in 2009 constituted approximately 20% of the UNRWA General Fund budget and 27% of the total budget. Aggregate contributions from the European Commission and European states (including both EU members and non-members) and regions constituted approximately 52% of the total budget. Congressional Research Service 14 U.S. Foreign Aid to the Palestinians Table 3. Historical U.S. Government Contributions to UNRWA (in $ millions) Fiscal Year(s) Amount Fiscal Year(s) Amount 1950-1989 1,473.3 2001 123.0 1990 57.0 2002 119.3 1991 75.6 2003 134.0 1992 69.0 2004 127.4 1993 73.8 2005 108.0 1994 78.2 2006 137.0 1995 74.8 2007 154.2 1996 77.0 2008 184.7 1997 79.2 2009 268.0 1998 78.3 2010 237.8 1999 80.5 2011 249.4 2000 89.0 TOTAL 4,148.5 Source: U.S. State Department. Notes: All amounts are approximate. Until the 1990s, Arab governments refrained from contributing to UNRWA’s budget in an effort to keep the Palestinian refugee issue on the international agenda and to press Israel to accept responsibility for their plight. Since then, most Arab states have made relatively small annual contributions. In Gaza, most observers acknowledge that the role of UNRWA in providing basic services (i.e., food, health care, education) takes much of the governing burden off Hamas. As a result, some complain that this amounts to UNRWA’s enabling of Hamas and argue that its activities should be discontinued or scaled back. This is in addition to critics who question UNRWA’s existence because they believe it perpetuates Palestinian dependency and resentment against Israel.3635 However, many others, U.S. and Israeli officials included, believe that UNRWA plays a valuable role by providing stability and serving as the eyes and ears of the international community in Gaza. They generally prefer UNRWA to the uncertain alternative that might emerge if UNRWA were removed from the picture.37 3636 35 See, e.g., Michael S. Bernstam, “The Palestinian Proletariat,” Commentary, December 2010. See FY2011 Congressional Budget Justification for Foreign Operations, Department of State (Volume 2), p. 86, available at http://www.state.gov/documents/organization/137936.pdf: “U.S. government support for UNRWA directly contributes to the U.S. strategic interest of meeting the humanitarian needs of Palestinians, while promoting their selfsufficiency. UNRWA plays a stabilizing role in the Middle East through its assistance programs, serving as an important counterweight to extremist elements.” 3736 Congressional Research Service 15 U.S. Foreign Aid to the Palestinians Issues for Congress Some observers, including a former general counsel for UNRWA, have criticized UNRWA for, among other things, insufficient or flawed vetting procedures and engaging in political advocacy.3837 UNRWA and its supporters, however, maintain that UNRWA officials are fulfilling their mandated roles as well as can be expected under challenging circumstances (i.e., UNRWA’s lack of a robust policing capability and other operational limitations, political pressures, and security concerns).3938 In testimony before the House Appropriations Subcommittee on State, Foreign Operations and Related Programs on April 23, 2009, Secretary of State Hillary Rodham Clinton spoke for the Obama Administration regarding U.S. oversight of contributions to UNRWA: We have made it clear to UNRWA, the United Nations Relief And Works Agency, that we intend to carefully track any aid that they receive. They have taken additional steps, partly at our urging, to make their process more transparent, consistent with both United Nations commitments and U.S. legislation. They conduct background checks on employees. They share staff lists with us and with Israel. They prohibit staff participation in political activities. They launch investigations upon receiving information from Israel, us, or anyone else about any staff member engaging in inappropriate or illicit activities. They are actually investigating staff members right now who were elected in internal elections within Gaza. And we have pressed them very hard because they have to earn our confidence in this.4039 Vetting of UNRWA Contributions The primary concern raised by some Members of Congress is that U.S. contributions to UNRWA might be used to support terrorists. Section 301(c) of the 1961 Foreign Assistance Act (P.L. 87195), as amended, says that “No contributions by the United States shall be made to [UNRWA] except on the condition that [UNRWA] take[s] all possible measures to assure that no part of the United States contribution shall be used to furnish assistance to any refugee who is receiving military training as a member of the so-called Palestine Liberation Army or any other guerrilla type organization or who has engaged in any act of terrorism.” A May 2009 GAO report said that, since a previous GAO report in 2003, UNRWA and the State Department had strengthened their policies and procedures to conform with Section 301(c) legal requirements, but that “weaknesses remain.”4140 Neither report found UNRWA to be in noncompliance with Section 301(c), and to date, no arm of the U.S. government has made such a 3837 See James G. Lindsay, Fixing UNRWA: Repairing the UN’s Troubled System of Aid to Palestinian Refugees, Washington Institute of Near East Policy Policy Focus #91, January 2009, available at http://www.thewashingtoninstitute.org/pubPDFs/PolicyFocus91.pdf. See also James Phillips, “The Gaza Aid Package: Time to Rethink U.S. Foreign Assistance to the Palestinians,” The Heritage Foundation WebMemo No. 2333, March 9, 2009, available at http://www.heritage.org/Research/MiddleEast/wm2333.cfm. 3938 A direct written rebuttal by Israeli academic Maya Rosenfeld to the former UNRWA general counsel’s critiques was carried by UNRWA’s website and is available at http://rete-eco.it/attachments/ 5172_Rejoinder%20to%20Lindsay_jan09.pdf. 4039 Transcript of remarks by Secretary of State Hillary Rodham Clinton, House Appropriations Subcommittee on State, Foreign Operations and Related Programs hearing: “Supplemental Request,” April 23, 2009. 4140 GAO, Measures to Prevent Inadvertent Payments to Terrorists…, op. cit. Congressional Research Service 16 U.S. Foreign Aid to the Palestinians finding. The following are some points from the 2009 report and subsequent developments related to it: • In the 2009 GAO report, State officials said compliance is evaluated based on State’s “internal level of confidence that UNRWA has taken all possible measures to ensure that terrorists are not receiving assistance, such as having procedures in place and taking measures to respond to issues that arise.”4241 State has not defined the term “all possible measures,” nor has it defined what would constitute noncompliance with Section 301(c). • The report said that State had not established written criteria to use in evaluating UNRWA’s compliance with Section 301(c), and recommended that State consider doing so.4342 In November 2009, State and UNRWA signed a non-binding “Framework for Cooperation” for 2010. The document agreed that, along with the compliance reports UNRWA submits to State biannually, State would use 15 enumerated criteria “as a way to evaluate” UNRWA’s compliance with Section 301(c). State signed a similar document with UNRWA for 2011.4443 • UNRWA said that it screens its staff and contractors every six months and that it screened all 4.6 million Palestinian refugees and microfinance clients in December 2008 (and intends to make this a routine procedure) for terrorist ties to Al Qaeda and the Taliban, pursuant to a list established pursuant to U.N. Security Council Resolution 1267. UNRWA said that it is unable to screen those of its beneficiaries who are displaced persons from the 1967 war because it does not collect information on those persons.4544 • UNRWA’s UN 1267 terrorist screening list does not include Hamas, Hezbollah, or most other militant groups that operate in UNRWA’s surroundings. UNRWA is unwilling to screen its contractors and funding recipients against a list supplied by only one U.N. member state. Nevertheless, UNRWA officials did say that if notified by U.S. officials of potential matches, they would “use the information as a trigger to conduct their own investigation,” which led to the report’s recommendation that the State Department consider screening UNRWA contractors.4645 In response, State says that it now screens quarterly, against the Excluded Parties Lists System (EPLS, which is a list of parties excluded throughout the U.S. government from receiving federal contracts47contracts46), the names of vendors of contracts equal to or exceeding $100,000, as provided by UNRWA. Each of UNRWA’s 83 contract awardees of over 4241 Ibid. Ibid. 4443 “Framework for Cooperation Between UNRWA and the Government of the United States of America for 2011,” available at http://www.state.gov/documents/organization/154856.pdf. The 15 enumerated criteria are found in Annex 4 of the framework document. 4544 GAO, Measures to Prevent Inadvertent Payments to Terrorists…, op. cit. In 2006, an organization that advocates for Palestinian refugees estimated the total number of 1967 displaced persons to be between 800,000 and 850,000. See BADIL Resource Center for Palestinian Residency & Refugee Rights, Survey of Palestinian Refugees and Internally Displaced Persons 2004-2005, May 2006, available at http://www.badil.org/en/documents/category/35-publications? download=135%3Asurvey04-05. 4645 GAO, Measures to Prevent Inadvertent Payments to Terrorists…, op. cit. 4746 U.S. General Services Administration website at https://www.acquisition.gov/faqs_whatis.asp. 4342 Congressional Research Service 17 U.S. Foreign Aid to the Palestinians $100,000 for the 2nd Quarter (April-June 2010) was screened twice by separate PRM staff. The analysis resulted in no matches against the EPLS.4847 • UNRWA has established procedures to investigate inappropriate staff behavior. UNRWA [said] that it seeks information from authorities whenever staff are detained, convicted, or refused a permit or targeted by Israeli military forces. UNRWA officials said they share the names of all UNRWA staff annually with the governments of Egypt, Israel, Jordan, Lebanon, Syria, and the Palestinian Authority but have received no information on staff members from these governments.4948 • UNRWA officials said that UNRWA provides assistance “in the context of its humanitarian mandate, meaning that agency policy is generally not to deny education or primary healthcare benefits.” The officials said that if a refugee was denied benefits because of suspected militant or terrorist activities or ties, his or her child “would not be disqualified from attending an UNRWA school.”5049 Legislation Critiques of UNRWA’s operations are routinely raised, and some Members of Congress have supported legislation or resolutions aimed at increasing oversight of the agency, strengthening its vetting procedures, and/or capping U.S. contributions. H.Rept. 111-151 contained a provision from the joint explanatory statement capping contributions to UNRWA at $119 million for its operations in the West Bank and Gaza from FY2009 funds appropriated pursuant to P.L. 111-32. This provision also required a report from the Secretary of State to the Committees on Appropriations no later than 45 days following the enactment of P.L. 111-32 on various UNRWA self-policing and transparency-promoting activities, including measures UNRWA takes to comply with Section 301(c) of the 1961 Foreign Assistance Act relating to preventing assistance to terrorists.5150 P.L. 111-117 (incorporated by reference in the relevant particulars for FY2011 by P.L. 112-10, and thus, by extension for FY2012 by P.L. 112-36) contains the same reporting requirement, without an accompanying cap on contributions. 4847 CRS correspondence with State Department, August 9, 2010. GAO, Measures to Prevent Inadvertent Payments to Terrorists…, op. cit. 5049 Ibid. 5150 See H.Rept. 111-151, Joint Explanatory Statement of the Committee of Conference, Title XI, “Migration and Refugee Assistance.” Also during the 111th Congress, Representative Ileana Ros-Lehtinen, the Ranking Minority Member on the House Committee for Foreign Affairs, sponsored H.R. 557 (United Nations Transparency, Accountability, and Reform Act of 2009), which included a section entitled “Withholding of United States Contributions to UNRWA,” with over 100 co-sponsors; and Representative Steven Rothman sponsored H.Con.Res. 29 (“Expressing the sense of Congress that the United Nations should take immediate steps to improve the transparency and accountability of the United Nations Relief and Works Agency for Palestinian Refugees (UNRWA) in the Near East to ensure that it is not providing funding, employment, or other support to terrorists”) with over 30 co-sponsors. Both H.R. 557 and H.Con.Res. 29 were referred to the House Committee on Foreign Affairs in January 2009. Ranking Member Ros-Lehtinen subsequently introduced H.R. 5065 (UNRWA Humanitarian Accountability Act) with over 25 co-sponsors. H.R. 5065 is nearly identical to the section pertaining to UNRWA found in H.R. 557, and was referred to the House Committee on Foreign Affairs in April 2010. 4948 Congressional Research Service 18 U.S. Foreign Aid to the Palestinians Issues for Congress in Determining Future Aid Hamas and a “Unity Government”? Although Fatah and Hamas reached an Egyptian-facilitated power-sharing agreement in May 2011, questions over how the agreement might actually be implemented persist. These questions include how PA and Hamas security operations might be integrated, when and how Palestinian presidential and legislative elections might be conducted, and who might occupy PA government positions. Resolutions passed in the summer of 2011 in both the House (H.Res. 268) and Senate (S.Res. 185) questioning the continuation of U.S. aid to a PA government that includes Hamas, although the resolutions do not expressly address whether they contemplate that Hamas’s underlying approval of a PA government that includes formally non-aligned “technocrats” instead of Hamas members would be sufficient to connote its involvement in the government.5251 Draft legislation for FY2012 appropriations approved by the House Appropriations Subcommittee for State, Foreign Operations, and Related Programs in July 2011 would consider a PA government resulting from an agreement with Hamas to have the same legal consequences as full power sharing.5352 The Senate version approved by the Senate Committee on Appropriations in S. 1601 would assign the same legal consequences for full power sharing to a PA government “over which Hamas exercises undue influence.” As mentioned above (see “Major Conditions, Limitations, and Restrictions on Aid”), current appropriations legislation prohibits the United States from providing financial assistance to Hamas under any conditions. This law also prohibits U.S. assistance to a PA government with Hamas ministers (subject to possible exceptions for a non-Hamas PA president and judiciary) unless all the government’s ministers accept the “Section 620K principles”: (1) recognition of “the Jewish state of Israel’s right to exist” and (2) acceptance of previous Israeli-Palestinian agreements—named after the section in PATA (P.L. 109-446) that sets them forth. These principles have some similarity to the principles the so-called international Quartet (United States, European Union, United Nations, and Russia) has required Hamas to meet before accepting dealings with it: (1) recognizing Israel’s right to exist, (2) renouncing violence, and (3) accepting previous Israeli-Palestinian agreements. Future debates might focus on the following issues: • Whether a “power of approval” by Hamas over a PA government, absent any further level of participation, should trigger a requirement for that government’s acceptance and compliance with the Section 620K principles. • Whether to relax or tighten U.S. restrictions on which Palestinian party/ies should be answerable for accepting and complying with the Section 620K principles. 5251 H.Res. 268 passed on July 7, 2011, by a vote of 407-6, and S.Res. 185 passed on June 28, 2011, by unanimous consent. Both resolutions’ ninth “resolved” clauses support “the position taken by Secretary of State Hillary Clinton on April 22, 2009, that the United States ‘will not deal with or in any way fund a Palestinian government that includes Hamas unless and until Hamas has renounced violence, recognized Israel and agreed to follow the previous obligations of the Palestinian Authority’”. 5352 Section 7040(f)(1) of the draft legislation, available at http://appropriations.house.gov/UploadedFiles/FY12-SFOPS07-25_xml.pdf. Congressional Research Service 19 U.S. Foreign Aid to the Palestinians • Whether to grant the U.S. President discretion—under certain conditions and/or for specific purposes—to waive aid restrictions relating to a power-sharing government that includes Hamas and does not meet the Section 620K principles. Assuming that the United States chooses not to engage with and/or contribute to a PA government that includes Hamas, future debates might take place over the degree to which the United States should actively dissuade others in the international community—particularly European and Arab actors—from engagement and contributions.5453 Questions Regarding a Two-State Solution Even assuming that the immediate objectives of U.S. assistance to the Palestinians—relieving humanitarian needs in Gaza and improving security and facilitating development in the West Bank—are met, a failure to achieve progress towards a politically legitimate and peaceful twostate solution could undermine the utility of U.S. aid in helping the Palestinians become more cohesive, stable, and self-reliant over the long term. Many factors may complicate prospects for a negotiated two-state solution: • Discord within and among Palestinian factions—reflected geographically by divided rule in the West Bank and Gaza (unless and until the May 2011 powersharing agreement is implemented) and ideologically by Hamas’s refusal to join the PLO in forswearing violent resistance against Israel. • Conditions that the Israeli government in power since April 2009 under Prime Minister Binyamin Netanyahu has attached to any consideration on its part of the concept of an independent Palestinian state, such as demilitarization and recognition of Israel as the “nation state of the Jewish people.”5554 • Physical entrenchment of Israeli settlers in the West Bank and of obstacles to Palestinian movement within the West Bank and in and out of both the West Bank and Gaza, together with its political and socioeconomic consequences. • Possibility of course-changing events—such as a major terrorist attack, a surprise election outcome, an outbreak of war, or pursuit by Palestinians of a political pathway to statehood as an alternative to negotiations with Israel.5655 This possibility could be exacerbated by the region-wide unrest and political change that has been ongoing since early 2011. 5453 On the previous occasions in which Hamas participated in the PA government from 2006-2007, the European Union joined the United States in refusing to provide direct assistance to the PA. There are indications, however, that Europeans might be less willing to follow the U.S. lead in the event that another PA government including Hamas is formed. See Muriel Asseburg and Paul Salem, “No Euro-Mediterranean Community without peace,” EU Institute for Security Studies and European Institute of the Mediterranean, September 2009, available at http://www.iss.europa.eu/ uploads/media/10Papers-01.pdf; Andrew Rettman, “EU Countries Practice ‘Secret’ Diplomacy, Hamas Says,” euobserver.com, September 14, 2009. 5554 See Transcript of translated remarks (from Hebrew) by Prime Minister Binyamin Netanyahu, Tel Aviv, Israel, June 14, 2009, available at http://www.pmo.gov.il/PMOEng/Communication/PMSpeaks/speechbarilan140609.htm. 5655 For further discussion of this issue, see CRS Report R40092, Israel and the Palestinians: Prospects for a Two-State Solution, by Jim Zanotti. Congressional Research Service 20 U.S. Foreign Aid to the Palestinians The PLO’s application for U.N. membership for a Palestinian state in September 2011—in concert with the factors listed above—is likely to further complicate prospects for a negotiated two-state solution.5756 One possible reason that some Members of Congress are reluctant to continue funding the PA in light of U.N. action is a possible perception of such action as an attempt to undermine the U.S. role as “honest broker” and guarantor of the peace process, and a sign that U.S. attempts to use aid for political leverage with the Palestinians are unproductive and even futile. The Gaza Situation Hamas’s control of Gaza presents a conundrum for many. Most parties, including Israel and the PA, are concerned that assisting Gaza’s population and rebuilding infrastructure damaged during Operation Cast Lead (the 2008-2009 Israel-Hamas conflict) could bolster Hamas. Thus, while controlled levels of humanitarian assistance have been permitted to enter Gaza, reconstruction projects have been very limited.5857 In June and December 2010, Israel announced plans to ease the closure regime it has enforced at its crossings with Gaza. More goods have come into Gaza as a result, but it is not clear if, when, and under what conditions a full resumption of agricultural and industrial trade and movement of persons between Gaza and the outside world might be expected. In late May 2011, Egypt permanently opened its crossing with Gaza at Rafah to passenger traffic, but because this will not extend to the passage of goods, it might not have a material effect on trade and smuggling patterns. Many observers believe that either Hamas’s positions on the Quartet principles or its control over Gaza would have to change before substantial U.S. funds might be used in the reconstruction of buildings and infrastructure in Gaza, with the exception of U.N. facilities and other special cases such as international schools.5958 In the meantime, occasional skirmishes between Palestinian militants (including Hamas) and Israel along Gaza’s borders and continuing low-level rocket and mortar fire from Gaza at targets in Israel could spiral into renewed conflict. Members of Congress are routinely wary that bilateral assistance for Gaza or contributions to UNRWA could be misused and diverted to benefit Hamas or other terrorist groups. Yet, some Members of Congress advocate expanding the level and type of humanitarian and development assistance to Gaza—often at the same time they advocate easing, ending, or even challenging the Israeli-Egyptian closure regime—because Gazans are seen as needing more support to improve their economic, physical, and psychological situations. In January 2010, 54 Representatives from 5756 See “Palestinian U.N. Initiatives and Possible Fatah-Hamas Consensus—Effects on FY2011 and FY2012 Aid” and CRS Report R42022, Palestinian Initiatives for 2011 at the United Nations , by Jim Zanotti and Marjorie Ann Browne. 5857 A December 2010 Washington Post article described the situation in Gaza with respect to issues such as (1) the limited operation of conveyor belts and passage of supply trucks at crossings, (2) concerns about sewage contamination and drinking water shortages, and (3) comparisons between construction materials available through the crossings for internationally-supervised projects and those smuggled into Gaza through tunnels from Egypt for Hamas-led construction projects. Janine Zacharia, “Aid groups decry Israel’s Gaza constraints,” Washington Post, December 21, 2010. See, also, e.g., Amnesty International UK, et al., “Dashed Hopes: Continuation of the Gaza Blockade,” November 30, 2010, available at http://www.oxfam.org/sites/www.oxfam.org/files/dashed-hopes-continuation-gazablockade-301110-en.pdf; Sarah A. Topol, “'Gaza Is Not Darfur!’”, Slate.com, August 5, 2010. 5958 See footnote 1918. The December 2010 Washington Post article said that UNRWA has built 151 housing units out of the 10,000 it hopes to build, and has only received Israeli approval to build six out of the 100 schools UNRWA says are needed to accommodate 40,000 children, while Hamas claims that it has renovated 1,000 houses and built a school with materials smuggled into Gaza through the help of Islamic charities from the Gulf region. Zacharia, op. cit. Congressional Research Service 21 U.S. Foreign Aid to the Palestinians the 111th Congress signed a letter to President Obama that requested a substantive lifting of the closure regime.6059 Strengthening the PA in the West Bank Instability in the West Bank and the Gaza Strip is, paradoxically, both a major reason for the increases in U.S. assistance over the past four years and a factor that could lead some to oppose maintaining or boosting current aid levels. After Hamas’s takeover of the Gaza Strip and dismissal from the PA in June 2007, the United States made assisting the PA with economic development and civil security—aimed at bolstering the standing of President Abbas and the Fayyad government—a higher priority. Yet, if the PA in Ramallah proves unable, at a minimum, to achieve and maintain popular legitimacy and competent control in the West Bank, U.S. reluctance to provide resources and training might increase, given concerns that aid could be used against Israel or Palestinian civilians, either by falling into the hands of Hamas or otherwise. Some observers argue that U.S. assistance does not enhance the legitimacy of Abbas and the PA, but rather detracts from it by leading some Palestinians to conclude that the PA is too beholden to the United States.6160 Others have warned that U.S. dependence on individual leaders such as Abbas and Fayyad works against long-term stability by undermining mechanisms of democratic governance and enabling growing authoritarianism.6261 Abbas’s application for U.N. membership for a Palestinian state and public support for nonviolent rallies in the West Bank protesting perceived injustices by Israel could decrease U.S. policymakers’ inclination to support a PA led by him, and the May 2011 Fatah-Hamas agreement might raise concerns that PA leaders may be insufficiently strong or motivated to prevent Hamas from gaining greater influence in the West Bank. Economic Development and International Donor Assistance The appointment in June 2007 of Salam Fayyad, a former World Bank and International Monetary Fund official, as PA prime minister raised hopes for Palestinian reform and economic growth that have been realized in part. Fayyad has produced reform proposals aimed at establishing a “de facto Palestinian state”6362 that have helped garner major international donor 6059 Text of Letter to the President, January 20, 2010, available at http://docs.google.com/viewer?url= http%3A%2F%2Fellison.house.gov%2Fimages%2Fstories%2FDocuments%2F2010%2FGaza_letter_to_Obama.pdf. 6160 See Sherifa Zuhur, Ali Abunimah, Haim Malka, Shibley Telhami, “Symposium: Hamas and the Two-State Solution: Villain, Victim or Missing Ingredient?” Middle East Policy, vol. 15, issue 2, July 1, 2008; Transcript of National Public Radio interview (“All Things Considered”) with Robert Malley, June 16, 2007, available at http://www.npr.org/ templates/story/story.php?storyId=11135538. 6261 See Nathan J. Brown, “Fayyad Is Not the Problem, but Fayyadism Is Not the Solution to Palestine’s Political Crisis,” Carnegie Endowment for International Peace, September 2010, http://www.carnegieendowment.org/files/ fayyad_not_problem_2.pdf. 6362 See, e.g., Palestinian National Authority, Palestine: Ending the Occupation, Establishing the State, Program of the Thirteenth Government, August 2009, available at http://www.mideastweb.org/palestine_state_program.htm. A key passage from the document reads: “Out of respect for our citizens, and in recognition of their desire to live free and peaceful lives under national independence, we must answer their demand to see the fruits of the state-building project. Against this background, the Palestinian government is struggling determinedly against a hostile occupation regime, employing all of its energies and available resources, most especially the capacities of our people, to complete the process of building institutions of the independent State of Palestine in order to establish a de facto state apparatus within the next two years. It is time now for the illegal occupation to end and for the Palestinian people to enjoy security, safety, freedom and independence.” Congressional Research Service 22 U.S. Foreign Aid to the Palestinians assistance pledges and promises of investment. International pledges of support, however, have routinely proven insufficient to cover the PA’s budgetary expenses, occasionally requiring efforts by Fayyad to obtain last-minute assistance and/or private financing or to temporarily curtail PA employee salaries. The success of Fayyad’s reform plans appears to hinge on the following factors: • Keeping the public sector solvent enough to sustain long-term private sector development; • Getting Israeli restrictions loosened or lifted on the movement of goods and people both within and out of the West Bank and Gaza64Gaza63 and on Palestinian development projects in so-called “Area C”;6564 and • Overall political progress to overcome Palestinian factional/geographical division and towards Palestinian statehood.6665 Several high-profile projects—housing developments, industrial parks, superstores, entertainment complexes—have been completed or are in various stages of proposal or construction in and around Ramallah, Bethlehem, Jericho, and the northern West Bank in an effort to jumpstart private sector development.6766 The World Bank reported real GDP growth of 9.3% for the West Bank and Gaza in 2010.6867 Yet, most analysts assert that actual and prospective economic development should not be overstated because the West Bank economy continues to be propped up by external aid and continues to recover from historic economic lows precipitated by the conflicts of the past decade (see Figure 1 below). Furthermore, uncertainty remains regarding movement and access and regarding progress in negotiations with Israel.6968 Fayyad’s future status within the PA government, and possibly the continuing prospects of Western support for the reform and economic development programs described above, have been thrown into limbo pending formation of the new government under the May 2011 Fatah-Hamas agreement. 6463 The current system of Israeli restrictions on movement within the West Bank can be traced to the time of the second Palestinian intifada (which began in late 2000), and the closure of Gaza crossings and ports following the Hamas takeover in June 2007 has led to a near economic standstill there. The International Crisis Group has referred to a UNDP official’s estimate that it would take five years for Gaza to be restored simply to the unenviable state in which it was immediately before the recent conflict began in December 2008. International Crisis Group, Gaza’s Unfinished Business, Middle East Report No. 85, April 23, 2009, available at http://www.crisisgroup.org/~/media/Files/ Middle%20East%20North%20Africa/Israel%20Palestine/85%20Gazas%20Unfinished%20Business.ashx. 6564 Zones denoted as “Area C” in the West Bank pursuant to the Israel-PLO Interim Agreement on the West Bank and the Gaza Strip, dated September 28, 1995, fall under Israeli administrative and security control. The agreement is available at http://www.mfa.gov.il/MFA/Peace+Process/Guide+to+the+Peace+Process/THE+ISRAELIPALESTINIAN+INTERIM+AGREEMENT.htm. 6665 See Nathan J. Brown, “Are Palestinians Building a State?”, Carnegie Endowment for International Peace, June 2010, available at http://www.carnegieendowment.org/files/palestinian_state1.pdf. 6766 Some of these ventures have been supported by U.S. organizations—including the Overseas Private Investment Corporation (OPIC), the Aspen Institute, the Center for American Progress, and CHF International—affiliated or involved with a public-private partnership known as the Middle East Investment Initiative. See http://meiinitiative.org. 6867 The World Bank, Statement at the Ad Hoc Liaison Committee Meeting, Brussels, Belgium, April 13, 2011, available at http://siteresources.worldbank.org/WESTBANKGAZAEXTN/Resources/AHLCApril2011WorldBankStatement.pdf. 6968 See The World Bank, op. cit.; Zahi Khouri, “The West Bank’s Deceptive Growth,” New York Times, September 8, 2009. Congressional Research Service 23 U.S. Foreign Aid to the Palestinians Figure 1. West Bank and Gaza Strip Gross Domestic Product (GDP) Per Capita: 1999-2009 Source: World Bank; Palestinian Central Bureau of Statistics. Congress has indicated its interest in staying abreast of the economic assistance Arab states provide to the West Bank and the PA, sometimes requiring reports from the Administration on the subject.7069 Arab states (especially Gulf states) provided large amounts of aid to the Hamas-led PA government in 2006-2007 after the United States and European Union withdrew their aid, but following the reinstitution of U.S. and EU aid in mid-2007, most of them reduced contributions.7170 Routinely, they make generous pledges of aid to the Palestinians, but at times fulfill them only in part and after significant delay. Jacob Walles, Deputy Assistant Secretary of State for Near Eastern Affairs, addressed the progressive decline in Arab contributions in a July 12, 2011, hearing before the House Foreign Affairs Subcommittee on the Middle East and South Asia: Just to give you some numbers. In 2009, the total amount provided the PA from Arab donors was $462 million. In 2010, that number was $287 million. And so far this year in 2011, the Arab states have provided only $78.5 million.... Arab states’ reluctance to fulfill pledges may stem from misgivings over “picking sides” in Palestinian factional disputes and from concerns that without imminent prospects either for domestic political unity or for progress on the peace process, any money contributed could be a waste. On the part of the Gulf states in particular, reluctance may also stem from a feeling that 7069 See, e.g., H.Rept. 111-366: “The conferees direct the Secretary of State to provide a report to the Committees on Appropriations not later than 180 days after enactment of this Act on international participation, including by Arab states, in the economic development of the West Bank and support for the Palestinian Authority, similar to that proposed by the House. This report may be submitted in classified form, if necessary.” 7170 See Glenn Kessler, “Arab Aid to Palestinians Often Doesn’t Fulfill Pledges,” Washington Post, July 27, 2008; “Falling Short,” Washington Post, July 27, 2008, available at http://www.washingtonpost.com/wp-dyn/content/graphic/ 2008/07/27/GR2008072700095.html?sid=ST2008072700226. Congressional Research Service 24 U.S. Foreign Aid to the Palestinians they are less responsible historically for the Palestinians’ current situation than Israel, the United States, and Europe. Conclusion Implementing U.S. bilateral assistance programs for the West Bank and Gaza and making UNRWA contributions presents significant challenges due both to regional political uncertainty and to concerns that aid might be diverted to Palestinian terrorist groups—particularly as Congress responds to PLO action in the United Nations on Palestinian statehood and observes how the May 2011 Fatah-Hamas agreement might be implemented. Prospects for stability in the West Bank appear to hinge on improved security, political and economic development, Israeli cooperation, and continuation of high levels of foreign assistance. In assessing whether U.S. aid to the Palestinians since the June 2007 West Bank/Fatah-Gaza Strip/Hamas split has advanced U.S. interests, Congress could evaluate how successful aid has been in • reducing the threat of terrorism; • inclining Palestinians towards peace with Israel; • preparing Palestinians for self-reliance in security, political, and economic matters; • promoting regional stability; and • meeting humanitarian needs. Given that evaluation, Congress will assess future aid in the context of U.S. policy priorities. Such evaluation and assessment might influence its deliberations over • which aid programs to start, continue, expand, scale back, change, or end; and • which oversight, vetting, monitoring, and evaluation requirements to apply to various aid programs. Author Contact Information Jim Zanotti Specialist in Middle Eastern Affairs jzanotti@crs.loc.gov, 7-1441 Congressional Research Service 25