ȱ
ǯǯȱȱȱȱȱȱ
ȱ ȱ
¢ȱȱȱȱȱ
¢ȱŘŖǰȱŘŖŖşȱ
ȱȱȱ
ŝȬśŝŖŖȱ
ǯǯȱ
ŘŘşŜŝȱ
ȱȱȱ
Pr
epared for Members and Committees of Congress
ǯǯȱȱȱȱȱȱ
ȱ
¢ȱ
U.S. aid to the Palestinians has fluctuated considerably over the past three years, largely due to
Hamas’s changing role within the Palestinian Authority (PA). After Hamas led the PA government
for over a year, its forcible takeover of the Gaza Strip in June 2007 led to the creation of a non-
Hamas government in the West Bank—resulting in different models of governance for the two
Palestinian territories. Since then, the U.S. has dramatically boosted aid levels to bolster the PA in
the West Bank and President Mahmoud Abbas vis-à-vis Hamas. In FY2008, Congress
appropriated a total of $414.5 million in bilateral assistance to the Palestinians, the largest single
year appropriation ever for the Palestinians. Because of congressional concerns that, among other
things, U.S. funds might be diverted to Palestinian terrorist groups, much of this assistance is
subject to legislative restrictions. For FY2009, an additional $200 million have already been
appropriated for the Palestinians (with another $100 million requested by the Bush
Administration). Experts advise that PA stability hinges on, now more than ever, improved
security, economic development, Israeli cooperation, and the continuation of high levels of
foreign assistance. U.S. contributions were made to assist emergency humanitarian efforts in the
Gaza Strip during the 2008-2009 Israel-Hamas conflict, and U.S. policymakers have also spoken
of possible U.S. participation in international efforts to help with the post-conflict reconstruction
of Gaza—subject to finding an acceptable approach vis-à-vis Hamas. This report will be updated
as events warrant.
ȱȱȱ
ǯǯȱȱȱȱȱȱ
ȱ
ȱ
Overview and Recent Developments .............................................................................................. 1
Types of U.S. Aid to the Palestinians .............................................................................................. 2
Project Assistance Through USAID.......................................................................................... 2
Direct Assistance to the Palestinian Authority .......................................................................... 3
Assistance for Palestinian Civil Security Forces....................................................................... 4
U.S. Contributions to UNRWA ................................................................................................. 4
Factors in Determining Future Aid.................................................................................................. 5
Effectiveness of U.S. Assistance on Security in West Bank and Gaza...................................... 5
Prospects of Economic Development and International Support.............................................. 5
FY2008 and FY2009 Assistance ..................................................................................................... 6
ȱ
Table 1. U.S. Bilateral Assistance to the Palestinians, FY2004-FY2009 ........................................ 6
ȱ
Author Contact Information ............................................................................................................ 7
ȱȱȱ
ǯǯȱȱȱȱȱȱ
ȱ
ȱȱȱȱ
The level of U.S. assistance to the Palestinians—among the largest per capita recipients of foreign
aid worldwide1—has fluctuated considerably over the past three years, mainly due to the on-
again, off-again role of Hamas within the Palestinian Authority (PA). Hamas is designated as a
Foreign Terrorist Organization (FTO) by the U.S. State Department. After the 2006 Hamas
victory in Palestinian Legislative Council elections, U.S. assistance to the Palestinians was
restructured and reduced. The U.S. 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 unity government (February to June 2007). During that time, U.S.
policymakers demanded unsuccessfully that Hamas renounce, among other things, violence and
its commitment to the destruction of the state of Israel.
Subsequent events, however, altered the situation dramatically. In June 2007, Hamas forcibly
took control of the Gaza Strip. PA President Mahmoud Abbas (head of the Fatah party), calling
the move a “coup,” dissolved the unity government and tasked 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.
Since then, the Bush Administration and Congress have boosted U.S. aid levels in hopes of
fostering an economic and security climate conducive to Palestinian statehood. The revival of
Israeli-Palestinian negotiations over 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 appears poised to advocate a similar approach. Nevertheless, significant
legislative conditions, limitations, and restrictions remain attached to certain aid given to
Palestinians.2
The 2008-2009 Gaza conflict between Israel and Hamas created conditions that led to the
provision—both through the U.S. Agency for International Development (USAID) and through
international organizations such as the United Nations Relief and Works Agency for Palestine
Refugees in the Near East (UNRWA) and the International Committee of the Red Cross—of just
over $61.5 million in emergency U.S. humanitarian assistance (as of February 13, 2009) for
Palestinians in the Gaza Strip. For a fuller description of these emergency contributions, please
see CRS Report R40101, Israel and Hamas: Conflict in Gaza (2008-2009) , coordinated by Jim
Zanotti.
International efforts to contribute to the post-conflict reconstruction of Gaza have begun, and U.S.
policymakers have expressed interest in participating. Questions remain, however, over how
reconstruction assistance given through the PA, UNRWA, or other entities or mechanisms can be
1 See U.N. Development Programme 2007/08 Human Development Report 18: Flows of Aid, Private Capital and Debt
at http://hdrstats.undp.org/indicators/171.html.
2 See the Consolidated Appropriations Act, 2008 (P.L. 110-161), Division J, Title III, Economic Support Fund & Title
VI, Secs. 644, 647, 650, 655-657. These conditions include a restriction on aid to Hamas (including Hamas affiliates
and any government that includes members of Hamas) or to a Palestinian state unless commitments toward peaceful
coexistence with Israel are made and other requirements met by the intended aid recipient.
ȱȱȱ
ŗȱ
ǯǯȱȱȱȱȱȱ
ȱ
effective given that Hamas still controls Gaza. Some analysts recommend informal coordination
with Hamas, if not direct cooperation, but others reject this recommendation as one that would
possibly strengthen Hamas through de facto recognition of it as a legitimate stakeholder in Gaza.
Since the signing of the Oslo Accord in 1993 and the establishment of limited Palestinian self-
rule in the West Bank and Gaza Strip in 1994, the U.S. government has committed more than $2
billion in bilateral economic assistance to the Palestinians. The 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 PA institutions,
through partnerships with U.S. and Palestinian organizations. During the 1990s, U.S. foreign aid
to the Palestinians averaged approximately $75 million per year. That average has increased
during this decade, but the outbreak and continuation of the second Palestinian intifada (or
“uprising”) and (as mentioned above) Hamas’s heightened role in Palestinian politics have made
it more difficult to implement effective and lasting aid projects that serve U.S. interests.
Contributions from the United States to UNRWA (which were first made from the time of
UNRWA’s inception in 1949) have continued.
¢ȱȱǯǯȱȱȱȱȱ
ȱȱȱ ȱ
Most aid to the Palestinians is provided by USAID to U.S.-based non-governmental organizations
operating in the West Bank and Gaza. 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. The program is
subject to a vetting process 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.3
3 The effectiveness of the USAID vetting process was questioned in a February 2009 article. See Matthew Levitt, “How
Not to Fund Hamas: Scrutinize Those Who Receive U.S. Aid,” New York Daily News, February 4, 2009. In response to
the Levitt article, USAID issued a statement to CRS on February 5, 2009 stating that the initial vetting procedures that
began seven years ago have been fully revised. According to the USAID statement, “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.” The USAID statement additionally asserted that
“we believe [Levitt, the author of the article in question] is confusing the WB/G [West Bank/Gaza] pilot PVS [Partner
Vetting System], which is active, with the Agency wide PVS, which has not yet been rolled out worldwide” (emphasis in
original) and that USAID’s “West Bank/Gaza program possess[es] the most comprehensive partner vetting system for
foreign assistance throughout the U.S. Government.” Other sources corroborate the assertion made in USAID’s
statement that its West Bank and Gaza program is one of the most, if not the most, rigorously vetted USAID programs
worldwide. See Walter Pincus, “Plan for Terror Screening of Aid Groups Cut Drastically,” Washington Post, August
30, 2007; Federal Register, vol. 2, no. 36, pp. 39042-39044.
ȱȱȱ
Řȱ
ǯǯȱȱȱȱȱȱ
ȱ
ȱȱȱȱȱ¢ȱ
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.4 Recent instances in
which the United States has provided direct assistance to the PA as a result of special presidential
action include the following:
• In January 2007, President Bush reprogrammed $86.362 million in prior-year
funding into the International Narcotics Control and Law Enforcement (INCLE)
account to support Palestinian civil security forces loyal to President Abbas.5
Chairwoman Nita M. Lowey of the House Appropriations Subcommittee for
State, Foreign Operations, and Related Programs put a hold on the funds in
February 2007, reportedly seeking assurances that they would only be used for
non-lethal assistance.6 Obligation of the funds for non-lethal purposes eventually
began in June 2007, the month the Hamas-led unity government was dissolved
and the new Fayyad PA government was formed.7
• In June 2007, President Bush issued a waiver to provide an additional $18
million in direct assistance to the PA to be used for a variety of purposes,
including democracy assistance and security assistance.8
• In February 2008, President Bush issued a waiver to provide $150 million in
budgetary assistance to the PA to “avert a serious and immediate financial
crisis.”9 Chairwoman Lowey again declared a hold, requesting greater details
about the funds’ allocation.10 The funds were disbursed to the PA after the State
Department delivered a certification (dated March 14, 2008) directly to
Chairwoman Lowey stating that the PA had established a single treasury account
and a single civil service payroll roster.11
• Another $150 million in budgetary assistance was provided to the PA in October
2008 via presidential waiver.12
4 See P.L. 110-161, Division J, Limitation on Assistance to the Palestinian Authority, Sec. 650. This law also expressly
prohibits using funds transferred to the PA to pay salaries of PA employees in the Gaza Strip.
5 See Presidential Determination No. 2007-11. Under Chapter 8 of part I (Section 481) of the 1961 Foreign Assistance
Act (as amended): “Notwithstanding any other provision of law, the President is authorized to furnish assistance to any
country or international organization, on such terms and conditions as he may determine, for the control of narcotic and
psychotropic drugs and other controlled substances, or for other anticrime purposes.”
6 See “Splits Between U.S. and Europe Over Aid for Palestinians,” International Herald Tribune, February 22, 2007.
7 CRS conversation with U.S. Department of State official, September 16, 2008.
8 See Presidential Determination No. 2007-20.
9 See Presidential Determination No. 2008-12.
10 “Appropriator Wants Palestinian Authority Aid on Hold Until Accountability in Place,” Congressional Quarterly,
March 4, 2008.
11 The certification was required by the 2008 foreign operations bill. See P.L. 110-161, Division J, Title III, Economic
Support Fund.
12 See Presidential Determination No. 2009-02.
ȱȱȱ
řȱ
ǯǯȱȱȱȱȱȱ
ȱ
ȱȱȱȱ¢ȱȱ
As mentioned above, aid has been given to train, reform, advise, house and provide non-lethal
equipment for PA security forces loyal to President Abbas in an effort both to counter militants
from organizations such as Hamas, Palestinian Islamic Jihad, and the Al-Aqsa Martyrs’ Brigades,
and to establish the rule of law for an expected Palestinian state. This assistance, planned by the
Bush Administration to last at least through 2011, has come from the INCLE account—to which a
total of $161,362,000 has been appropriated or reprogrammed since June 2007. Since Hamas
gained control of the Gaza Strip, Lt. Gen. Keith Dayton, the U.S. Security Coordinator, has
helped with the “gendarmerie-style” training of roughly 400 Presidential Guardsmen and 1,500
National Security Forces troops at the International Police Training Center near Amman, Jordan.13
Most reports agree that law and order have improved where these PA forces have been deployed,
but uncertainty remains (particularly among some Israeli officials) over the willingness and
ability of the forces to incapacitate militants. Some Palestinians and outside observers 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 Bank and its recent military
campaign in Gaza.14
ǯǯȱȱȱȱ
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 1947-1949 Arab-Israeli
war and their families—now comprising approximately 4.6 million Palestinians in Jordan, Syria,
Lebanon, the West Bank, and Gaza.15 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.
According to the State Department’s Bureau of Population, Refugees, and Migration (PRM), U.S.
contributions to UNRWA for 2008 totaled approximately $185 million.16 This figure does not
include the December 30, 2008 U.S. contribution of $85 million from the MRA account toward
UNRWA’s 2009 appeals. To address post-conflict humanitarian needs in Gaza, a contribution of
$13.5 million to UNRWA from the ERMA account was authorized on January 27, 2009. It is not
clear whether the tensions which arose between Israel and UNRWA during the 2008-2009 Gaza
conflict (over casualties and damage inflicted by Israel on multiple occasions upon UNRWA staff,
Palestinian civilians and/or U.N.-marked property—explained by Israeli officials as accidental or
as occurring in response to fire from Palestinian militants at or adjacent to U.N.-marked grounds)
will have a significant and/or lasting effect on UNRWA’s future operations in Gaza.17
13 See Adam Entous, “Palestinian Forces Return from U.S.-Funded Training, Reuters, May 28, 2008; “500 Palestinian
Security Force Members Head to Jordan for U.S.-Funded Training,” Reuters, September 18, 2008.
14 See International Crisis Group, Ruling Palestine II: The West Bank Model? Middle East Report no. 79, July 17,
2008.
15 For further information on UNRWA, see CRS Report RS21668, United Nations Relief and Works Agency for
Palestine Refugees in the Near East (UNRWA), by Rhoda Margesson.
16 According to PRM, U.S. contributions in 2008 have constituted approximately 17.8% of the UNRWA General Fund
budget and have comprised a major share (up to 25%) of other UNRWA funds benefitting Palestinian refugees in
Lebanon, the West Bank, and Gaza. Over the last five years, annual U.S. contributions to UNRWA have averaged
approximately $137 million.
17 For further information on U.S. humanitarian assistance in relation to the Gaza conflict and on Israel-UNRWA
(continued...)
ȱȱȱ
Śȱ
ǯǯȱȱȱȱȱȱ
ȱ
ȱȱȱȱȱ
ȱȱǯǯȱȱȱ¢ȱȱȱȱȱ £ȱ
Instability in the Palestinian territories is, paradoxically, both a major reason for the recent
increase in U.S. assistance and a factor that could lead some to oppose maintaining 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 is 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.18 This debate has
intensified and has become more complicated in the wake of the 2008-2009 Gaza conflict, as
questions have been raised about how to undertake the task of post-conflict reconstruction with a
Hamas “government” in control of Gaza.
ȱȱȱȱȱ ȱȱ
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 produced a Palestinian Reform and Development
Plan for 2008-2010 (PRDP) that helped garner major international donor assistance pledges and
investment deals, respectively, at conferences in Paris (December 2007) and in Bethlehem and
Nablus (May and November 2008) that Middle East Quartet envoy (and former British prime
minister) Tony Blair helped organize. International pledges of support, however, have proved
insufficient to cover the PA’s monthly budgetary expenses, occasionally requiring last-minute
efforts by Fayyad and Blair to obtain outside assistance.19 Concerns over meeting expenses
appear likely to continue given the PA’s plans to contribute up to $667 million toward post-
conflict reconstruction in Gaza. An international donors’ conference intended to gather support
for Gaza reconstruction efforts is scheduled to take place in Cairo on March 2. The ultimate
(...continued)
tensions during the Gaza conflict, see CRS Report R40101, Israel and Hamas: Conflict in Gaza (2008-2009),
coordinated by Jim Zanotti.
18 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.
19 See Adam Entous and Mohammed Assadi, “Palestinian PM Gets Phone Firm Help to Pay Wages,” Reuters, August
8, 2008. See also The World Bank, Implementing the Palestinian Reform and Development Agenda: Economic
Monitoring Report to the Ad Hoc Liaison Committee, May 2, 2008. Only a small fraction of the $7.7 billion pledged in
Paris ($1.1 billion) was pledged for budgetary support, about $535 million short of the PA’s targeted needs for 2008. A
Washington Post article stated that many Arab governments have only fulfilled a small percentage of their pledges to
the PA since 2002, and, as a group, have conspicuously decreased donations since Fayyad’s government was installed
(although some have since made additional donations). See Glenn Kessler, “Arab Aid to Palestinians Often Doesn’t
Fulfill Pledges,” Washington Post, July 27, 2008.
ȱȱȱ
śȱ
ǯǯȱȱȱȱȱȱ
ȱ
success of Fayyad’s PRDP appears to hinge on two factors: keeping the public sector solvent
enough to sustain long-term private sector development, and getting Israeli restrictions loosened
or lifted on the movement of goods and people both within and out of the West Bank and Gaza.20
ŘŖŖŞȱȱŘŖŖşȱȱ
The United States appropriated a total of $414.5 million in bilateral assistance to the Palestinians
for FY2008:
• $239.5 million in Economic Support Fund (ESF) assistance,
• $150 million in direct assistance to the PA, and
• $25 million in INCLE security assistance.21
A “bridge fund” appropriation for FY2009 of $150 million in ESF assistance for the West Bank
and Gaza, along with $50 million in INCLE security assistance, was made pursuant to the
Supplemental Appropriations Act, 2008 (P.L. 110-252). Before the Obama Administration entered
office in January 2009, the Bush Administration requested additional ESF assistance of $75
million, along with $25 million in INCLE assistance, for FY2009.22
Table 1. U.S. Bilateral Assistance to the Palestinians, FY2004-FY2009
(regular and supplemental appropriations; current year $ in millions)
FY2009
Account
FY2004 FY2005 FY2006 FY2007 FY2008 Bridge Fund
& Request
ESF 74.5
224.4
148.5
50.0
389.5
225.0
P.L. 480 Title II (Food Aid)
-
6.0
4.4
19.488
-
-
INCLE
- - - - 25.0
75.0
Transition
Aid
- - 0.343
- - -
Total 74.5
230.4
153.243
69.488
414.5
300.0
Sources: U.S. Department of State, USAID.
20 See The World Bank, op. cit.; International Crisis Group, op. cit. Restrictions on movement have been a key factor in
the Palestinian economic downturn since the Second Palestinian Intifada (which began in late 2000), and the closure of
Gaza crossings following the Hamas takeover in June 2007 has led to a near economic standstill there.
21 P.L. 110-161; Supplemental Appropriations Act, 2008 (P.L. 110-252), Title I, Chapter 4, Subchapter A. $171 million
of the $239 million in ESF (none of which may be reprogrammed for direct transfer to the PA) and $25 million in
INCLE assistance were appropriated by P.L. 110-252. Both amounts will remain available for use until September 30,
2009.
22 The Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009 (P.L. 110-329) is a
continuing resolution authorizing FY2009 funding for all U.S. projects and activities, including aid to the Palestinians,
at the rate and in the manner they were provided for in P.L. 110-161 until the earlier of (1) passage of a superseding
law and (2) March 6, 2009.
ȱȱȱ
Ŝȱ
ǯǯȱȱȱȱȱȱ
ȱ
ȱȱ ȱ
Jim Zanotti
Analyst in Middle Eastern Affairs
jzanotti@crs.loc.gov, 7-1441
ȱȱȱ
ŝȱ