U.S. Foreign Aid to the Palestinians
Jim Zanotti
Specialist in Middle Eastern Affairs
April 4, 2012
Congressional Research Service
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www.crs.gov
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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 some
already-appropriated FY2011 U.S. aid to the Palestinians, largely due to Palestinian efforts—
currently on hold—to seek greater international support of Palestinian statehood outside of
negotiations with Israel. Palestine Liberation Organization (PLO).
Additionally, various agreements since May 2011 between Fatah and Hamas leaders have raised
concerns among some Members of Congress about continuing U.S. budgetary and security
assistance to a PA government whose composition 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 Hamas-
controlled 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.
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Contents
Introduction: Issues for Congress .................................................................................................... 1
Palestinian U.N. Initiatives and Possible Fatah-Hamas Consensus—Effects on Aid...................... 2
Congressional Holds on FY2011 Aid ........................................................................................ 3
FY2012 Aid and FY2013 Request............................................................................................. 5
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............................................................................ 10
Types of Funding Programs .............................................................................................. 10
Vetting Requirements and Procedures............................................................................... 10
Direct Assistance to the Palestinian Authority......................................................................... 11
U.S. Security Assistance to the Palestinian Authority ............................................................. 13
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 ................................................................................... 21
Economic Development and International Donor Assistance ................................................. 22
Conclusion ..................................................................................................................................... 25

Figures
Figure 1. West Bank and Gaza Strip Gross Domestic Product (GDP) Per Capita: 1999-
2009 ............................................................................................................................................ 24

Tables
Table 1. Proposed Spending Plan for FY2012 Bilateral Assistance ................................................ 5
Table 2. Proposed Spending Plan for FY2013 Bilateral Assistance ................................................ 6
Table 3. U.S. Bilateral Assistance to the Palestinians, FY2005-FY2013 ........................................ 9
Table 4. Historical U.S. Government Contributions to UNRWA .................................................. 15

Contacts
Author Contact Information........................................................................................................... 25

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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 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 Israeli-
Palestinian 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
U.S. policymakers routinely call for greater or more timely assistance from Arab governments in
line with their pledges.

1 For more information on Hamas and these terrorist designations, see CRS Report R41514, Hamas: Background and
Issues for Congress, by Jim Zanotti.
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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 Aid
In late 2011, Palestine Liberation Organization (PLO) and PA officials pursued action in the
United Nations aimed at solidifying international support for Palestinian statehood. On September
23, 2011, Mahmoud Abbas, who serves as PLO chairman as well as PA president, presented an
application to the U.N. Secretary-General for Palestinian U.N. membership. The Security Council
did not vote on the Palestinian application owing to a deadlock in its membership committee over
whether the West Bank and Gaza Strip meet the requisite criteria for statehood. However, the
U.N. Educational, Scientific and Cultural Organization (UNESCO) admitted “Palestine” as a
member in the fall of 2011.
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. In February 2011, Abbas and Meshaal reached additional agreement in
Doha, Qatar on a PA government that Abbas would lead as prime minister until such time as
elections can be held. However, internal disagreements within Hamas over the Doha agreement—
possibly reflecting divisions over Hamas’s overall strategy and relationship with Iran and other
countries in region—have apparently 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 For further

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
Palestinian Authority should it persist in efforts to circumvent direct negotiations by turning to the United Nations or
other international bodies.”
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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, by Jim Zanotti and Marjorie Ann Browne.
Congressional Holds on FY2011 Aid
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, Representative Nita Lowey, then
chairwoman 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.4
Various Members of congressional committees with jurisdiction over the authorization and
appropriation of U.S. aid to the Palestinians placed informal holds on the obligation of the
following tranches 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
• $147.6 million in International Narcotics Control and Law Enforcement (INCLE)
non-lethal assistance for PA security forces had also been subject to a hold.6
Media reports and statements from Member offices indicated that Representative Kay Granger,
chairwoman of the House Appropriations Subcommittee on State, Foreign Operations, and
Related Programs; and Representative Ileana Ros-Lehtinen, chairman of the House Foreign
Affairs Committee, had placed a hold on the ESF funds, and Chairman Ros-Lehtinen placed the
hold on the INCLE funds.7 Chairman Ros-Lehtinen reportedly released her hold on the INCLE
funding in the fall of 2011. In early 2012, $40 million of the ESF was released. In March 2012,
Chairwoman Granger released her hold on the remaining ESF, explaining her reasoning behind
both the hold and the timing of its release in a statement quoted by Reuters:
I have taken a strong position on aid to the Palestinian Authority to send a message that
seeking statehood at the United Nations, forming a unity government with Hamas and
walking away from the negotiating table with Israel were not pathways to peace. Right now
it is in our interest—and the interest of our allies in the region—to allow aid to flow to
address security and humanitarian concerns.8

4 “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,” CQ Today, March 4, 2008.
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/checkpoint-
washington, October 4, 2011.
8 “U.S. lawmakers release $88.6 million in aid to Palestinians,” Reuters, April 4, 2012.
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However, Chairman Ros-Lehtinen has reportedly retained a hold on approximately $60 million of
the ESF project assistance for the West Bank and Gaza. It is unclear how long the hold might last.
Additionally, she reportedly asked that the Administration not use the funds released for
“‘assistance and recovery in Hamas-controlled Gaza,’ West Bank road construction, or trade and
tourism promotion in the Palestinian territories.”9 She also reportedly expressed concern that the
Administration had “threatened to spend the money ‘over congressional objections’ if the
lawmakers' holds were not lifted.”10
At a March 20, 2012, House Foreign Affairs Committee hearing addressing the Obama
Administration’s FY2013 budget request for foreign aid, Chairman Ros-Lehtinen asked U.S.
Agency for International Development (USAID) Administrator Rajiv Shah for a written response
to questions she posed and statements she made regarding aid to various countries. She made the
following statements regarding U.S. aid to the Palestinians:
On funding for the Palestinian Authority, Dr. Shah, the administration is pressing Congress
to release $147 million for Palestinians in the West Bank and Gaza. Among the arguments
utilized is that Abu Mazen [Mahmoud Abbas] needs to be supported because he's all we
have. However, the administration is not demanding that [Abbas] return to the negotiation
table with Israel without preconditions, nor that he stops his unilateral statehood scheme at
the U.N.
The administration also says we need to help rebuild the Palestinian economy, this at a time
when our economy is facing serious challenges, and Americans are suffering.
Now in the list of projects the administration wants to fund with the $147 million in taxpayer
dollars, there are some that are aimed at addressing humanitarian concerns -- funding for
water programs, health, food aid, and support for USAID programming. Congress and the
administration can find common ground on these.
However, there are others that Congress finds difficult to justify as advancing U.S. national
security interests or in assisting our ally and friend Israel. In this respect, if you could justify
$2.9 million for trade facilitation, $4.5 million for tourism promotion, and $8.1 million for
road construction.
Specifically, I would ask that you justify a total of $26.4 million in reconstruction and
recovery for Hamas-run Gaza that includes cash-for-work programs. And more broadly, how
much has the U.S. spent in total since 1993 in West Bank and Gaza, and how much is the
administration proposing we spend next year, and how can we justify that?
None of the $200 million in FY2011 direct budgetary assistance for the PA was subjected to a
hold. 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.11

9 Ibid.
10 Ibid.
11 Jennifer Steinhauer and Steven Lee Myers, “House Republicans Discover a Growing Bond with Netanyahu,” New
York Times, September 21, 2011.
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FY2012 Aid and FY2013 Request
Aid to the Palestinians for FY2012 was appropriated at the levels requested by the Obama
Administration pursuant to the Consolidated Appropriations Act, 2012 (P.L. 112-74). See Table 1
below for details of the Administration’s spending plan for this aid. The Administration’s FY2013
budget request seeks ESF and INCLE aid to the Palestinians at reduced levels from FY2012. See
Table 2 below for figures and details of the Administration’s spending plan for this aid.
According to the Administration’s FY2013 congressional budget justification, USAID’s West
Bank and Gaza mission “will undergo a strategic planning exercise in the coming months. As a
result of this exercise, USAID’s strategic objectives in the West Bank and Gaza will be defined in
a new five year strategy which will guide program and resource planning in FY2013 and beyond.
As part of this exercise, past performance of existing USAID projects will be reviewed and future
programmatic choices will be discussed. The Mission’s strategy development process will help
identify the key sectors in which USAID programs can achieve the greatest programmatic impact
with the resources available.”12
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 inter-
institutional 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).
Notes: All amounts are approximate.
a. See footnote 20.

12 U.S. State Department, FY2013 Congressional Budget Justification for Foreign Operations (Annex: Regional
Perspectives).
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Table 2. Proposed Spending Plan for FY2013 Bilateral Assistance
Amount Purpose
Economic Support Fund

($370 million total)
$150 million
Direct budgetary assistance to Palestinian Authority (PA) in West Bank
$220 million
Assistance for the West Bank and Gaza (through USAID)a
•
$22.5 million – governance, rule of law, civil society
•
$88 million – health, education, social services
•
$78.7 million – economic development
•
$30.8 million – humanitarian assistance
International Narcotics Control
and Law Enforcement
($70 million total)
$40.8 million
Training, non-lethal equipment, and garrisoning assistance to PA security
forces in the West Bank, supporting efforts by the U.S. Security Coordinator
$29.2 million
Assistance for PA Ministry of Interior and for the justice sector (prosecutors
and criminal investigators) to improve performance, efficiency, and inter-
institutional cooperation
Rule-of-law infrastructure, including courthouses, police stations, and prisons
Source: U.S. State Department, FY2013 Congressional Budget Justification for Foreign Operations (Annex:
Regional Perspectives).
Notes: All amounts are approximate.
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,13 who are among the largest per capita recipients of
foreign aid worldwide.14 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
president 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

13 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.
14 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.
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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 Secretary-
General’s office, the European Union (EU), 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 PLO to
pursue widespread international recognition of Palestinian statehood.
Major Conditions, Limitations, and Restrictions on
Aid
Annual appropriations legislation routinely contains the following conditions, limitations, and
restrictions on U.S. aid to Palestinians:15
• 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, or that results from an agreement
with Hamas and over which Hamas exercises “undue influence,” 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-

15 Conditions, limitations, and restrictions for FY2012 are contained in the Consolidated Appropriations Act, 2012
(P.L. 112-74), secs. 7035-7040 and 7086.
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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 president and judiciary (if not Hamas-
controlled) may under certain conditions receive aid pursuant to a presidential
waiver for national security purposes.
It is unclear whether a power-sharing government of the type anticipated under
the May 2011 or February 2012 Fatah-Hamas agreements would come under the
legal definition of a “power-sharing PA government that includes Hamas as a
member” or a government over which Hamas exercises “undue influence.” It is
also unclear whether it would come under the legal definition of a “Hamas-
controlled” PA government, and thus trigger the additional conditions on U.S. aid
cited above. 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.16
• 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.
1. has demonstrated a firm commitment to peaceful coexistence with the State of
Israel;
2. is taking appropriate measures to counter terrorism and terrorist financing in the
West Bank and Gaza in cooperation with Israel and others; and
3. 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
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).
• Palestinian Membership in the United Nations or U.N. Specialized Agencies: No
Economic Support Fund aid is permitted to the PA if the Palestinians obtain from
this point forward (the restriction does not apply to Palestinian membership in
UNESCO) “the same standing as member states or full membership as a state in
the United Nations or any specialized agency thereof outside an agreement
negotiated between Israel and the Palestinians.” The Secretary of State may

16 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.
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waive this restriction for national security reasons by filing a waiver detailing
how “the continuation of assistance would assist in furthering Middle East
peace.”17
• 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).18
Types of U.S. Bilateral Aid to the Palestinians
Table 3. U.S. Bilateral Assistance to the Palestinians, FY2005-FY2013
(regular and supplemental appropriations; current year $ in millions)
Account FY2005
FY2006
FY2007
FY2008 FY2009
FY2010
FY2011
FY2012
FY2013a
ESF 224.4
148.5
50.0
389.5
776.0
400.4
400.4
400.4
370.0
P.L. 480
6.0 4.4 19.488
-
20.715
-
-
-
-
Title II
(Food Aid)
INCLEb - -
-
25.0 184.0 100.0 150.0 113.0 70.0
Total 230.4
153.243
69.488
414.5
980.715
500.4
550.4
513.4
440.0
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 FY2013 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).

17 P.L. 112-74, sec. 7086(a).
18 P.L. 112-74, secs. 7039-7040. 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).
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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 Department19) to U.S. non-
governmental organizations (NGOs) operating in the West Bank and the Gaza Strip.20 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).21 See Table 1 and Table 2
above for the Obama Administration’s proposed spending plans for FY2012 and FY2013 ESF
West Bank/Gaza assistance.
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.22 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.23

19 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.
20 The State Department’s FY2012 Congressional Budget Justification for Foreign Operations (Annex: Regional
Perspectives), p. 571, 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.”
21 For further detail on the types of projects funded, see GAO, Foreign Assistance: U.S. Assistance to the West Bank
and Gaza for Fiscal Years 2008 and 2009, May 14, 2010.
22 P.L. 112-74, 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.”
23 “Audit: Terrorists Got U.S. Aid; Agency’s Screening Called Inadequate,” Chicago Tribune, November 16, 2007;
Testimony of Henrietta Fore, then 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
(continued...)
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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.24
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.25
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.26 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.27 Annual appropriations legislation also routinely places
conditions on aid to any power-sharing PA government “of which Hamas is a member,” and the

(...continued)
Budget for the U.S. Agency for International Development, February 27, 2008.
24 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.
25 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
antiterrorism clauses and certifications during their contracting process.
26 Ileana Ros-Lehtinen, Chairman 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 anti-
Semitic 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.
27 See P.L. 112-74, 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: Provided, That the report shall also detail the steps the Palestinian
Authority has taken to arrest terrorists, confiscate weapons and dismantle the terrorist infrastructure.”
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FY2012 bill extended these conditions to any PA government that result from an agreement with
Hamas over which Hamas has “undue influence” (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.28
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 $550 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.29
• 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.30
• 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).31
• In August 2011, $50 million in budgetary assistance from the ESF account were
provided via presidential waiver.32
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.33

28 Congressional briefing with State Department and USAID officials, July 9, 2009.
29 Presidential Determination No. 2009-23.
30 Presidential Memorandum 2010-06.
31 Presidential Determination 2011-1.
32 USAID FY2011 Congressional Notification #133, August 18, 2011; Presidential Determination 2011-14, August 30,
2011.
33 USAID FY2011 Congressional Notification #133, August 18, 2011.
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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 but increasing proportion of
this training and infrastructure assistance has been provided to strengthen and reform the PA
criminal justice sector (see Table 1 and Table 2 above). This assistance has come from the
International Narcotics Control and Law Enforcement (INCLE) account—to which a total of
$658.4 million has been appropriated or reprogrammed for use in the West Bank since 2007. The
Obama Administration has requested an additional $70 million in FY2013 INCLE funding.
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 as of late 2011 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 4,200 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 eight 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 for
FY2012:
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.34 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

34 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.
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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.35
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 Bank36 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,
a possible U.N. action on Palestinian statehood in September 2011, and periodic outbursts of
violence.
How potential Fatah-Hamas consensus on a PA governing arrangement 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 4 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.37 UNRWA also creates

35 See, e.g., Nathan Thrall, “Our Man in Palestine,” New York Review of Books, October 14, 2010. For further
discussion of human rights concerns surrounding PA security forces in the West Bank and Hamas in Gaza, see Human
Rights Watch, Internal Fight: Palestinian Abuses in Gaza and the West Bank, July 29, 2008.
36 See International Crisis Group, Squaring the Circle: Palestinian Security Reform Under Occupation, Middle East
Report No. 98, September 7, 2010; International Crisis Group, Ruling Palestine II: The West Bank Model? Middle East
Report No. 79, July 17, 2008. 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.
37 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.
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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.
Table 4. 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.38
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

38 See, e.g., Michael S. Bernstam, “The Palestinian Proletariat,” Commentary, December 2010.
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Gaza. They generally prefer UNRWA to the uncertain alternative that might emerge if UNRWA
were removed from the picture.39
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.40 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).41
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.42
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. 87-
195), 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.”

39 See U.S. State Department, FY2011 Congressional Budget Justification for Foreign Operations (Volume 2), p. 86:
“U.S. government support for UNRWA directly contributes to the U.S. strategic interest of meeting the humanitarian
needs of Palestinians, while promoting their self-sufficiency. UNRWA plays a stabilizing role in the Middle East
through its assistance programs, serving as an important counterweight to extremist elements.”
40 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. 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.
41 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.
42 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.
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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.”43 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
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.”44 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.45 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 has signed a similar document with UNRWA for 2011 and 2012.46
• 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.47
• 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.48 In response, State says that it now screens quarterly, against the

43 GAO, Measures to Prevent Inadvertent Payments to Terrorists…, op. cit.
44 Ibid.
45 Ibid.
46 “Framework for Cooperation Between UNRWA and the Government of the United States of America for 2012,”
available at http://www.state.gov/j/prm/releases/frameworknew/185819.htm. The 15 enumerated criteria are found in
Annex 2 of the framework document.
47 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.
48 GAO, Measures to Prevent Inadvertent Payments to Terrorists…, op. cit.
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Excluded Parties Lists System (EPLS, which is a list of parties excluded
throughout the U.S. government from receiving federal contracts49),
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
$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.50
• 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.51
• 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.”52
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.53 Through reference to H.Rept. 111-151, Section 7049(d) of P.L. 112-74 requires the
same report for FY2012, without an accompanying cap on contributions. Additionally, the
conference report for P.L. 112-74 (H.Rept. 112-331) endorsed an earlier Senate report (112-85) in
which the Senate Appropriations Committee directed GAO to submit a report assessing

49 U.S. General Services Administration website at https://www.acquisition.gov/faqs_whatis.asp.
50 CRS correspondence with State Department, August 9, 2010.
51 GAO, Measures to Prevent Inadvertent Payments to Terrorists…, op. cit.
52 Ibid.
53 See H.Rept. 111-151, Joint Explanatory Statement of the Committee of Conference, Title XI, “Migration and
Refugee Assistance.” The United Nations Transparency, Accountability, and Reform Act of 2011 (H.R. 2829),
introduced by House Foreign Affairs Committee Chairman Ileana Ros-Lehtinen, was reported by the Committee on
December 8, 2011. H.R. 2829, if enacted, would require the Secretary of State to certify that UNRWA was meeting
various criteria pertaining to transparency and anti-incitement and anti-terrorism measures before permitting U.S.
contributions to UNRWA, and would cap any such contributions.
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1. the ability of the Palestinian Authority to assume responsibility for any of the
programs and activities conducted by the U.N. Relief and Works Agency in the
West Bank;
2. actions required by the Palestinian Authority in order to assume such
responsibility; and
3. the opinion of the Department of State and relevant ministries of the Government
of Israel, including the Ministry of Defense, on the viability of transitioning such
programs and activities from UNRWA to the Palestinian Authority.
Issues for Congress in Determining Future Aid
Hamas and a “Unity Government”?
Questions persist over whether and how Fatah and Hamas might reach consensus on a PA
governing arrangement. These questions include how PA (West Bank) and Hamas (Gaza) security
operations might be integrated, when and how Palestinian presidential and legislative elections
might be conducted, and who might occupy PA government positions.
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) or a
government resulting from an agreement with Hamas over which Hamas has “undue influence”
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 Secretary-General’s office, 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 of 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.
• 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
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should actively dissuade others in the international community—particularly European and Arab
actors—from engagement and contributions.54
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 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.
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 a consensus Fatah-
Hamas PA governance arrangement 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.”55
• 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. This possibility
could be exacerbated by the region-wide unrest and political change that has been
ongoing since early 2011.
The PLO’s application for U.N. membership for a Palestinian state in September 2011 and
UNESCO’s admittance of “Palestine” in the fall of 2011—in concert with the factors listed
above—is likely to further complicate prospects for a negotiated two-state solution.56 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

54 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.
55 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.
56 See CRS Report R42022, Palestinian Initiatives for 2011 at the United Nations, by Jim Zanotti and Marjorie Ann
Browne.
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“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. Several 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 limited,57 though appear to be increasing in early 2012.58 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. Exports from Gaza are reportedly
permitted, but not to Israel or the West Bank, which historically have constituted approximately
85% of Gaza’s export market.59 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. In the meantime, occasional
skirmishes between Palestinian militants (mostly non-Hamas militants) and Israel along Israel’s
borders with Gaza and Egypt’s Sinai Peninsula, and periodic rocket and mortar barrages 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
the 111th Congress signed a letter to President Obama that requested a substantive lifting of the
closure regime.60
Strengthening the PA in the West Bank
Instability in the West Bank and the Gaza Strip is, paradoxically, both a major reason for
increased U.S. assistance over the past five 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

57 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; Sarah A. Topol, “'Gaza Is Not Darfur!’”, Slate.com, August 5, 2010.
58 CRS in-person conversation with NGO representative based in Israel, March 27, 2012.
59 Ibid.
60 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.
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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.61 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.62 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 a potential Fatah-Hamas consensus governing arrangement 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”63 that have helped garner major international donor
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 Gaza64 and on Palestinian
development projects in so-called “Area C”;65 and

61 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.
62 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.
63 See, e.g., Palestinian National Authority, Palestine: Ending the Occupation, Establishing the State, Program of the
Thirteenth Government, August 2009. 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.”
64 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
(continued...)
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• Overall political progress to overcome Palestinian factional/geographical division
and towards Palestinian statehood.66
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.67 According to the International Monetary Fund, however, West Bank
growth
slowed to 5.7 percent in 2011 (compared to an average of 9 percent in 2008–10), with a
weakening of activity in agriculture. The slowdown reflects continued fiscal retrenchment,
declining donor aid (especially from Arab donors), the global economic slowdown, as well
the absence of further easing of restrictions on internal movement and exports. The [West
Bank’s and Gaza’s] exports to Israel are estimated to have declined by a cumulative 24
percent over 2008-11, reflecting restrictions on exports to Israel.68
Additionally, 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.69
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, remain in
limbo pending the outcome of Fatah-Hamas deliberations on interim governance arrangements
and possible future elections.

(...continued)
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.
65 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+ISRAELI-
PALESTINIAN+INTERIM+AGREEMENT.htm.
66 See Nathan J. Brown, “Are Palestinians Building a State?”, Carnegie Endowment for International Peace, June 2010.
67 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.
68 International Monetary Fund, Recent Experience and Prospects of the Economy of the West Bank and Gaza: Staff
Report Prepared for the Meeting of the Ad Hoc Liaison Committee, March 31, 2012.
69 See World Bank, Statement at the Ad Hoc Liaison Committee Meeting, Brussels, Belgium, April 13, 2011; Zahi
Khouri, “The West Bank’s Deceptive Growth,” New York Times, September 8, 2009.
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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.70 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.71
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

70 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.”
71 See Glenn Kessler, “Arab Aid to Palestinians Often Doesn’t Fulfill Pledges,” Washington Post, July 27, 2008;
“Falling Short,” Washington Post, July 27, 2008.
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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 internationally on Palestinian statehood and observes how
various Fatah-Hamas agreements since May 2011 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

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