United States Aid to the Palestinians

United States Aid to the Palestinians

Order Code RS21594
March 4, 2005
CRS Report for Congress
Received through the CRS Web
United States Aid to the Palestinians
Clyde Mark
Specialist in Middle East Affairs
Foreign Affairs, Defense, and Trade Division
Summary
United States economic assistance for the Palestinians has averaged about $85
million per year since Israel and the PLO signed the 1993 Declaration of Principles.
Congress wants to ensure that U.S. assistance is used for legitimate humanitarian
projects and that no U.S. aid is diverted for military or terrorist use against Israel.
United States Aid to the Palestinians provides a description of the aid program and
tables with annual amounts for the Palestinians. The report will be updated as necessary.
See also CRS Issue Brief IB92052, Palestinians and Middle East Peace: Issues for the
United States, updated periodically.
Quick Facts
! The United States has never provided aid to the Palestine Liberation
Organization (PLO).
! The United States has provided aid directly to the Palestinian Authority
(PA) three times; $36 million in FY1994, $20 million in FY2003, and
$20 million in FY2005.
! U.S. economic aid to the Palestinians has averaged about $85 million per
year since 1993; there has been no military aid. (See Table 3, page 6.)
! The President has requested $150 million in FY2006 and an additional
$200 million in FY2005 supplemental aid for the Palestinians.
! About 80% of U.S. aid to the Palestinians is channeled through
contractors and 20% is channeled through private voluntary
organizations, both groups selected and monitored by USAID.
! U.S. aid for the Palestinians has not been earmarked in appropriations
bills since 1975.
Congressional Research Service ˜ The Library of Congress

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U.S. Aid for the Palestinians
The United States began providing assistance for the Palestinians in 1950 with
contributions to the United Nations Relief and Works Agency (UNRWA), the
international body created to provide food, shelter, medical attention, and education for
the Palestinian refugees from the 1948-1949 Arab-Israeli war. (See section on UNRWA
below.) In 1975, with strong support from private voluntary organizations, the United
States began to provide foreign assistance for Palestinian projects, primarily humanitarian
(child care, medical clinics) or infrastructure (clean water, roads, schools). Since 1975,
about 80% of U.S. aid funds for the Palestinians has gone through contractors and 20%
has gone through private voluntary organizations (PVOs). USAID selects the contractors
and PVOs, monitors their projects, and audits their accounts.
U.S. Pledge at the 1993 Donors Conference. After nine months of secret
negotiations, Israel and the PLO exchanged letters of mutual recognition on September
9, 1993, and signed a Declaration of Principles1 on September 13 that provided a
framework for negotiations intended to lead to a permanent peace settlement in five years.
At an October 1, 1993, Washington meeting, 46 donor nations pledged $2.4 billion for
the Palestinian entity. The donors established the “Holst Fund” at the World Bank
(named after Johan Jorgen Holst, the Norwegian Foreign Minister central to the
negotiations) to transfer funds from the international donors to the Palestinian entity. The
U.S. Administration offered $500 million ($125 million in loans or loan guarantees and
$375 million in grants) over 5 years for economic development of the Palestinian entity.
Palestinians drew only about $3 million of the $125 million available in loan guarantees.
The United States provided $36 million funding for the Palestinian Authority through the
Holst Fund. The remaining $339 million was delivered through PVOs and through
USAID contracts. No U.S. aid went directly to the PLO.
Table 1. U.S. Aid Obligations to the Palestinians, 1994-1998
(millions of dollars)
FY1994-
Program
Totals
FY1996
FY1997
FY1998
1995
Expand Economic
Opportunity
65.814
26.410
16.182
14.219
9.003
Scarce Water
193.269
69.832
32.764
50.969
39.704
Governance
35.160
3.073
9.364
11.500
11.223
Transition to Self Rule
49.268
39.132
.136
10.000
0
Short Term Develop. Needs
24.754
17.839
5.860
.300
.755
Totals
368.265
156.286
64.306
86.988
60.685
Source: USAID Statistical Annex - FY1997, p. 139-141.
1 For a description and status of the peace negotiations, see CRS Issue Brief IB91137, The Middle
East Peace Talks, updated periodically.

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Wye Agreement.2 On November 30, 1998, then President Bill Clinton told a
second donors conference in Washington that the United States would provide $400
million in grants for the Palestinians. (The President also requested $1.2 billion for Israel
and $300 million for Jordan to implement the Wye Agreement.) According to a State
Department report presented to Congress in late October 1999, the Wye funding for the
Palestinians would be spent as follows:
Palestinians: $400 million
$100 million — Community
Development (health, education, water,
infrastructure, services)
$30 million
— Rule of Law (law enforcement, human rights, train judges,
prosecutors, lawyers, etc.)
$10 million
— Industrial Estate - West Bank
$100 million — Gaza Port, Gaza-West Bank passageway
$30 million
— Scholarship Fund
$100 million — Jenin-Nablus Road
$30 million
— Contingency Fund
Congress did not include funding for the Wye Agreement in the Foreign Operations
Appropriations bills for FY2000 (H.R. 2606, S. 1234). The President vetoed H.R. 2606
in part because it did not contain the Wye Agreement funding. After negotiations with
the White House, the House of Representatives passed H.R. 3196 on November 5, 1999,
that included the Wye Agreement funding; $1.2 billion for Israel, $200 million for Jordan,
$25 million for Egypt, and $400 million for the Palestinians. H.R. 3196 was set aside and
replaced with H.R. 3422, which was included by reference in H.R. 3194, the consolidated
appropriations bill signed by the President on November 29, 1999 (P.L. 106-113) with the
funding intact. The $400 million Wye funding for the Palestinians was disbursed in fiscal
years 2000 through 2003 and was in addition to the annual “regular” aid levels of about
$75 million each year. (See Table 3, page 6)
Jenin and Disaster Relief. The supplemental appropriation for FY2002 (H.R.
4775, P.L. 107-206, signed on August 2, 2002) included $50 million in contingent
emergency disaster relief assistance for the Palestinians to repair damages inflicted during
the April-May 2002 Israeli military operations in the Palestinian city of Jenin. The
President did not allocate the $50 million for the Palestinians or any of the contingent
emergency funds because he did not agree with Congress on the nature of the
emergencies. The Department of State announced on April 21, 2003, that $50 million
was allocated for the Palestinians from the supplemental appropriations (P.L. 108-11).
The United States announced on July 2, 2003, that $30 million of the $50 million would
be used for infrastructure projects and to support Palestinian enterprises that lost business
2 The October 23, 1998 Wye Agreement called upon Israel and the Palestinians to implement
previous agreements. Israel was to withdraw from Palestinian areas, and open the Gaza airport
and seaport, and the Gaza-West Bank safe passage corridor, and the Palestinians were to stop
terrorism, collect illegal weapons, reduce the police force, amend the PLO covenant, and end
incitement.

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during the Israeli closures,3 and that $20 million would go to the PA to pay for
infrastructure and overdue utility bills owed to Israel.
U.S. Aid to the Palestinian Authority. In 1994, the United States provided $36
million through the Holst Fund for the PA, but did not give any additional direct aid to
the PA because of suspicions that the funds could be siphoned off for terror activities4 or
to line the pockets of corrupt officials, and because of a lack of confidence in Palestinian
President Yasir Arafat’s peaceful intentions. The United States announced on July 8,
2003, that it would provide the remaining $20 million of the $50 million from the FY2003
supplemental as direct aid to the PA for infrastructure projects.5 Resuming direct aid to
the PA in 2003 appeared to be a U.S. gesture of support for newly installed Prime
Minister Mahmud Abbas, an opponent of terrorism and a proponent of the “road map”
peace process.6 In November 2004, the White House proposed providing $20 million to
fund the January 2005 Palestinian presidential election. Congress suspected that the funds
would be diverted for terrorism or corruption, so the Department of State proposed and
Congress accepted that the $20 million be given to Israel to pay overdue Palestinian utility
bills, thus freeing up $20 million in other revenues to fund the election.
United Nations Relief and Works Agency (UNRWA)7
United Nations General Assembly Resolution 212 (III) of November 19, 1948,
recognized the need to provide funding for the Palestinian refugees. Paragraph 7 of
UNGA Resolution 302 (IV) of December 8, 1949, established the United Nations Relief
and Works Agency (UNRWA) to administer the distribution of food, shelter, clothing,
medical treatment, and education for the refugees. The U.N. General Assembly has
renewed the UNRWA mandate each year since. Contributions to UNRWA are voluntary
and may be made in either cash or kind. Frequently, UNRWA appeals to donor nations
to increase their contributions to cover additional emergency expenses.
Some Members of Congress have questioned continuing U.S. contributions to
UNRWA. Critics claim that many “ghosts” are on the UNRWA rolls, collecting benefits
that are undeserved or unneeded, and that such benefits may be diverted to illegal or
terrorist purposes. Critics also claim that refugee camps housing UNRWA recipients are
used as training grounds for guerrilla armies and terrorists. Others claim that textbooks
3 “US Gives Palestinians $30 Million in Recovery Aid,” Reuters, July 2, 2003. See also
[http://www.usaid.gov/wbg/headline_115.htm].
4 The USAID Inspector General reported that 75 audits have produced no evidence that any funds
were diverted to terrorists. [http://www.usaid.gov/oig/public/semiann/sarc0409.pdf].
5 Kessler, Glenn, “U.S. Plans to Provide Direct Aid to Palestinians,” Washington Post, July 9,
2003. See also [http://www.usaid.gov/wbg/headline_116.htm]. Deputy Secretary of State
Richard Armitage submitted a waiver on July 8, 2003, to provide aid to the Palestinian Authority
citing Section 451 of the Foreign Assistance Act as amended.
6 The “road map” proposed by the United Nations, Russia, the European Union, and the United
States in April 2003, called for Israeli withdrawals, Palestinian Authority reforms, a Palestinian
state, and a resumption of final status peace negotiations within three years.
7 See CRS Report for Congress RS21668, United Nations Relief and Works Agency for Palestine
Refugees in the Near East (UNRWA).

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in UNRWA schools are anti-Israel or anti-Jewish. Another frequently heard compliant
is that UNRWA has made no effort to settle the refugees permanently, do away with the
camps, and end UNRWA’s existence.8 UNRWA’s defenders point out that UNRWA
periodically purges the rolls to ensure that only those eligible and in need are receiving
benefits, and that the camps are the property of the host country, and are operated and
policed by the host country. UNRWA has no police force to stop military training in a
camp. UNRWA runs the schools but uses host country textbooks and curriculum because
the refugee students have to pass host country examinations. UNRWA defenders suggest
that complaints about the anti-Israeli nature of the textbooks should be directed to the host
countries. And, others point out that UNRWA does not have a United Nations mandate
to resettle the refugees, only to ensure their welfare.9
Table 2. U.S. Contributions to UNRWA, 1950-2002
(millions of dollars)
Year
Amount
Cumulative 1950-1991
1,618
1992
69
1993
68
1994
78
1995
74
1996
77
1997
79
1998
78
1999
81
2000
89
2001
101
2002
100
2003
146
2004
127
2005*
88
Cumulative 1950-2002
2,873
Source: Department of State.
* Regular contribution only. Before an anticipated emergency funding request
8 For a sampling of UNRWA critics, see Bard, Mitchell, Rewriting History in Textbooks, Chevy
Chase, Maryland, American-Israel Cooperative Enterprises, December 1993. Rosett, Claudia,
“The Real World: The U.N.’s Twisted Refugee Policies,” Wall Street Journal Europe, January
8, 2003. Dudkevitch, Margot, UNRWA Used by Terrorists, Jerusalem Post, April 1, 2003.
9 See UNRWA at [http://www.un.org/unrwa/].

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Current Considerations
Arafat died on November 11, 2004, and was replaced by President Mahmud Abbas
in the January 9, 2005 election, raising hopes that the peace process would resume under
the more acceptable Abbas. .President George W. Bush requested that Congress
appropriate $150 million in FY2006 funds and $200 million in a FY2005 supplemental
appropriation for the Palestinians. The United States’ pledge coincided with a $330
million European Union pledge made at the London conference on 2 March 2005. The
funds are intended to support the Abbas government and the new cabinet sworn in on 24
February.
Table 3, U.S. Assistance to West Bank & Gaza, FY1975-FY2004
($ in thousands)
Fiscal Year
Expenditures
Fiscal Year
Expenditures
1975
$1,000
1991
7,663
1976
1,572
1992
7,074
1977
3,416
1993
29,557
1978
2,687
1994
56,769
1979
6,801
1995
80,263
1980
3,000
1996
63,806
1981
2,500
1997
68,680
1982
6,000
1998
60,685
1983
6,500
1999
80,092
1984
8,500
2000
118,641
1985
12,141
2001
114,292
1986
13,950
2002
181,036
1987
8,400
2003
173,907
1988
6,911
2004
84,786
1989
20,903
1990
12,618
Total
$1,244,150
Source: U.S. Department of State, Agency for International Development, available online at
[http://usaid.gov/wbg/budget.htm].