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(photo credit: Ariel Jerozolimski)
Bank of Israel Governor Stanley Fischer indicated Saturday he would advise the government to transfer to the Palestinian Authority some NIS 240 million in customs and tax revenue Israel was supposed to have given the PA on Friday.
"I generally prefer to abide by agreements I've signed," Fischer said in an Israel Radio interview. "So that is at least one rationale for transferring the money. There are all kinds of other rationales, but that is my starting point."
Under the 1995 Israel-PA interim agreements, Jerusalem is to transfer the customs and tax revenues it collects at the ports and crossing points on behalf of the PA each month. Israel held up transferring the funds following Hamas's victory in the Palestinian Legislative Council election, saying that it wanted to "wait and see" whether Hamas would be in the new PA government before going through with the transfer. Hamas does not recognize the interim agreements, nor any PA agreements with Israel.
The cabinet was scheduled to decide at its weekly meeting Sunday whether the money should be transferred and is widely expected to approve the transfer, which would enable the PA to pay January salaries to some 135,000 workers.
One-government officials said that Israel wanted to make sure, however, that the money would only be going to pay the salaries, and would not somehow end up in Hamas's hands.
The PA is facing a severe financial crisis, due to the Israeli decision not to transfer tax revenues and a European decision late last year to withhold funds because of lack of transparency in the PA and because the PA hired new workers and raised salaries.
Israel's position is that it will not cooperate with the PA if Hamas is a member of the government and does not disavow terrorism, recognize Israel and accept all previous agreements with it.
In addition to Fischer, the defense establishment - both the IDF and the Shin Bet (Israel's Security Agency) - have come out in favor of transferring the money as well, concerned that leaving so many people without salaries would plunge the Palestinian areas deeper into chaos and anarchy. Both Egypt and the US have also urged Israel to transfer the money, at least during the period of a transitional government inside the PA.
The US administration, meanwhile, is working to ensure a flow of foreign aid to the PA in order to deal with the financial crisis the Palestinians are facing. A senior administration official said Friday that though the US itself cannot assist the Palestinians directly, it is trying to find ways to help the Palestinian interim government overcome its cash flow problems.
"We've taken a decision here that we want to support the interim government under President Abbas", the official, who spoke under condition of anonymity said, "they have a significant need for outside support and we have agreed to try and help them with this process, trying to make sure that other potential donors are trying to be supportive."
The US expects the major donors of the PA, namely the EU, Japan and Arab countries, to find ways to provide the PA with cash that will be used mainly for paying salaries of workers in the public sector.
The senior administration official added that the main goal of the US now is to strike the right balance between making sure that the Palestinian people are not cut off of all foreign aid and the need to make sure money does not get to the hands of terrorists.
"I don't think anybody, including in Israel, wants to see desperate people," the official said. The US was not putting pressure on Israel to transfer immediately the tax money it has collected for the PA, though it does see this money as being owed to the PA.
"We have a dialogue with Israel about it," the senior official said, adding that the administration recognizes the fact that "this is not an easy choice" for Israel. The issue of Israel's reaction to the Palestinian elections will be in the center of the upcoming visit of Foreign Minister Tzipi Livni to Washington this week. Livni will meet Secretary of State Condoleezza Rice on Wednesday and according to administration officials the US would like to hear from her about Israel's views and concerns in light of the new situation in the Middle East.
This will be Livni's first visit as Foreign Minister in the US and the first high level dialogue between US and Israeli ministers since the PA elections. The US has made it clear that it is not seeking any compromise with the Hamas and it will not try to accommodate the organization's views. "The burden is on them to modify a position that has been unacceptable for the international community", said the senior official, adding that the only focus of the administration now is working with the Palestinian interim government led by Mahmud Abbas and presenting a unified international front in regard to the demands from the Hamas.
These demands - recognizing Israel, renouncing violence and giving up terror - are, according to the official, "entirely consistent with Israel's national and security needs." The official stressed that the Hamas needs to adhere to the terms of the road map, even though it was elected on a platform that is "directly contradictory" to the plan. At present, the US is not putting pressure on Israel to move ahead with the dismantling of illegal settlements, a provision detailed in the roadmap.
The senior official said that the US still expects Israel to live up to its obligations on the issue of settlements and outposts, but "our preference is to give the government of Israel, the people of Israel space in which to deal with these issues." The official added that the violence in Amona last week was "a matter of some concern" to the US. The administration will not call on Israel publicly to dismantle more outposts, since this would be seen as a pressure which would make things more difficult for Israel. While on the political level the US is showing support to the Israeli government both by accepting Israel's view of Hamas as not being a partner for negotiations and by not pressuring the Olmert government on the issue of settlements, the administration is cool to the Israeli request for further financial aid for the development of the Negev and Galilee.
Israel had put forth a request for a special aid package, reaching over a billion dollars, for development projects in the wake of the Gaza disengagement. President Bush has voiced support for the request, but in the eight months that have passed since it was first presented, not much has been done to approve it.
On Friday, a senior administration official said that the talks are still going on, but he stressed the need for Israel to understand the financial difficulties the US is facing.
"This is a really tough budget year for us," said the official, referring to the costs of the war in Iraq, homeland security and the costs incurred by hurricane Katrina, "I'm sure our friends in Israel understand that."