Olmert cabinet 298.
(photo credit: AP [file])
The Cabinet on Sunday agreed to transfer about NIS 240 million owed to the Palestinians, after delaying the payment last week.
Cabinet Minister Zeev Boim said the transfer was taking place Sunday.
The government had been expected at its weekly cabinet meeting on Sunday to decide to transfer the millions in customs and tax revenue Israel was supposed to have given the PA on Friday so that the Palestinian Authority can pay January salaries to its 135,000 workers.
Likud Chairman and prime minister hopeful Binyamin Netanyahu blasted the decision, saying, "We are trying to create international pressure against Hamas - so every shekel we give to a Hamas-led government is unexplainable."
Bank of Israel Governor Stanley Fischer indicated Saturday he would advise the government to transfer the funds.
"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 to the PA each month the customs and tax revenues it collects at the ports and crossing points on behalf of the PA.
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.
One government official 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 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 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 was 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 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 from 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.
Israel's reaction to the Palestinian elections will be the focus of the visit by 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 to the US as foreign minister and the first high-level dialogue between US and Israeli officials since the PA elections.
The US has made it clear that it is not seeking any compromise with 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. The only focus of the administration now, the official added, was working with the Palestinian interim government led by Mahmoud Abbas, and presenting a unified international front in regard to the demands presented to 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 Hamas needed 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 road map. The senior official said that the US still expected 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 the US is showing support for Israel 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, amounting to over $1 billion, for development projects in the wake of the disengagement. President Bush has voiced support for the request, but in the eight months that have passed since it was first presented, little has been done to approve it.
On Friday, a senior administration official said that talks regarding the aid package were 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."