Saudi Arabia could bail the Palestinian Authority out of an impending fiscal crisis following the landslide victory of Hamas if it transfers the $100 million to the Palestinian Authority that it pledged to PA chairman Mahmoud Abbas when he visited there in late December. In addition to bailing out the PA, the money would also give Israel and the world more time to ponder how to deal with the PA following Wednesday's Hamas victory.

PLC ELECTIONS AFTERMATH

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According to western diplomatic sources, Saudi Arabia pledged the money to Abbas because the European Union refused to transfer payment of some $60 million in November after the PA embarked on campaign economics: raising salaries and putting more people on its payroll. The Saudi money would be enough for the PA to pay January's salaries - about $60 million - and give it some additional breathing room. Israel is scheduled to transfer to the PA some $60 million in taxes and customs revenues it collects for the PA on Friday. Acting Prime Minister Ehud Olmert said at Sunday's cabinet meeting that Israel still had not decided whether - in light of the Hamas victory - it would indeed transfer the funds. In the evening, at a press conference with visiting German Chancellor Angela Merkel, Olmert said that Israel "has no intention of transferring funds" that will aid terrorists. Underscoring that Israel was "very sensitive" to Abbas's position, he said Israel had to be very careful that money it transferred would not later be used against Israel. Merkel said that Europe should not fund the PA as long as Hamas does not recognize Israel and disarm. Government officials have said that Israel had the option of delaying the decision for a few days to see what developed in the PA, who would be a part of the new government, and whether international pressure would force Hamas to renounce terrorism and repeal its charter. One of Israel's concern is that if the international community cuts off all funds to the PA, Iran will step in, increasing its influence and sway over the PA. If the Saudis make good on their $100 million pledge, the funds from Israel would be less critical for the PA, and Israel would buy some more time to watch the developments in the PA before deciding what to do with the funds. The money, government officials have pointed out, is not Israel's but rather tax and customs money it collects on behalf of the Palestinians. Israel held up the transfer of this money to the Palestinians in November 2000, soon after the outbreak of violence, for some 18 months, before restarting the transfers following intense international pressure. Israel is not the only party interested in buying some time to see what develops in the PA, and whether Hamas forms or is part of the future PA government, before deciding their aid policy to the PA. On the eve of two key international meetings Monday that will go a long way toward setting the tone as to how the world will now deal with the PA - a meeting of the Quartet in London and the EU foreign ministers in Brussels - Israeli diplomatic officials said the international community basically agreed with Israel about the need for Hamas to disarm and recognize it, but was also waiting to see what happens over the next few weeks before setting policy. Quartet envoy James Wolfensohn, for example, will not be turning to donor countries for aid to the PA in their current fiscal crisis - as has been done in the past -until the Quartet sets a clear policy regarding what type of dealings it will have with the PA now that Hamas won the elections. While the Quartet is expected to release a statement following Monday's meeting praising the PA for running a fair election, they are also expected to call on Hamas to renounce violence, disarm and recognize Israel. But the Quartet is not expected to get into finer policy matters - such as whether the international community should continue to support the PA - until it sees how Hamas behaves over the next few weeks. Likewise, no operative decisions are expected to come out of the EU meeting in Brussels. According to assessments reaching Jerusalem, there are some voices in the EU calling for Europe to avoid any direct discussion with Hamas, while others want the EU "to honor the will of the people." While the foreign ministers are expected to call on Hamas to disarm, denounce terrorism and recognize Israel, they are also - in the interest of balance - also expected to repeat their routine condemnation of the security fence, settlement construction and unauthorized outposts.

Saudi Arabia promises PA $100m

Exclusive: Could compensate for money held back by Israel, EU after Hamas win.