Yasser Arafat transferred millions of dollars in international aid and taxes transferred to the Palestinian Authority by Israel to purchase large quantities of weapons, the PA chairman's former financial aide, Fuad Shubaki, has told the Shin Bet (Israel Security Agency). Some of the Israeli money, Shubaki told his investigators, was also used to fund Palestinian terror groups. Shubaki was apprehended two months ago during an IDF raid on the Jericho prison where he was being held together with Ahmed Sa'adat - leader of the Popular Front for the Liberation of Palestine - and the other assassins of former Israeli tourism minister Rehavan Ze'evi. Prior to his imprisonment in Jericho, Shubaki served as the chief financial officer for the Palestinian security forces and as such was the mastermind behind the Karine A weapons ship caught by the IDF loaded with advanced weaponry in the Red Sea in 2002 as it was making its way to the Gaza Strip. Under Arafat's direction, Shubaki, 64, told his interrogators, high-ranking PA security officials were involved in manufacturing and purchasing weapons in addition to funding terror groups in their war against Israel. Shubaki estimated that $7-10 million were used every two years to purchase arms for the Gaza Strip, and another $2 million were spent on weapons for the West Bank. The money, he said, came from international aid to the PA, tax money Israel routinely transferred to the PA and taxes collected in the Gaza Strip. Shubaki confessed to involvement in the purchasing of weapons for the head of the Tanzim terror group in Gaza, used in attacks against military installations and Israeli settlements in the Gaza Strip. [To read an archive interview the Post had with Shubaki, click here] He revealed that several senior Palestinian officials were involved in the allocation of the money to military purposes. Among them was Jibril Rajoub - head of the PA Preventative Security Force in the West Bank - who together with the other officials received payments for his part in the weapons purchases. Following the outbreak of violence in September 2000, Shubaki told his interrogators that Arafat ordered the appointment of PA officials in various Arab countries to facilitate the arms purchases. The PA officials would transfer Shibaki their arm-deal proposals and he would then take them to Arafat for final approval. In 2001, Shubaki said, Iran offered to assist the Palestinians in training soldiers, providing weapons and funding the construction of weapon factories. Arafat, he said, rejected the offer - made to Shubaki during a meeting with Iranian officials in Dubai - fearing it was an Iranian plot to undermine his rule. One of the largest weapon deals struck between Iran and the Palestinians was the attempt to smuggle over 50 tons of armaments aboard the Karine A ship in 2002. Shubaki revealed that the transaction was coordinated between the PA, Hizbullah and the Iranian Revolutionary Guard. In addition to the light weaponry used by the Palestinians at the time, the Karine A also carried Sagger guided anti-tank missiles used by Hizbullah against Israeli armor in Lebanon, LAW anti-tank missiles, long-range mortars, and mines. Also on board the vessel were short and long-range Katyusha, including 122 mm rockets with a range of some 20 kilometers. The ship was eventually intercepted by Naval commandos en-route to Gaza 500 km off of Israel's coast.