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March 12, 2007- Vol. 8, Issue 19


ISRAELI PRAISE FOR ARAB PEACE PLAN: Prime Minister Ehud Olmert said Sunday that Israel was willing to treat the 2002 Saudi peace initiative "seriously," adding that "we hope very much that at the meeting of heads of Arab states to take place in Riyadh, the positive elements expressed in the Saudi initiative will be revalidated and will perhaps improve the chances of negotiation between us and the Palestinian Authority." Olmert's comments follow a report by Israel Radio that Deputy Defense Minister Ephraim Sneh met by chance with Saudi Ambassador to the U.S. Adel al-Jubeir. At the end of a brief conversation, the Saudi diplomat reportedly said: "We have many problems to solve together."

Ha'aretz's Akiva Eldar writes that "five years after the missed opportunity of the Arab peace initiative approved in Beirut, the Arab League is offering Israel a second chance. In a Riyadh summit at the end of the month, the Arab League intends to pave the way for accelerated negotiations between Israel and the Palestinians and lay the groundwork for an end to the conflict along the northern border as well. Israeli acceptance of the initiative would be rewarded by 'normal relations' with all its neighbors." But Eldar added a note of caution, writing that "an Arab diplomat told me several days ago that it would be best if I lowered expectations of the Riyadh summit. Not that he doubts the sincerity of the Arab League's intentions. 'Our pessimism is derived from the condition of your leadership,' he said. 'What value would the summit decision have, if what concerns the prime minister is who will get to him first - Winograd, the state comptroller's report, or the attorney general?'" - all references to Olmert's domestic problems. (Ha'aretz, 3/5 & 3/11/07; Israel Radio, 3/11/07)

MAKING PEACE WITH HALF OF THE PALESTINIANS: Israel's embrace of the Saudi peace initiative stands in stark contrast to the cold reception that the Olmert government provided to the Palestinian national unity government agreement, negotiated between Hamas and Fatah at a Saudi-hosted summit in Mecca. According to a report in Ma'ariv, Prime Minister Ehud Olmert wants to push Palestinian President Mahmoud Abbas to walk away from that agreement, while two of Olmert's advisers, Shalom Turjeman and Yoram Turbowicz, have been meeting with senior Bush Administration officials to coordinate positions on this matter. Israeli policy makers are struggling with the question of how to treat Fatah officials who have been selected to serve as ministers in the national unity government.

Former Israeli Deputy Foreign Minister Rabbi Michael Melchior took issue with this strategy of divide and conquer. Writing in Ha'aretz, he noted that "it is not possible to make peace with only half of the Palestinians. Abu Mazen cannot supply all the goods himself. The authority he received from Hamas to hold negotiations and a referendum has both political and religious significance. Even the terrorist, Khaled Meshal, has unwittingly started to speak a different language. This cruel and hard-hearted man has not yet accepted the State of Israel as an accepted fact, but even his declarations that the PA is obliged to uphold the agreements with Israel is indeed 'a new diplomatic language' that Hamas has adopted because of 'national necessity.' Together with Israel's uncompromising demand for the eradication of terror and for maintaining security, we must also broaden the existing channels of dialogue. Those who do not want the current leadership will tomorrow get Islamic Jihad and al-Qaida instead. If we bury all hope about the current alternative, we will find ourselves facing an Arab world united behind the Iranian intentions to annihilate Israel. The continuation of the present situation will bring upon us nothing but disaster."

Looking back thirty years, Melchior identifies a constructive shift in the Arab and Muslim worlds' approach to Israel, that "ever since the messages sent by [Egyptian President] Anwar Sadat at the beginning of the 1970s and his historic visit to Jerusalem, there has been a slow but steady and constant process among the 22 Arab countries of coming to terms with, and reconciling to the idea of, the existence of the State of Israel. This process has not yet seeped down completely to the Muslim religious leadership. The rise in strength of Islam as an extremely significant force in politics has created a certain differentiation between the positions of the Muslim states and their spiritual leaders. Alongside expressions of hatred, some of them purely anti-Semitic, the first seeds of acceptance of the existence of Israel and a wish to become reconciled with it are starting to blossom among the spiritual leaders. This voice was heard loud and clear in the interfaith meetings with the spiritual and educational leaders, in courageous and intensive programs, and even in some religious rulings that emanated from the schools of learning of religious sages in Saudi Arabia, Egypt and the territories."

Melchior proposes that the Mecca agreement be used as a "ladder" that could offer Hamas "a way to climb down from the roof, from the utopian Muslim ideology to the ground of reality, a large part of which [is] the need to reconcile with the existence of the state of Israel... if the sides know how to use the ladder, they will be able, with its help and with the required caution, to reach another diplomatic horizon, one of hope and reconciliation. The group picture of the Palestinian leaders, dressed in white in Mecca, once again stresses the important place and the great power of the religious path on the way to solving the conflict. We, too, no less than the others, need to climb down the ladder." (Ha'aretz, 3/5/007; Ma'ariv, 3/6/07)

MONEY, IT'S A CRIME: The Palestinian Authority (PA) faces an acute financial crisis "that could threaten its very existence," the World Bank warned on Wednesday. According to a report by the international organization, the Palestinian economy declined in 2006 from an already low level, per capita gross domestic product dropped by at least 8 percent, and about 25 percent of the Palestinian labor force is now unemployed. In Gaza, the unemployment rate is even higher, 36 percent, up from 29 percent the year before. Meanwhile, poverty among government employees is growing, with 71 percent of civil servants living below the poverty line, compared with 35 percent in June 2005.

The bank criticized the PA's bloated payrolls, noting that it must try to reduce its wage bill from more than $93 million a month to $80 million a month, through steps including a hiring freeze, reducing salaries and voluntary retirement. "While the temptation among many Palestinians is to view overstaffing as a long-term problem to be addressed once the private sector is able to absorb the additional labor, the reality is that short-term fiscal imperatives will deny the PA that lengthy time frame for adjustment," the report said. The bank noted that the PA's payroll has steadily expanded by nearly 9 percent a year since 1999, roughly twice the rate of population growth. Some 165,000 Palestinians now work for the government as civil servants and in the security forces.

The World Bank report also said that it was "unclear" to what extent payments being made through Palestinian President Mahmoud Abbas's office were following the Palestinian government's established financial controls and internal audit procedures. "Anecdotal evidence has raised concerns of a significant reduction in transparency and accountability because of erroneous reporting and a failure to submit financial reports regularly," the report said. Abbas's office has received at least $265 million in funds since Hamas took power last year, mostly from Arab League states including Saudi Arabia, Qatar and Kuwait.

The report recommended that donor countries should stop bypassing the Hamas-controlled Finance Ministry when sending funds to the PA "when circumstances allow." The bank called for the re-establishment of the central account in the Finance Ministry, established under the stewardship of former Finance Minister Salam Fayyad, "and the practice of routing aid flows through the office of the president [should be] shut down."

In related news, Ma'ariv reported last week that $100 million of Palestinian tax revenue transferred to Abbas's office by Israel were not spent in accordance with an alleged agreement between Israel and Abbas's office. Israel expected the funds to be spent on bolstering the security forces subordinate to Abbas, on predetermined humanitarian programs, and on the operations of the Palestinian president's office. Instead, the funds were reportedly used to pay salaries and to repay debts. Israel reportedly asked Abbas's office to provide a list of expenditures for the $100 million it provided in this one-time transfer this January, and does not plan to transfer additional Palestinian tax revenues that Israel collects on the PA's behalf. (AP, 3/7/07; JTA, 3/8; Reuters, 3/7; Ma'ariv, 3/8/07)

SHARE IT FAIRLY: "It would be unfair to place responsibility for the PA's current dire fiscal and administrative condition solely upon the Palestinians," the World Bank report released on Wednesday claimed. "No administration would easily cope with the massive collapse in revenues that the PA was confronted with in 2006." The bank noted that tax revenues in the six months after the Hamas government was sworn in amounted to only $17 million a month compared with $104 million in the same period in 2005. The dire situation was made worse by Israeli restrictions on the movement of people and goods and Israel's policy of withholding tax rebates - to date more than $500 million. The bank also said that U.S. threats to prosecute banks dealing with the PA had exacerbated a crisis that was already apparent in 2005 when the PA was running a monthly deficit of $60 million.

The World Bank urged donor countries to keep aid levels high to sustain the Palestinian economy in the short term. It also called on Israel to radically improve the flow of goods and people in the Palestinian territories, including implementing the crossing points agreement negotiated with the aid of U.S. Secretary of State Condoleezza Rice. The bank said tax rebates collected by Israel "should be released directly to the Palestinian Authority." Daphna Golan, a researcher at Hebrew University's Minerva Center for Human Rights, argued that it is in Israel's interest to see the Palestinian economy improve. "If we want a normal future here," she said, "we don't want neighbors who are hungry."

Similarly, the conservative New York Jewish Week editorial on Friday called on American lawmakers "to work actively and quickly with the administration to find ways to strengthen Abbas and avert even more of a humanitarian disaster in Gaza and the West Bank without boosting those who would misuse it. The goal of helping Abbas and the Palestinian people remains an important one for U.S. and Israeli interests. It should not be cast aside out of a desire to punish them for their bad choices, or delayed because nobody wants to expend the energy to construct effective, genuinely transparent aid programs. New aid is not a reward to the Palestinians; it is a necessary part of the effort to keep a bad situation from becoming worse. Much worse." (AP, 3/7/07; Israel Radio, 3/7; Reuters; 3/7; Financial Times, 3/7/07; Christian Science Monitor, 3/7/07; NY Jewish Week, 3/9/07)

BUT DON'T TAKE A SLICE OF MY PIE: In an interview published by Newsweek last week, former Palestinian Finance Minister Salam Fayyad - who is also expected to return to the post in a national unity government - acknowledged the reversal under the Hamas government of many of the reforms he implemented after Yasser Arafat's death: "the state of public finance has suffered and suffered badly. There has been a reversal of many areas of reform. Transparency-there's been a major decline there. Extra-budgetary spending re-emerged. Getting a handle on what's been going on becomes more difficult. It's the job of the treasurer to know what's going on. None of this has happened. We need to fix the system in a hurry. We need to reconstitute a single treasury account-an address where all the money comes. I'll never say: 'It doesn't matter how we get money, as long as we get it.' The Ministry of Finance should be the financial center."

Fayyad noted that while the Temporary International Mechanism (TIM) set up by the Quartet was intended to "prevent a humanitarian disaster" and that "it prevented a total calamity," the TIM undermined transparency. "It's like any other attempt to bypass the Minister of Finance," he said, "the Ministry of Finance has to be the address-on the receipt side and on the expenditure side. In the absence of that, no one is in control. There's no central authority."

The Palestinian tax funds held by Israel, Fayyad said, represent "a very important source of revenue for us. It makes up two-thirds of our revenue collection.... You can compensate for the loss of that money, but only for a while. This is not something we can do forever. On our own, we bring in $15 to 20 million per month-compared to a need of $160 million per month. Survival depends on how successful we are in bridging the gap. Clearly, you can't go long with 10 percent of what you need. That's all we have control over-just 10 percent of our need. I'm a realist, and one cannot look at that as a sustainable situation."

Fayyad also spoke about why he is willing to work with Hamas now, after refusing to stay in the Finance Ministry when Hamas took over: "A year in office humbles you [Hamas.] Being in government is not an easy thing under the best of circumstances. Anyone who would approach this with an excessive dose of confidence is foolhardy. That's one factor. Also, now I think there's a better understanding of what's required to make this happen. There was complete lawlessness, internecine fighting, sliding closer to civil war-this is something I don't take lightly. What's different this time is [the] Mecca [agreement on forming a national unity government]." He also rejected the need for the Palestinians to renounce violence and recognize Israel, saying that this was done by the PLO - "the sole representative of the Palestinian people" - in 1993 and that "no government has the power to revoke that.." He added, "you do not keep on validating something that has already been validated. If you keep on validating it, it tends to undermine the validity of what you're trying to validate." (Newsweek, 3/5/07)

THE TERMINATOR: Elbit Systems - an Israeli defense firm - unveiled a portable robot capable of entering combat zones alone and shooting bursts of automatic gunfire or throwing a variety of grenades. The small robot - called Viper - weighs roughly 12 kilograms and is 36 centimeters long, 36 centimeters wide, and 22 centimeters high. It is operated either by remote control or it can run a program entered in advance. In the future, the robot will be able to make decisions for itself regarding if and when to fire weapons of various kinds.

The robot is intended to be carried in a special backpack by infantry units. When necessary - for instance to scope out a building suspected of housing enemy units, the soldier will be able to low it to the ground and controls it from a distance. Israel reportedly plans to deploy Viper among its units after field tests. (Yedioth Ahronoth, 3/8/07; Reuters, 3/8/07)

REMEMBERING THE SASSON REPORT: This week marks two years since the official Israeli government report on settlement outposts was released. At the time, this publication reported that "Israeli attorney Talia Sasson released her report on settlements built without proper Israeli legal approval, known as outposts, and caused an earthquake in the Israeli political establishment. Based on the limited information she was able to uncover, Sasson found that there are at least 105 outposts in existence. She concluded that illegal settlements, among them enclaves built on privately owned Palestinian land, are to be dismantled. Further, she said that curbs should be placed on the operations of the World Zionist Organization's (WZO) Settlement Department, which was involved in the construction of the outposts, and that increased supervision should be placed on the department's activities in the occupied territories. The Israeli cabinet approved the report's recommendations yesterday and set up a ministerial committee to deliver a detailed proposal for action within 90 days. The decision commits the government to evacuating just 24 outposts established since March 2001 (as required by the Road Map), even though Sasson reported a higher overall number and Peace Now has put the number of outposts built since March 2001 at about 50." Would you believe that the ministerial committee is more than 600 days late - and counting - in meeting this 90 day deadline? (Middle East Peace Report, 3/14/05)