Palestinian Foreign Aid:
U.S. Foreign Aid

(FY 2013 - 2014)

Foreign Aid: Table of Contents | Aid Restrictions | Presidential Waiver

Excerpted Report:

    - Summary
    - What Does the Unity Government Mean for USAID
    - Types of Funding Programs
    - Direct Assistance to the PA
    - Security Assistance to the PA
    - US Contributions to UNRWA
    - Conclusion

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Summary

Since the establishment of limited Palestinian self-rule in the West Bank and Gaza Strip in the mid-1990s, the U.S. government has committed approximately $5 billion in bilateral assistance to the Palestinians, who are among the world’s largest per capita recipients of international foreign aid. Successive Administrations have requested aid for the Palestinians in apparent support of at least three major U.S. policy priorities of interest to Congress:

• Preventing terrorism against Israel from Hamas and other militant organizations.
• Fostering stability, prosperity, and self-governance in the West Bank that inclines Palestinians toward peaceful coexistence with Israel and a “two-state solution.”
• Meeting humanitarian needs

Between June 2007 and June 2014, these U.S. policy priorities crystallized around the factional and geographical split between the Fatah-led Palestinian Authority (PA) in the West Bank and Hamas in the Gaza Strip. The formation of a PA government in June 2014 pursuant to a FatahHamas agreement has raised a number of questions regarding the implications for Palestinian unity, prospects for Israeli-Palestinian peace and security, and U.S. aid. The Obama Administration has stated its intent to continue financial assistance to the PA and to carefully monitor the new government’s composition and actions, while several Members of Congress have voiced skepticism and are considering changing conditions under which aid can flow to the PA.

From FY2008 to the present, annual Economic Support Fund (ESF) assistance to the West Bank and Gaza Strip has averaged around $400 million, with that amount divided between U.S. Agency for International Development (USAID)-administered project assistance (through grants to contracting organizations) and direct budgetary assistance to the Palestinian Authority (PA). Annual International Narcotics Control and Law Enforcement (INCLE) nonlethal assistance for PA security forces and the criminal justice sector in the West Bank has averaged around $100 million. In line with Obama Administration requests, funding levels declined slightly in FY2013, with a new baseline of overall annual ESF assistance of $370 million, and a new baseline of annual INCLE assistance of $70 million.

Because of congressional concerns that, among other things, U.S. aid to the Palestinians might be diverted to Palestinian terrorist groups, the aid is subject to a host of vetting and oversight requirements and legislative restrictions. Additionally, since FY2011, Congress has taken various forms of action in response to Palestinian initiatives in the United Nations and other international forums aimed at increasing international recognition of Palestinian statehood outside of negotiations with Israel. Additionally, the United States is the largest single-state donor to the U.N. Relief and Works Agency for Palestine Refugees in the Near East (UNRWA).

U.S. assistance to the Palestinians is given alongside assistance from other international donors, and U.S. policy makers routinely call for greater or more timely assistance from Arab governments in line with pledges those governments make. The PA remains dependent on external donor assistance to meet its budgetary needs-especially its large public payroll-and it also seeks foreign investment to jumpstart its private sector. Even if the immediate objectives of U.S. assistance programs for the Palestinians are met, the long-term utility of U.S. aid in encouraging regional stability and Palestinian economic and political self-sufficiency might depend to some extent on progress toward a political solution that addresses Palestinian national aspirations and Israeli security demands.

U.S. Bilateral Assistance to the Palestinians, FY2008-FY2015
(regular and supplemental appropriations; current year $ in millions)

Account	FY2008	FY2009	FY2010	FY2011	FY2012	FY2013	FY2014	FY2015
ESF	389.5	776.0	400.4	395.7	395.7	356.7	272.0	370.0
P.L. 480 (Food Aid)	-	20.715	-	-	-	-	-	-
INCLE**	25.0	184.0	100.0	150.0	100.0	70.0	70.0	70.0
Total	414.5	960.0	500.4	545.7	495.7	437.2	440.0	441.0

Table Sources: U.S. State Department, USAID.
Notes: All amounts are approximate; for purposes of this table and this report, “bilateral assistance” does not include U.S. contributions to UNRWA or other international organizations from the Migration/Refugee Assistance (MRA) or Emergency Refugee and Migration Assistance (ERMA) accounts, regardless of how the term is defined in legislation.
a. ESF stands for Economic Support Fund
b. INCLE stands for International Narcotics Control and Law Enforcement. INCLE figures do not include $86.362 million of FY2006 ESF funds reprogrammed into the INCLE account by President Bush in January 2007.

What Does the Fatah-Hamas Unity Government Mean for USAID

In June 2014, Abbas swore in a new PA caretaker government with nominal authority over PA-controlled areas in both the West Bank and Gaza, in accordance with an April 2014 Fatah-Hamas agreement. At the same time, Hamas’s de facto ministers in Gaza left their posts. The new government does not include any ministers from Hamas and has publicly stated commitments to nonviolent coexistence with Israel and to upholding formal obligations reflected in past Israeli-Palestinian agreements. In the aftermath of the alleged murder of three Israeli teenagers by two West Bank Palestinians with apparent Hamas ties, as of early July 2014, Israel was reportedly pressing Mahmoud Abbas to dissolve the Hamas-approved PA government. If Abbas elects to continue the government’s tenure, the following questions appear to have relevance to the current situation:

• To what extent, if at all, can the new government practically consolidate control over Gaza, especially in relation to security enforcement, given the continued presence of militias controlled by Hamas and other armed groups?
• Can the PA find a financially and politically workable way to address the situation faced by 42,000 people in Gaza previously employed as civil servants by Hamas?
• What is the likelihood that PA presidential and parliamentary elections contemplated in the April 2014 Fatah-Hamas agreement might take place, and could they lead to a permanent end to the Palestinians’ geographical and factional split? If such elections do take place, what is their probable timing?
• As a result of the new government, to what extent, if at all, will the PA change its (1) approach to domestic political reform and economic development, (2) diplomatic approach to its disputes with Israel, and/or (3) the nature and extent of its West Bank security cooperation with Israel?

The Obama Administration has stated its intent to continue financial assistance to the PA and to carefully monitor the new government’s composition and actions. Several Members of Congress have expressed skepticism about providing U.S. assistance to any PA government approved by Hamas, and some have proposed legislation that would change the conditions on aid to such a government (see “Conditions on Funding Hamas-Approved PA Government” below).

To date, the only distribution of FY2014 aid to the Palestinians has been $15 million in ESF project assistance through contracting organizations.11 Regarding possible future ESF distributions (for both project assistance and direct budgetary assistance to the PA) in FY2014, according to July 3, 2014, email correspondence from a State Department official to CRS, “Given the current political context, the Department of State is working closely with the interagency and with the Hill to determine the best way forward on notification. No final decisions have been made.”

Regarding the possible effect of delays in distributing aid, a U.S. Agency for International Development (USAID) official made the following statement to CRS via email on June 23, 2014:

Several USAID programs in education, health, infrastructure, and economic growth, which contribute to continued political and economic stability in the West Bank and Gaza and the viability of a two-state solution, are currently in urgent need of funding. If funding is not received, crucial development gains may be jeopardized.

For information on possible INCLE security assistance distributions in FY2014, see “U.S. Security Assistance to the Palestinian Authority” below.

Current and Past Legislative Conditions

Current conditions regarding a “power-sharing PA government” involving Hamas are as follows. No aid is permitted for a power-sharing PA government that includes Hamas as a member, or that results from an agreement with Hamas and over which Hamas exercises “undue influence,” unless the President certifies that the PA government, including all ministers, has “publicly accepted and is complying with” the following two principles embodied in Section 620K of the Palestinian Anti-Terrorism Act of 2006 (PATA), P.L. 109-446: recognition of “the Jewish state of Israel’s right to exist” and acceptance of previous Israeli-Palestinian agreements (the “Section 620K principles”). If the PA government is “Hamas-controlled,” PATA applies additional conditions, limitations, and restrictions on aid. Under PATA, in the event that Hamas participation in a PA government precludes ministries from receiving aid, the PA president and judiciary (if not Hamas-controlled) may under certain conditions receive aid pursuant to a presidential waiver for national security purposes.

It is unclear whether the PA government established in June 2014 is either subject to the “undue influence” of Hamas or “Hamas-controlled,” thus potentially triggering the conditions on U.S. aid cited above. The Obama Administration does not appear to have made a determination that either undue influence or Hamas control applies in this case, though some Members of Congress have voiced concerns regarding the issue. Under PATA, the Palestinian Legislative Council (PLC) is considered to be part of the PA, but the legal consequences if the PLC were to reconvene with the majority Hamas won in 2006 are unclear.

Major Conditions, Limitations, and Restrictions on Aid

Annual appropriations legislation routinely contains the following conditions, limitations, and restrictions on U.S. aid to Palestinians

• Hamas and Terrorism: Aid is specifically prohibited from going to Hamas or Hamas-controlled entities, and no aid may be made available for the purpose of recognizing or otherwise honoring individuals who commit or have committed acts of terrorism. Additionally, the Secretary of State is required to take all appropriate steps to ensure that ESF assistance for the West Bank and Gaza does not support terrorism, and to terminate assistance to “any individual, entity, or educational institution which the Secretary has determined to be involved in or advocating terrorist activity.”
• Palestinian Membership in the United Nations or U.N. Specialized Agencies, and Action at the International Criminal Court (ICC): No Economic Support Fund aid is permitted to the PA if the Palestinians:
  • obtain from this point forward (the restriction does not apply to Palestinian membership in UNESCO) “the same standing as member states or full membership as a state in the United Nations or any specialized agency thereof outside an agreement negotiated between Israel and the Palestinians” or
  • initiate “an International Criminal Court judicially authorized investigation, or actively support such an investigation, that subjects Israeli nationals to an investigation for alleged crimes against Palestinians.”
• PA Personnel in Gaza: No aid is permitted for PA personnel located in Gaza. Although the PA does pay salaries to individuals located in Gaza, USAID insists that U.S. direct budgetary assistance to the PA goes toward paying the PA’s suppliers and commercial creditors.
• PLO and Palestinian Broadcasting Corporation (PBC): No aid is permitted for the PLO or for the PBC.
• Palestinian State: No funds may be provided to support a future Palestinian state unless the Secretary of State certifies that the governing entity of the state:
  • has demonstrated a firm commitment to peaceful coexistence with the State of Israel;
  • is taking appropriate measures to counter terrorism and terrorist financing in the West Bank and Gaza in cooperation with Israel and others; and
  • is working with other countries in the region to “vigorously pursue efforts to establish a just, lasting, and comprehensive peace in the Middle East that will enable Israel and an independent Palestinian state to exist within the context of full and normal relationships.”
• Vetting, Monitoring, and Evaluation: As discussed throughout this report, for U.S. aid programs for the Palestinians, annual appropriations legislation routinely requires executive branch reports and certifications, as well as internal and Government Accountability Office (GAO) audits. These requirements appear to be aimed at, among other things, preventing U.S. aid from benefitting terrorists or abetting corruption, and assessing aid programs’ effectiveness.

Direct Assistance to the Palestinian Authority (Economic Support Fund)

Budgetary assistance is a major part of the U.S. strategy to support the PA in the West Bank, although some Members of Congress have voiced expectations of better governance and a more proactive approach by the PA toward peace with Israel in return.38 According to annual foreign operations appropriations laws, congressionally approved funds for the West Bank and Gaza Strip cannot be given directly to the PA unless the President submits a waiver to Congress stating that doing so is in the interest of national security, and the Secretary of State certifies that there is a single PA treasury account, civil service roster, and payroll; and (2) “the Palestinian Authority is acting to counter incitement of violence against Israelis and is supporting activities aimed at promoting peace, coexistence, and security cooperation with Israel.”

Annual appropriations legislation also routinely places conditions on aid to any power-sharing PA government “of which Hamas is a member,” and, since FY2012, appropriations legislation has extended these conditions to any PA government that results from an agreement with Hamas over which Hamas has “undue influence.” Even after money is transferred to the PA’s treasury account, the United States retains prior approval of any transactions from that account, along with a power of audit over those funds and a three-year right of refund.

During the final year of President George W. Bush’s Administration, President Bush issued waivers providing $300 million in direct budgetary assistance to the PA. President Barack Obama has followed the precedent Bush established by authorizing a total of $898 million in direct budgetary assistance, as follows:

• In July 2009, $200 million in ESF money were transferred to the PA in the wake of a presidential waiver issued by President Obama.
• In December 2009, $75 million in budgetary assistance were provided to the PA under the July presidential waiver as an advance on FY2010 ESF funds, pursuant to a continuing resolution (later appropriated pursuant to P.L. 111-117).
• In April 2010, another $75 million in budgetary assistance from the ESF account were provided to the PA following a presidential waiver.
• In October 2010, $150 million in budgetary assistance were provided to the PA following a presidential waiver as an advance on FY2011 ESF funds, pursuant to the Continuing Appropriations Act, 2011 (P.L. 111-242).
• In September 2011, $50 million in budgetary assistance from the ESF account were provided following a presidential waiver.
• • In April 2012, the Administration notified Congress of its intention to obligate an additional $200 million in budgetary assistance from the ESF account, accompanied by a presidential waiver. However, due to delays from informal congressional holds, this amount was ultimately reprogrammed for project assistance. In February 2013, $200 million in FY2013 ESF funding were provided following a presidential waiver46 to replace the reprogrammed amount.
• Another $148 million in budgetary assistance from the ESF account were provided following a July 2013 presidential waiver.

Direct U.S. budgetary assistance to the PA goes toward paying off its commercial debt, as the following FY2013 USAID congressional notification language says:

Direct budget support will be used in the same manner as previous transfers—to service debt to commercial suppliers and commercial banks. Debt to commercial banks will be debt originally incurred for purchases from commercial suppliers. Each of the payees will have been vetted in accordance with USAID West Bank and Gaza existing procedures, as applicable, as a precondition to the transfer of funds by the PA for such payments. Funds may also be used to pay for upcoming purchases from commercial suppliers or reimbursements of recent purchases from suppliers.

U.S. Security Assistance to the Palestinian Authority

Aid from the INCLE account has been given to train, reform, advise, house, and provide nonlethal equipment for PA civil security forces in the West Bank loyal to President Abbas. This aid is aimed at countering militants from organizations such as Hamas and Palestine Islamic Jihad – Shaqaqi Faction, and establishing the rule of law for an expected Palestinian state. In recent years, some of this training and infrastructure assistance has been provided to strengthen and reform the PA criminal justice sector. Regarding FY2014 assistance, according to July 3, 2014, email correspondence from a State Department official to CRS:

We plan to notify and obligate [FY2014 INCLE] funds later this year; but the timing will depend on our assessment of the actions, policies, and composition of the interim PA government and its continued adherence to Quartet principles. The planned breakdown for FY 2014 funds includes roughly $45 million to train and equip the PA Security Forces; $13.9 million for justice, corrections, and law enforcement programs; and $4.5 million for strategic development and capacity building in the Ministry of Interior.

After Hamas forcibly took control of the Gaza Strip in June 2007, the office of the U.S. Security Coordinator (USSC) for Israel and the Palestinian Authority (a three-star U.S. general/flag officer, supported by U.S. and allied staff and military officers from the United Kingdom, Canada, and around six other countries) has worked in coordination with the State Department’s Bureau of International Narcotics and Law Enforcement Affairs (INL) to sponsor and oversee training for West Bank-based PA security forces personnel, many of whom have been newly recruited. From 2007 to 2012, nine full PA National Security Forces (NSF)50 special battalions and two Presidential Guard (PG)51 battalions—constituting more than 6,000 total personnel—received initial training at the Jordan International Police Training Center (JIPTC). Additionally, hundreds of members of the PA Civil Defense (firefighters and other emergency responders) have been trained in Amman at the Jordanian Academy of Civil Protection.

Following the completion of initial training for newly formed PA security force battalions, the USSC/INL program reportedly shifted to a less resource intensive “advise and assist” role alongside its efforts to assist the PA in improving the functioning of its criminal justice system. The self-described USSC/INL role is to help PA security forces “develop indigenous readiness, training, and logistics programs and the capability to maintain/sustain their force structure readiness and infrastructure.”

The USSC/INL security assistance program exists alongside other assistance and training programs provided to Palestinian security forces and intelligence organizations by various other countries and the European Union (EU). Some reports cite the probable existence of covert U.S. assistance programs as well. By most accounts, the PA forces receiving training have shown increased professionalism and have helped substantially improve law and order and lower the profile of terrorist organizations in West Bank cities. Israeli officials generally support the USSC/INL program, routinely citing both the PA forces’ greater effectiveness as well as increased and sustained levels of Israel-PA security cooperation in the West Bank since the program began. This cooperation, however, is vulnerable to criticism from Hamas and others seeking to undermine Mahmoud Abbas’s popular credibility as a champion of Palestinian national aspirations.

Additionally, the aspiration to coordinate international security assistance efforts and to consolidate the various PA security forces under unified civilian control that is accountable to rule of law and to human rights norms remains largely unfulfilled. PA forces have come under criticism for the political targeting of Hamas—in collaboration with Israel and the United States—through massive shutdowns and forced leadership changes to West Bank charities with alleged ties to Hamas members and through reportedly arbitrary detentions of Hamas members and supporters. Also, since 2012, some PA security personnel have reportedly been involved in criminal activity in a way that has raised questions about the sustainability of law and order in parts of the northern West Bank that have been held out as models of progress. This reportedly mainly involved personnel who had been granted amnesty from previous involvement with terrorist groups. At least one report cited unnamed Palestinian officials asserting that those arrested by the PA for criminal activity included a few personnel who belonged to battalions that had received U.S.-backed training. Some of those arrested reportedly “claimed to have been humiliated and tortured by their colleagues in the security forces and placed in cells with Hamas members against whom they had fought years earlier.”

Some Palestinians and outside observers assert that the effectiveness and credibility of PA operations are undermined by Israeli restrictions—including curfews, checkpoints, no-go zones, and limitations on international arms and equipment transfers—as well as by Israel’s own security operations in the West Bank62 and at crossings into Gaza. Israel claims that its continuing operations in the West Bank are necessary in order to reduce the threat of terrorism. It is unclear how concerns about the effectiveness of the PA security forces might evolve if protests and occasional instances of Israeli-Palestinian confrontation in the West Bank increase in frequency and intensity amid heightened tension.

How the newly formed government via Fatah-Hamas agreement may affect the activities of PA security forces in the West Bank is unclear, though it is possible that these activities will remain largely unchanged until either PA presidential and legislative elections can be held or Fatah and Hamas can agree on security coordination for both the West Bank and Gaza. The likelihood of either contingency occurring is seriously questioned by many observers.

U.S. Contributions to UNRWA

The United States is the largest single-state donor to UNRWA. According to UNRWA’s website, its mandate from the U.N. General Assembly is to “provide relief, human development and protection services to Palestine refugees and persons displaced by the 1967 hostilities in its fields of operation: Jordan, Lebanon, the Syrian Arab Republic, West Bank and the Gaza Strip.”64 “Palestine refugees” include original refugees from the 1948 Arab-Israeli war and their descendants—now comprising approximately five million Palestinians in the places listed above. U.S. contributions to UNRWA—separate from U.S. bilateral aid to the West Bank and Gaza— come from the Migration and Refugee Assistance (MRA) account and, in exceptional situations, the Emergency Refugee and Migration Assistance (ERMA) account, which are managed by the State Department’s Bureau of Population, Refugees, and Migration (PRM). Since UNRWA’s inception in 1950, the United States has provided the agency with more than $4.9 billion in contributions. Other refugees worldwide fall under the mandate of the U.N. High Commissioner for Refugees (UNHCR).

The budget for UNRWA’s core activities (general fund) for 2014 is approximately $732 million, funded mainly by Western governments, international organizations, and private donors. Core activities include providing food, shelter, education, medical care, and other humanitarian services to designated beneficiaries. In December 2013, the organization, which is primarily funded by voluntary donor contributions, projected a revenue shortfall for 2014 of $65 million. Financial difficulties and resulting employee layoffs and service reductions have at least partly contributed to protests and strikes in the West Bank and Gaza. UNRWA also creates special emergency funds for pressing humanitarian needs. U.S. contributions totaled $294.0 million for FY2013 ($135.1 million for the general fund, $158.9 million for emergency funds and additional activities). According to CRS email correspondence with PRM, $250.9 million in FY2014 contributions have been disbursed as of July 1, 2014 ($135.4 million for the general fund, $115.5 million for emergency funds and additional activities).

Historical U.S. Government Contributions to UNRWA
(in $ millions)

Until the 1990s, Arab governments refrained from contributing to UNRWA’s budget in an effort to keep the Palestinian refugee issue on the international agenda and to press Israel to accept responsibility for their plight. Since then, several Arab states have made relatively modest annual contributions toward UNRWA’s core activities. According to one UNRWA official, some Arab states, notably Saudi Arabia and Kuwait, have given “very generously to emergencies—like Syria today and Gaza and Lebanon in the past—and to special construction (housing) projects.”

In Gaza, most observers acknowledge that the role of UNRWA in providing basic services (i.e., food, health care, education) takes much of the burden off the PA and Hamas personnel who officially or unofficially hold sway in the territory in either a governing or a security capacity. As a result, some complain that this amounts to UNRWA’s enabling of the Palestinians and argue that the organization’s activities should be discontinued or scaled back. This is in addition to critics who question UNRWA’s existence because they believe it perpetuates Palestinian dependency and resentment against Israel.70 However, many others, U.S. and Israeli officials included, assert that UNRWA plays a valuable role by providing stability and serving as the eyes and ears of the international community in Gaza. They generally characterize UNRWA’s continued presence as preferable to the uncertain alternative that might emerge if UNRWA were removed from the picture,71 presumably at least partly because Hamas or other groups appear incapable of adequately addressing the needs of the refugees who comprise approximately two-thirds of Gaza’s population.

Syria’s ongoing conflict has significantly affected the more than 500,000 Palestinian refugees that were based there at the outset of the conflict in 2011. UNRWA has sought and continues to seek emergency funding to address these refugees’ needs. According to the “Syria Crisis” portal on UNRWA’s website as of July 3, 2014, 63% of these refugees have been displaced either within Syria or to neighboring countries.72 Some Palestinian refugees in Syria have been killed or injured, and some have reportedly taken part in the conflict. Much international attention has focused on the ongoing plight of Palestinian refugees in Yarmouk camp, which is located in greater Damascus.73 Future events could exacerbate or mitigate the dilemma of Palestinian refugees in Syria, with potential implications for UNRWA needs assessments.

Conclusion

Implementing U.S. bilateral assistance programs for the West Bank and Gaza and making UNRWA contributions routinely present challenges due to regional political uncertainty, ongoing Israeli-Palestinian disputes, concerns over the composition and behavior of the PA government, and concerns that aid might be diverted to Palestinian terrorist groups. Nevertheless, the PA remains dependent on external donor assistance to meet its budgetary needs—especially its large public payroll—and it also seeks foreign investment to jumpstart its private sector.

In assessing whether U.S. aid to the Palestinians has advanced U.S. interests in recent years, Congress could evaluate how successful aid has been in

• reducing the threat of terrorism;
• inclining Palestinians towards peace with Israel;
• preparing Palestinians for self-reliance in security, political, and economic matters;
• promoting regional stability; and
• meeting humanitarian needs.

Even if the immediate objectives of U.S. assistance programs for the Palestinians are met, the long-term utility of U.S. aid in encouraging regional stability and Palestinian economic and political self-sufficiency might depend to some extent on progress toward a political solution that addresses Palestinian national aspirations and Israeli security demands. Congress’s assessment of the effectiveness of past aid in the context of U.S. policy priorities might influence its deliberations over

• which aid programs to start, continue, expand, scale back, change, or end; and
• which oversight, vetting, monitoring, and evaluation requirements to apply to various aid programs.

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Sources: Zanotti, Jim. “U.S. Foreign Aid to the Palestinians,” Congressional Research Service, (July 3, 2014)