Thursday, May 04, 2006

[political-researchp] Bloglines - In New Problem for Palestinians, Banks Reject Transfers

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In New Problem for Palestinians, Banks Reject Transfers

May 4, 2006

RAMALLAH, West Bank, May 3 — As the Hamas-led government struggles to raise cash after the suspension of Western aid to the Palestinian Authority, it faces a new and unexpected obstacle: banks here are refusing to accept its money transfers from abroad.

The United States Treasury last month barred almost all financial dealings with the Palestinian Authority in response to Hamas's rise to power, under a federal law that makes it a crime to provide funds to terrorist groups.

That has rattled local banks, which are tied to the American banking system. The banks abruptly stopped handling even basic wire transfers needed for the authority to receive money donated by foreign countries.

In recent weeks Arab countries, coordinated by the Arab League in Cairo, have raised more than $70 million. But so far, Palestinian officials say, no bank has been willing to move the money to the West Bank or the Gaza Strip, wary of legal entanglements with the United States.

Ismail Haniya, the Palestinian prime minister and a leader of Hamas, said Wednesday that the government could begin paying overdue salaries, which are now two months late, if the money reached the Palestinian Authority's bank accounts.

"The problem is not with raising money," Mr. Haniya said at a news conference in Gaza City. "The problem is how to transfer this money to the Palestinians."

Mr. Haniya accused the United States of putting pressure on the banks "so that the money we have collected does not reach citizens or civil servants." Hamas says it will not bow to political pressure from Israel or the West. But without money from abroad, it is not clear how the Palestinian Authority can function.

The European Union joined the United States in suspending all financial assistance for the authority after Hamas took office in late March as a result of its decisive victory in Palestinian legislative elections. Israel has also frozen the roughly $50 million it collects in tax and customs revenues each month on behalf of the Palestinians.

Now, with the United States Treasury's action, even Arab and Muslim countries that want to assist the authority have not been able to deliver their aid.

American diplomats say the United States is not directly putting pressure on the banks. But the Treasury has publicized the government's position that Hamas is a terrorist organization and that financial transactions with the Palestinian Authority are barred. There are a few exceptions to the ban, including dealings with the Palestinian Authority president, Mahmoud Abbas, who opposes violence against Israel and supports peace talks.

"Generally speaking, if an organization or individual is facilitating direct fund-raising for Hamas, they open themselves up to action by the United States," said Molly Millerwise, a spokeswoman for the Treasury in Washington.

On Tuesday, Stuart Levey, the under secretary for terrorism and financial intelligence at the Treasury, was in Israel to meet with senior Israeli officials on how to prevent money from reaching designated terrorist groups, the United States Embassy said.

The Palestinian Authority needs at least $150 million a month just to pay salaries and run essential institutions like schools, hospitals and the police force. On its own the authority raises barely $30 million a month, and it is falling deeper into debt each day.

Since coming to power, the Hamas-dominated government has missed two paydays for the authority's 165,000 employees. Palestinian nurses and teachers, civil servants and security force officers like Muhammad Burbar, 23, are caught in the middle.

Mr. Burbar has not received his monthly $333 paycheck since February. He is out of cash, and his wife needs medical treatment. On Tuesday the couple sold a tiny gold bracelet and a pendant they bought for their daughter when she was born last year.

They received $28 from a gold shop in Ramallah.

"We didn't have any other choice," Mr. Burbar said. "I have no idea when I will get paid again, and I'm not optimistic. This could go on for another six months."

The shop owner, Khader al-Asbah, said 99 percent of his customers in the last two months sold family jewelry, traditionally held as a form of savings by Palestinian families.

Economists and aid groups say the Palestinian economy, ailing since the start of an uprising against Israel in 2000, risks a major contraction if government workers go unpaid for months.

The United States government lacks legal jurisdiction over financial transactions abroad if no American citizens or institutions are involved. But many Middle Eastern banks have branches in the United States or have business relationships with American banks to handle international transactions.

Banks here fear they could jeopardize their ties to the United States or put themselves at legal risk if they handle money for the Palestinian Authority, regardless of its origin, said George Abed, governor of the Palestinian Monetary Authority, which effectively serves as the Palestinian central bank.

The Arab Bank, based in Jordan, has held the main account for the Palestinian Authority in recent years. Officials there and at other banks have refused to discuss the issue of transactions for the authority.

But Mr. Abed acknowledged that the Palestinian government and the banks were in an extremely awkward position. "Banks, being careful as they usually are, have been telling the Palestinian Authority that they can't complete these transactions," Mr. Abed said Tuesday in an interview in Ramallah.

The Arab Bank, which has branches in the United States, has been subject to American legal action, including a lawsuit filed in Federal District Court in Brooklyn by about 50 American survivors or relatives of people killed in suicide bombings or other attacks by Hamas.

"No bank wants to risk being cut off from international transactions," Mr. Abed said. "This is oxygen for banks. If you are a bank, and you shut yourself out of the United States and Europe, what are you going to do — conduct all your transactions in rupees?"

Though the banks are wary, Hamas says it will not give in.

One option is to have the Arab League send the donated money directly into the personal bank accounts of Palestinian Authority employees, bypassing the authority. But that may be highly impractical, because money would have to be wired into 165,000 separate bank accounts.

"It is being studied, but it does not sound very feasible," Hesham Youssef, a senior Arab League official, said in a phone interview from Cairo.

The United States, the European Union and Israel have demanded that Hamas do three things before they will consider dealing with the group: recognize Israel, disavow violence and accept existing Israeli-Palestinian agreements.

Hamas has refused, instead appealing to Arab and Muslim countries to replace the lost financing.

Arab League countries recently renewed a pledge made years ago to provide the Palestinian Authority with $55 million a month, but it has regularly fallen short. Even if the league finds a way to get the money to the Palestinian Authority, it is barely one-third of what the authority needs to pay its monthly bills.


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