A Palestinian State-The Day After

Few states can claim to have failed before they are even declared, but the Palestinian Authority may be about to create one of them.
Mark Silverberg, INN

On Thursday, August 4th, Arab League foreign ministers and representatives from Jordan, Egypt, Saudi Arabia, Morocco, Lebanon and Qatar announced that they would support the plan of the Palestinian Authority (PA) to seek a seat for a Palestinian state at the UN General Assembly (UNGA).

So what kind of state exactly would the UNGA be endorsing?

The 1933 Montevideo Convention on the Rights and Duties of States defines a “state” as an entity with a permanent population; a defined territory; a government;

That state would have two incompatible presidents, two rival prime ministers pursuing incompatible policies, a constitution whose central provisions are being violated by both Hamas and the Palestinian Authority, no functioning legislature (elected on Jan. 25, 2006, for a term of four years, the Palestinian Legislative Council has enacted no laws, and has conducted no meetings since 2007), no ability to hold national elections, a population not entirely under its control, questionable borders that would involve annexing territory under the control of another state (Israel), and no clear plan to resolve any of these conflicts.

Nevertheless, assuming such a “state” is declared by the UNGA in September, serious political and economic consequences can be expected.

Political Consequences
First and foremost, the Oslo Accords would be rendered obsolete thereby ending any and all obligations Israel agreed to in their signing. This would not only terminate the basis upon which the PA itself was established and release Israel from cooperating with the Palestinians on numerous issues especially security, but such a declaration would open the door to annexation and the extension of Israeli sovereignty over several major cities and towns on the West Bank, notably Ariel, Ma’aleh Adumim and the Gush Etzion bloc.

From a security perspective, should the Accords be abrogated and Israeli security forces be withdrawn, Palestinian officials are well aware that Hamas is waiting in the wings for its opportunity to take over the West Bank, as it did in Gaza, and the Palestinians are not overly anxious to commit collective suicide through a third intifada that could quickly spiral out of control in favor of the Islamists.

Economic Concerns
Nor does the economic horizon appear to be any better. Well over two hundred NGOs in the West Bank and Gaza, and thirty per cent of the Palestinian GDP comes from foreign aid, making Palestinians the largest per capita recipients of foreign aid in the world.

According to World Bank estimates, the PA received $525M of international aid in the first half of 2010, $1.4B in 2009 and $1.8B in 2008 making foreign aid the driving force for economic growth in the Palestinian territories. These billions of dollars in foreign aid would be jeopardized should the UNGA approve a Palestinian state outside the Oslo framework.

Few states can claim to have failed before they are even declared, but the Palestinian Authority may be about to create one of them.

Part of the problem the PA faces relates to the multitude of programs and services provided by the UN Relief and Works Agency (UNRWA), the vast majority of whose funding is derived from foreign aid. UNRWA defines “refugees” much more broadly that any other global NGO. Its vast definition includes not only those Palestinians who fled their homes in 1948 – then numbering about 750,000 – but their children, grandchildren and great-grandchildren as well, who now number 4.8 million in Gaza, Jordan, Lebanon, Syria and the West Bank.

Up to this point, Palestinian leaders may have had a vested interest in continuing to perpetrate the myth of the promised Palestinian right of return to Israel, but if foreign aid to UNRWA dries up because of the UN bid, who would pay for the vast educational, social, healthcare and relief services the agency now provides to these millions of “refugees” – and at what political and economic cost?

The thought terrifies PA leaders – and for good reason. The PA has reached its borrowing limit. It carries a $585M deficit, is dependent on foreign aid to sustain its infrastructures, is the largest employer on the West Bank, and pays the salaries of approximately 150,000 civil servants and military personnel. During June and July, in a foretaste of what is to come, those salaries were cut in half and the prognosis looks even worse in the run up to September if they choose to proceed with their UN statehood initiative.

Palestinian banks and the private sector have loaned the PA more than $1B and they are loath to lend more. Some ministries have already lost electricity due to their inability to pay their bills. In July, the PA ordered a reduction in the price of bread, leading to bakery strikes, and September will bring additional bills for educational fees and school supplies. Garbage is piling up in the streets.

In a country of less than four million, the economic repercussions of a massive loss in foreign aid revenues would be staggering not to mention politically dangerous.

Objecting to any reconciliation deal between the PA and Hamas, Israel is already withholding $105M in value added taxes and customs duties on goods imported into the West Bank and Gaza Strip that enter through Israeli ports and are collected by Israel on behalf of the Palestinian Authority. Almost two-thirds of Palestinian government net income – about $1.5B per year – comes from such taxes.

The U.S. Congress is also threatening to cut off aid should the PA reconcile with Hamas and move forward on its statehood initiative. In fiscal year 2011, U.S. foreign aid to the PA reached $550M, but that aid is now in jeopardy.

On July 7th, the House passed a resolution opposing the statehood initiative by a 407-6 margin. House leaders followed up the resolution with a letter sent directly to PA President Mahmoud Abbas to “warn of the severe consequences” of continuing the UN initiative.

In addition, 87% of Palestinian exports now go to Israel, making the Palestinian economy dependent on good relations with its neighbor – a relationship that is deteriorating by the day. Over and above this, one-seventh of the total Palestinian workforce (constituting one-quarter of the total Palestinian payroll) work in Israeli settlements, which the PA has, at least for now, sought to ban.

Nor is the pending loss of Western foreign aid, the PA’s only dilemma. The PA’s chief Arab benefactors (most notably Saudi Arabia) have failed to meet their own multi-billion dollar commitments to economic aid this year. Arab donors pledged $971M to the Palestinian Authority this year, but the year is more than half over and only $330M has been delivered. While Saudi Arabia did announce a $30M donation to the PA recently, that is far cry from the billions it promised.

Compounding Palestinian fears of an economic disaster should UN statehood be declared is a recent Palestinian Media Watch report just presented to the U.S. Congress documenting that, in May 2011 alone, the PA paid just over $5M in salaries to Palestinians in Israeli jails, including thousands of convicted terrorists with Israeli blood on their hands. Last year, the U.S. provided $225M to the general Palestinian budget from which these salaries continue to be paid. As this represents a flagrant violation of U.S. anti-terrorism laws, Congress is now reviewing its options.

Israel and the United States have made it clear that unity talks with Hamas and the PA’s unilateral UN bid for statehood will have serious financial and political consequences.

As Daniel Greenfield, regular oped contributor to Arutz Sheva, writes: “The Palestinian Authority can’t pay its own bills. It can’t even fund its own army, yet insists on having one. It can’t generate its own electricity, provide its own water or even hold elections. If that’s not the definition of being unready for statehood – what is?”

The second Intifada led to one of the deepest recessions the Palestinian economy has experienced in its modern history when the GDP shrunk by almost 40 percent. They know they have much more to lose this time if they proceed with their statehood plan and if a 3rd Intifada breaks out, as is expected.

And if they don’t know it yet, they will know it soon enough.

Mark Silverberg is a foreign policy analyst for the Ariel Center for Policy Research (Israel), a Contributing Editor for Family Security Matters and the New Media Journal and a member of Hadassah’s National Academic Advisory Board. His book “The Quartermasters of Terror: Saudi Arabia and the Global Islamic Jihad” and his articles have been archived under www. marksilverberg .com and www. analyst-network .com.