WJC ANALYSIS – The Palestinian financial crisis

The Muslim Brotherhood and Qatar are backing Fatah and putting pressure on Hamas in Gaza to reconcile and move away from Iran.

By Pinhas Inbari

The community of donors to the Palestinian Authority met in Brussels over the weekend. Both the government in Ramallah, sponsored by the donors, and the Hamas government in Gaza are in dire financial straits and progressively more dependent on foreign aid and susceptible to political pressure. In Ramallah, Prime Minister Salam Fayyad is unable to put together a budget that would pay for Palestinian salaries. In Gaza, Hamas’ government has sunk into even deeper trouble. It is unable to provide for the steady flow of electricity, gasoline, or home cooking gas. To make matters worse, a major water supply crisis looms on the horizon.

The donor community is dissatisfied with Ramallah’s spending, dedicated to challenging Israel instead of pursuing negotiations. The donors are under the impression that the pressure they try to exact on the PLO results only in lip service regarding a return to the negotiating table. The PLO, however, keeps insisting on a set of pre-conditions to negotiations with Israel, which include an absolute halt to settlement building, the recognition of the 1967 lines as the borders of a future Palestinian state, and the release of significantly more Fatah prisoners than were released in exchange for the liberation of Gilad Shalit.

The International Quartet has offered Ramallah a goodwill package that includes the spread of Ramallah’s rule into Areas B and C, the release of old Fatah prisoners, the revision of the economic agreements between Israel and the PLO, etc. This gesture, however, falls far short of minimal PLO expectations which, when met, would induce it to revoke its unilateral bid for statehood at the United Nations.

The donor community is unlikely to turn its demands into an ultimatum and will continue subsidizing the Palestinian Authority. In fact, the donors have decided to grant the PA a billion-dollar aid package, which Prime Minister Fayyad has asked to be transferred immediately in order to cover Ramallah’s debts. However, despite the West’s clear commitment to support the PA financially, the Palestinians are still concerned about their economic future due to the indifference of the Arab states to their fate.

While Ramallah is under pressure from the West, Hamas is besieged by its Arab brethren.

In order to understand the nature of the pressure inflicted on Hamas, one needs to understand the internal struggle between Hamas’ Diaspora leadership headed by Khaled Mashal and Hamas’ leadership in Gaza under Ismail Haniyeh. Hamas’ supporters, Egypt and Qatar, are putting pressure on the leadership in Gaza in order to prop up Mashal’s status within the organization and marginalize Haniyeh. While Hamas’ Diaspora leadership under Mashal inches closer to the Sunni Arabs and Turkey, its leadership in Gaza has sought the patronage of Iran.

The split has brought the Gazan leadership into direct, though tacit, confrontation with the military leadership in Egypt, i.e. the Supreme Council of the Armed Forces. In addition, the Muslim Brotherhood, which is set to take over Egypt, is fully on Khaled Mashal’s side and is negotiating with him to join the global Muslim Brotherhood Shura.

Gaza’s leadership is unequivocally against this initiative because it believes that entering the framework of the global Muslim Brotherhood would put an end to Gaza’s independence and force its government to accept the decisions of foreign powers. Notably, over the weekend, Hamas’ Gazan leadership began hinting at an ‘Egyptian plot’ aimed to topple it. Additionally, the leadership blamed Ramallah for belonging to this conspiracy – a charge that triggered an exchange of accusations between Ramallah and Gaza and ended any prospects of reconciliation.

The advent of the Arab Spring created a big hole in Hamas’ budget. The organization lost a steady monthly support of US$ 80 million to its civil government from both the deposed Libyan despot Muammar Gaddafi and from Iran. The latter, however, may resume a transfer of limited funds to Gaza further to Mahmoud al-Zahar and Haniyeh’s recent visits to Tehran. According to sources in Ramallah, the Iranians will likely condition the resumption of their support on the opening of a hospital in Gaza that will bear the name of Ayatollah Ruhollah Khomeini on Hamas’ refraining from obstructing the conversion of Muslims from Sunni to Shia.

For its part, Qatar, which has become Mashal’s main supporter, has told the Gazan leadership that it is ready to pay the lost budget only if Gaza signs on to the reconciliation agreement with Fatah.

It is unlikely that Hamas’ leadership in Gaza will abandon its radical positions. According to Egyptian media, the leadership is plotting a major incursion into Sinai in order to export the crisis to its neighbor similar to the way it tried to force a solution to the Rafah crossing problem during President Mubarak’s rule.

When Mubarak refused to let Hamas man the Palestinian side of the Rafah crossing, it entered Sinai. Egypt responded by building a wall along the border and agreed to open the crossing only on sporadic occasions based on humanitarian need. With a similar problem now looming between the new government in Egypt and the old hands in Hamas, and with the persistence of the economic woes in Gaza, it is possible that its citizens will heed the example of their neighbors and demand their own Arab Spring.