Palestine’s trade links in the US in jeopardy

Palestinian Authority to struggle if US ceases funding, says Palestinian Monetary Authority Governor Jihad al-Wazir

For several months, measures to reduce aid to the Palestinian Authority have been on the minds of many lawmakers in the United States. In August, the measures were actually implemented, effectively cutting off roughly $200m in aid to the PA. In addition, measures were also put in place to freeze the distribution of a further $200m. While the attempt had been dismissed as political posturing on the part of a number of lawmakers under the guise of balancing the US budget, there was a general feeling that enough opposition to any cuts existed in Congress and the measure would be defeated; unfortunately, that was not the case.

Prior to the freeze, Palestinian Monetary Authority Governor Jihad al-Wazir commented on what the action would mean for the financial stability of the PA. “It would have a major impact on the economic situation in the West Bank, if the you lose $500m [in US aid] from financial support for development in the West Bank… really, the risk of a PA collapse is very real under the financial strain, without US assistance, without donor assistance in general.”

There has been speculation that the underlying reason for the measure was the intention of PA president Mahmoud Abbas to ask the United Nations to recognise Palestine as a state, sometime in September. The cut off of the funds came before the end of the governmental fiscal year, which was on 30th September and would also affect the potential for any funds to be disbursed during the upcoming fiscal year.

The response to the measure was swift, with a statement issued by the PA’s spokesperson, Ghassan Khatib. “It is another kind of collective punishment which is going to harm the needs of the public without making any positive contribution,” stated Khatib. “It is ironic to be punished for going to the United Nations”.

While the measure did not have the backing of many members of Congress, the process to overcome the freeze took time. Attempts by President Obama to work with Congress to lift the freeze were partially successful on November 7, when a decision was made to release $200m that had been set-aside as security funds for the Palestinian Authority. Still to be settled is the additional support, which is earmarked as economic funds and is still considered frozen at the present time.

Whether the remaining funds will be released is still a matter for debate. Regardless of the outcome, there is no doubt that the freezing of the aid has done nothing to enhance the image of the United States among other world powers. Approval of unilateral recognition of the PA by the UN also triggered a reduction in financial support by the US to UNESCO, owing to a 1994 law that prohibits the country from providing funds to any United Nations organisation that supports a unilateral recognition of statehood in Palestine. Depending on how lawmakers in the US move to deal with the new circumstances, the potential for economic collapse remains a real possibility in the PA, along with further damage to the international reputation of the United States.