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Hamas Fights Chaos, Cash Crunch

Prepared by: Esther Pan
Updated: April 24, 2006


In a sign of the continuing strains beween President Mahmoud Abbas' Fatah party and ruling party Hamas, rival gunmen clashed at the Palestinian health ministry, leaving three wounded (BBC). Fatah and Hamas supporters also confronted each other at demonstrations in Gaza (al-Jazeera) as tension grows between the two factions. After Hamas tried to appoint militant leader Jamal Abu Samhadana as head of a new security force, Abbas blocked the decision (BBC). The two sides also offered vastly different reactions after an April 17 suicide bomb attack in Tel Aviv killed nine Israelis and wounded more than sixty (LAT). Hamas officials defended the attack, calling it "justified," while Abbas condemned it as the slaughter of innocents (CNN).

Hamas' recalcitrance in the face of international pressure to give up violence has exacted a very high toll on ordinary Palestinians. The Palestinian territories are in disarray (LAT), and the PA is experiencing a severe cash crunch after the European Union (Deutsche Presse-Agentur) and the United States cut off their aid flows. The United States is also pressuring international banks not to transfer funds from other sources to the PA (al-Jazeera). The PA government's financial straits are analyzed in this CFR Background Q&A. The more than $600 million in aid from the EU and more than $400 million from the United States made up the lion's share of the PA's operating budget. The State Department offers a breakdown of where the U.S. funds went.

Arab states have vowed to help the PA. Iran pledged $50 million (AP), and the next day Qatar did the same (Daily Star). But experts say the Arab world has been unreliable in the past about paying its pledges to the PA, and all the pledges combined will not come close to making up the shortfall in the PA budget. Beirut's Daily Star excoriates Arab tightfistedness, saying the amounts needed by the PA are "piddling in a region awash with the proceeds of sky-high oil and gas prices" and blaming the Arab states for a lack of political will to save the Palestinians.

The PA economy is also enormously dependent on Israel. Elizabeth Young of the Washington Institute for Near East Policy details how Israel's decision to withhold some $60 million per month from the PA in customs duties affects Palestinians in this policy brief.

Some commentators are saying part of the economic hardship is being caused by internal Palestinian politics, as Abbas refuses to hand over money formerly controlled by Yasir Arafat (Debkafile). Others speculate that if the economic situation continues to worsen, Abbas could dissolve parliament, raising the specter of even more instability in the PA's future.

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