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04TELAVIV2056 2004-04-05 09:09:00 CONFIDENTIAL Embassy Tel Aviv
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This record is a partial extract of the original cable. The full text of the original cable is not available.
					  C O N F I D E N T I A L SECTION 01 OF 03 TEL AVIV 002056 



E.O. 12958: DECL: 03/30/2009

Classified By: Ambassador Daniel C. Kurtzer for reasons 1.4 (b), (d).

This is a joint message from Ambassador Kurtzer,
Consul-General Pearce and USAID Director Garber.

1. (C) Summary/Recommendations: On January 30, Chiefs of
Mission in Tel Aviv and Jerusalem and the West Bank/Gaza
USAID Mission Director decided jointly to put an eight-week
hold on four USAID projects to allow time to: 1) measure
progress in the investigation of the October, 2003 murder of
our security personnel in Gaza; 2) measure progress in
Egyptian-sponsored security planning; and 3) evaluate whether
it would be possible to manage major projects without
participation of American citizen employees or contractors.
The projects put on hold were the Gaza water carrier and
desalination plant, the Bani Naim water project in the West
Bank, and emergency road repair projects affecting mostly
Gaza. On March 26, the same group met and concluded that
virtually no progress could be reported in the murder
investigation and the Egyptian security plan has been put on
hold as the instability and insecurity in Gaza has grown in
the last eight weeks. On the third issue, it is not
desirable but it is possible to waive virtually all use of
direct hire or contractor Amcit personnel in carrying out the

2. (C) Recommendations: The Embassy, ConGen, and USAID
Mission differ on next steps, and offer three distinct

-- The Embassy, (with overall responsibility for U.S.
government activities in Gaza), believes that given the
continued lack of progress in the Gaza murder investigation,
and the continuing lack of workable security arrangements in
Gaza, the USG should suspend the Gaza water carrier and
desalination projects, as well as road repair in Gaza. While
the conditions in the West Bank are not as bad as in Gaza,
the Embassy also believes that suspension of the Bani Naim
water project will send an important signal to the
Palestinian Authority. The Embassy is deeply concerned that
to go on with business as usual will signal to Palestinians
that no cost is associated with killing Americans in Gaza.

-- The USAID Mission for the West Bank and Gaza believes
that the Bani Naim and road projects should go forward and
would have either the two water projects proceed subject to
starts and stops due to security concerns, or reprogram the
money for other uses in the West Bank/Gaza assistance effort.
The USAID mission believes other means could be used to
leverage progress on the investigation, that operations could
proceed through actively managing security concerns, and that
the greater U.S. interest is in averting a humanitarian
crisis in Gaza, which could contribute to even greater
instability. The USAID mission believes it can adequately
address the oversight issues within very severe security
constraints on travel by AMCIT direct hire or contract

-- The Consulate-General, (with overall responsibility for
Jerusalem and the West Bank as well as the policy dialogue
with the Palestinians), agrees for security reasons with
Embassy recommendation that the Gaza water and road projects
be deferred or canceled. But it concurs with USAID that the
Bani Naim water project should proceed, using local
contractors to the maximum extent possible, and subject to
ongonig monitoring of the security situation. Similarly, the
proposed West Bank road projects, on which local contractors
will do the work, should proceed. The ConGen notes that the
USG threat to suspend or cancel assistance projects in the
WB/Gaza has had virtually no demonstrable impact on the
security behavior of the PA, and questions whether actual
cancellation will provide additional leverage. If all the
projects are canceled without distinguishing among the
differing level of risk each poses, we may send not only a
signal to the PA on security, but also a signal to the
Palestinian populace that the USG does not care about its
basic humanitarian needs. It could also signal the donor
community that the USG is disengaging from assistance, which
could spark similar actions by other donors and worsen the
situation on the ground.

Given contractual decisions that must be made on the water
carrier project in the very near future, we request prompt
Washington consideration of this matter. Posts will supply
any additional inputs required.

(End Summary/Recommendations)


Security Issues


3. (C) In early December of last year, the USG put the
Palestinians on notice on the relationship between security
issues and our ability to carry out major USAID projects.
This theme has been reiterated constantly since to senior
Palestinian interlocutors. At the meeting of the Ad Hoc
Liaison Committee (for Palestinian assistance) held in Rome
on the 10th of December, NEA Assistant Secretary Burns told
the group:

I want to speak plainly about the importance the United
States attaches to investigating the murder of three of our
diplomatic colleagues in Gaza last fall. We are still
waiting for results in that investigation. Without progress,
culminating in the arrest and conviction of those
responsible, we simply cannot carry out our full range of
assistance projects for the Palestinian people. Without a
more secure working environment, moving forward with large
scale programs -- such as the long-planned Gaza water
infrastructure projects, and millions of dollars in road
repair money ready to be disbursed in the spring -- will be

Neither of the two conditions stated by A/S Burns had been
met when we reviewed them as of January 30 and neither has
been met two months later. Promises of major developments in
the investigation have been made at some junctures with no
results. A security court trial of suspects, who may or may
not have been directly involved, was scheduled and then
canceled. The investigation is further hindered by lack of
trust and coordination between the Palestinian security
services. Arafat's role has been at best unclear; at times
he has given orders to spur further action while at other
times he has reportedly viewed the investigation as a
political enticement with which to lure the USG back into a
relationship with him.

4. (C) Meanwhile the overall security environment in Gaza
has deteriorated, with the Palestinian security leaders
advising for the last three months that they are not in
control and that travel by U.S. Government personnel in Gaza
remains quite risky. The killing of Sheikh Yassin further
exacerbated the situation, with perceptions among many
Palestinians that the USG condoned the killing. At this
time, no direct hire American staff are being permitted to
travel inside Gaza, and with new threats at Erez, we have
even stopped meetings just inside the border at the Abu
Eskander guest house. USAID American citizen contractors are
sharply limiting their travel into Gaza. Even travel by
contractors could be halted if the missions in Tel Aviv or
Jerusalem decided that it was no longer sustainable in a
relatively safe manner.


The Projects and Their Oversight


5. (C) The Gaza water projects will be the largest projects
USAID has embarked on in its support for the Palestinians.
The water carrier and desalination plant in Gaza are expected
to cost about $65 million each. Given the current security
situation in Gaza, the prospect of direct-hire American staff
being allowed to travel to Gaza to exercise oversight of
these projects is very questionable. USAID Washington has
already agreed that these projects could be carried out with
a very limited number of trips by U.S. direct hire staff.
For example, perhaps only a trip by contracting officer and
engineer at the end of the water carrier project (i.e., in
2006 or 2007) to certify the project would be technically
required. Also the Gaza regional water carrier project could
be broken up into smaller pieces and involve more local
contracting. While it would be preferable to have an
American contractor providing engineering oversight on a
daily basis, particularly the desalination plant, it would be
possible, according to USAID Director, to waive such a legal
requirement should it be decided to proceed under adverse
security conditions, and to insist that the contractor retain
instead a U.S.-trained, non-American engineer. Obviously the
absence of U.S. direct hire personnel to inspect and certify
progress would not be ideal, but with a talented local staff
and a qualified construction management firm Mission is
willing to accept the risk. (USAID Mission advises that
USAID Washington is also prepared to accept the risk.)
Oversight requirement would be more easily manageable for the
Bani Naim project in the West Bank, and the roads projects
could be carried out with very limited Amcit involvement.


Policy Considerations


6. (C) A robust assistance program, combined with
diplomatic efforts to assure funding for the needs of the
Palestinians, has been a consistent element of U.S. policy.
This vector has been maintained even as the USG has assessed
that the near term chances of significant progress on the
political issues are minimal. We have strongly supported
revenue transfers by the Israelis. We have urged other
donors to address Palestinian needs, and we have done all we
can to support reformers in the PA. Thus, any decision to
defer or forego a significant element of our assistance
program would send a negative signal to the Palestinian
reformers and to the donor community. On the other hand,
moving ahead with major projects absent resolution of the
Gaza murders and a creation of a more secure environment
would send a message to the Palestinian leadership and
Palestinian terrorists that there is no cost for killing
Americans. However, we do not claim any success so far in
use of an implicit "stick" in eliciting progress in the
investigation or in prompting Palestinian security
improvements. Those PA reformers who understand the impact
of such a decision have little or no influence on security,
and those in charge of security and the investigation have
little or no appreciation for the costs of canceling the
projects. We cannot rule out, however, that a clear cut-off
of substantial programs would have a greater impact than our
warnings to this effect have had so far.




7. (C) The direct costs associated with any suspension of
the four projects are minimal. The water carrier project is
the most advanced and would require an approximately $300,000
cancellation fee and associated costs in demobilizing the
construction management firm's operations here. Such costs
must of course be weighed against the security premiums
associated with protective measures that would be required to
carry out the projects in Gaza at this time. We have not
identified any significant costs related to the deferral of
the other three projects.

8. (C) We recognize fully the humanitarian costs in not
addressing or delaying solutions to the dire water situation
in the WB/G, particularly in Gaza. However, if we cannot be
at least somewhat assured that these projects to alleviate
the water problems can be carried out in safety, we would
face both excessive construction costs and the prospect of
more costly cancellation at a later date due to security
problems. Other donors are likely to be influenced by a
suspension; some have scaled back their exposure in Gaza
already. In general, it will be more difficult to mobilize
support for Palestinian needs, a role the United States has
played for many years.


Requested Action


9. (C) We cannot take final decisions on these matters in
the field. The significant policy questions require a full
airing in Washington and we will supply further inputs and
elaborated arguments as requested for such consideration. We
would ask that such a deliberation take place as soon as
possible, given the advanced stage of the contracting process
for the Gaza Regional Water Carrier in particular and the
need to issue an RFP for Bani Naim within the next couple of
weeks, or risk losing $15 million in FY03 funds.

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