TEMPORARY INTERNATIONAL MECHANISM: FIRST

C O N F I D E N T I A L JERUSALEM 004031

SIPDIS

NOFORN
SIPDIS

NEA FOR FRONT OFFICE; NEA/IPA FOR WILLIAMS/MAHER/STEINGER;
NSC FOR ABRAMS/DORAN/WATERS; TREASURY FOR
SZUBIN/LOEFFLER/NUGENT/HIRSON; BRUSSELS FOR LERNER; PLEASE
PASS TO USAID FOR KUNDER/MCCLOUD/BORODIN

E.O. 12958: DECL: 09/06/2016
TAGS: EFIN EAID KWBG
SUBJECT: TEMPORARY INTERNATIONAL MECHANISM: FIRST
CONSULTATIVE GROUP REVIEW HELD

REF: A. STATE 144230

B. JERUSALEM 3933

Classified By: Consul General Jake Walles, Reasons 1.4 (b) and (d).


1. (C) Summary: The first meeting of the Temporary
International Mechanism (TIM) Consultative Group, September
1, reviewed implementation progress to date. Both Windows II
(provision of fuel to health, water, and sanitation sectors
in Gaza) and III (allowances) have been implemented fully by
the TIM's European Management Unit. Under Window I, the
World Bank has received donor funding for its Emergency
Services Support Program (ESSP) but has not yet signed a
grant agreement with the PA Presidency or begun disbursement.
EconChief presented USG concerns about the extension of the
ESSP beyond the Quartet-approved health sector pilot project
and the TIM payment of allowances based on PA employment and
urged the adoption of a broad needs-based approach. European
donors expressed support for the TIM and for its expansion
beyond its initial three-month mandate. The European
Commission chair of the meeting said he would brief European
Commissioner Ferrero-Waldner on the outcome of the meeting
and she, in turn, would then raise the TIM's review with
Quartet members. End summary.

Window I: ESSP
--------------


2. (C) World Bank Country Director David Craig briefed on
the ESSP. He confirmed that funding of USD 19 M had been
received from the European Commission (USD 12.58 million),
DFID (USD 5.5 million),and Austria (USD 1.2 million). Both
DFID and Austria had earmarked their contributions for the
health sector, Craig said. The World Bank anticipated the
following pledges: Spain (USD 12.58 million),Sweden (USD 6.1
million),Belgium (USD 3.2 million),and DFID (a second
payment of USD 5.5 million for water, electricity, and
sanitation). With USD 46 million already pledged or
delivered, Craig estimated that a total of USD 56 million
will be needed for a six-month budget, if water, electricity,
and sanitation are included along with non-salary
expenditures of the Ministries of Health, Education, and
Social Affairs. Germany, Norway, and Ireland are also
interested in the ESSP but have not issued firm pledges,
according to Craig. Craig said that the Bank hoped to sign a
grant agreement with the PA Office of the President by
September 10. He said that the Bank should be able to start
disbursing in September at the rate of USD 3-5 million per
month which will increase to USD 5-7 million per month by the
end of November when payments for procurements begin.

Window II: IERC
--------------


3. (C) TIM Management Unit head Hans Duynhouwer briefed that
13 million of the original 40 million euros in European
Commission funding had been disbursed (including 6 million
euros for the Gaza Power Plant before the June 28 airstrike).
He confirmed that 5.5 million liters of fuel had been
provided to 213 different points of delivery in Gaza,
including public and NGO hospitals, primary healthcare
clinics, and water and sanitation systems.

Window III: Allowances
--------------


4. (C) Duynhouwer confirmed that 11,562 health workers had
received an initial payment and would receive a second
payment, starting September 4. He described the average
payments as NIS 2000 and said that payments were based on the
following formula: a minimum payment of NIS 1400 plus 50
percent of the monthly salary above that amount. He said
each of the two disbursements to healthcare workers totaled
4.1 million euros, for a total payment of 8.2 million euros.


5. (C) On needs-based allowances, Duynhouwer said that the
TIM Management Unit had focused on finding a concept that
would not take long to implement but that was transparent,
accountable, and able to be audited. The concept involved
two groups receiving a flat-rate allowance of NIS 1500: (a)
"low income cases" of civil servants (50,000 total) and
pensioners (8,000 total) that had experienced a sudden and
sharp decrease in purchasing power and who normally received

monthly salaries/pensions totaling less than NIS 2000 and (b)
"social hardship cases" on the Ministry of Social Affairs'
list (40,000 total). Duynhouwer estimated that allowances
going to 98,000 beneficiaries, with an average family size of
six, would actually benefit 600,000 Palestinians or about 20
percent of the population. Duynhouwer said that, as of
September 1, 43,000 "low income cases" had received
allowances totaling 11.5 million euros. By September 8, he
hoped another 7,000 would receive their payment and that the
"social hardship cases" would begin to be paid. The TIM
Management Unit's objective is to complete the disbursements
before the start of Ramadan. Meeting Chair Richard Weber of
the European Commission noted that, by the end of September,
the Commission will have spent 33 million euros of the
original 40 million euros under Window III. After deducting
bank fees, he anticipated only having 5 million euros
remaining, not enough for a further round of allowances.

Comments from PA Presidency
--------------


6. (C) Khaled Zeidan, from the office of the Economic
Advisor to the PA Presidency, commented that the Presidency
hoped that disbursements from the ESSP could be accelerated,
given the emergency situation, and urged that the program be
expanded to water, electricity, and sanitation. On Window
II, Zeidan said the PA Presidency hoped that coverage could
be expanded to cover utility payments for certain groups or
geographic areas. On Window III, he said the PA Presidency
was pleased that allowances are starting to reach
beneficiaries and appealed for the Police to be treated as
civil servants and, thereby, eligible for needs-based
allowances. Richard Weber noted that it is a political
matter whether security service members would also be
considered and noted the European Commission's concerns about
funding security service members and terrorism. He said he
would raise the matter with European Commissioner
Ferrero-Waldner and that it would likely need to be discussed
at the level of the Quartet.

Reaction to USG statement
--------------


7. (C) EconChief and Acting USAID Missing Director noted USG
support of the TIM effort and commended the TIM Management
Unit's efforts to get the mechanism up and running.
EconChief outlined USG concerns about the expansion of the
ESSP beyond a health sector-only pilot project approved by
the Quartet and noted that payments in areas outside of the
Quartet-approved parameters could affect the USG's
willingness to extend the mechanism at its three-month
evaluation. On Window III, she noted that from a policy and
regulatory perspective, the U.S. government cannot support
the provision of allowances based on PA employment and urged
the adoption of a broad needs-based approach as the best way
forward for the TIM and that establishment of such a
mechanism would be a central consideration as the USG
evaluates whether to extend the TIM.


8. (C) In response, the World Bank's David Craig said he
would relay USG comments about the expansion of the ESSP
beyond the Quartet's vision to the World Bank President. He
said that the ESSP is a continuation of an earlier Bank
multi-donor trust fund program and is not specific to the
TIM. He articulated that the Bank had continued all of its
programs, post-PA government hand-over, since it had received
an OFAC general license and no donors had raised concerns
about Bank activities. Weber noted that the European
Commission had decided it could not earmark its contribution
to the ESSP since the ESSP is a multi-donor trust fund.


9. (C) In response to USG concerns on Window III, Weber
reacted sharply to the USG position that the needs-based
allowance program should be broadened. He focused on the
fact that the European Commission cannot provide allowances
to security sector employees. EconChief responded that the
USG is not advocating that security sector employees should
be targeted, rather that PA employment and salary levels
should not be used as criteria for choosing which group of
individuals to assist. Instead, the program should be
broadened and focused on the truly needy. Weber said that if
the program is expanded than security service employees would
naturally fall into the eligible beneficiary pool.


European donor comments
--------------


10. (C) Great Britain: The British Consul General
congratulated the TIM Management Unit on getting the
mechanism up and running quickly and asked at what price the
fuel was being purchased. The TIM Management Unit said that
fuel was bought at the market rate -- one euro per liter.


11. (C) Netherlands: The Dutch Representative called for a
media strategy to broadcast the international community's
support of the Palestinian people through the TIM. He also
urged renewal of the mechanism if funds are available. The
Chair noted that there were indications from Germany, France,
and Greece that a total of 30 million euros might be
forthcoming. The Dutch Representative asked about the
possibility of using frozen PA clearance revenues for the
TIM, to which Zeidan responded that the PA Presidency prefers
that the frozen PA clearance revenue be transferred to the
PA, not through the TIM.


12. (C) Sweden: The Swedish Deputy Representative asked who
would be supplying urgent pharmaceuticals if the ESSP would
not be purchasing pharmaceuticals before October. Imad Dweik
from the World Bank responded that other donors, including
USAID, were donating pharmaceuticals and that WHO is
coordinating the various donations.


13. (C) France: The French Representative announced that
France had announced in Stockholm a further contribution of
10 million euros to the TIM, bringing its total TIM pledge to
15 million euros.

Conclusions
--------------


14. (C) TIM Consultative Group meeting chair Richard Weber
of the European Commission concluded that "within the limits
of the funds, money had been used fully and well." Aside
from the articulated USG concerns (see para. 8),Weber noted
that there is overall agreement on the extension of the TIM
at least until the end of 2006. He said he planned to brief
European Commissioner Ferrero-Waldner who would then consult
with EU Foreign Ministers and then Quartet members on how to
move forward with the formal three-month review of the TIM.
WALLES