ISRAEL WANTS TO PREVENT HUMANITARIAN CRISIS IN PA

C O N F I D E N T I A L SECTION 01 OF 02 TEL AVIV 000814

SIPDIS

E.O. 12958: DECL: 02/22/2016
TAGS: EAID ECON PREL IS KWBG KPAL GOI EXTERNAL HUMANITARIAN AID ISRAELI PALESTINIAN AFFAIRS
SUBJECT: ISRAEL WANTS TO PREVENT HUMANITARIAN CRISIS IN PA


Classified By: DCM Gene A. Cretz for reasons 1.4 b and d.

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Summary
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1. (C) Ministry of Finance DG Yossi Bachar emphasized in a
February 23 meeting with NEA DAS Dibble that the GOI is torn
between the imperative of not dealing with a Hamas-led PA
government on the one hand and doing everything possible to
not harm the Palestinian population on the other. He said
that if the Palestinians suffer, Israelis will too, but
stressed that any steps taken with regard to humanitarian
assistance have to be closely coordinated with the
international community, especially the U.S. In his view,
one of the main problems is that the GOI does not know who
will be in the PA government and if it will even be possible
to hold talks with them. The important thing, according to
Bachar, is to figure out how to provide humanitarian help for
the Palestinian population without dealing with Hamas, and he
also agreed with DAS Dibble's emphasis on the need to keep
any aid that is provided from redounding to Hamas' credit.
Regarding the provision of gasoline supplies and health care,
Bachar said that there are legal problems in deducting
payments for them from the customs and other tax revenue that
Israel collects on the PA's behalf. Also, such deductions
would amount to the same thing as transferring money to the
PA, and the GOI would not countenance that. Deducting for
Gaza electricity and water payments, however, are
specifically permitted by the Paris Protocol, and Israel will
continue to do so. He also noted that, with elections
coming, decisions on these issues are very politically
sensitive, and that it is up to the political echelon to
decide how to proceed. End Summary

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Humanitarian Crisis Must be Prevented
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2. (C) In a February 23 meeting with NEA DAS Elizabeth
Dibble, Israel Desk Senior Economic officer Greg Logerfo, and
Economic Counselor and Deputy Counselor, Ministry of Finance
DG Yossi Bachar and Senior Advisor Rani Loebenstein said that
they agreed completely with the U.S. view that everything
possible must be done to prevent a humanitarian crisis in the
PA, while at the same time not dealing with the Hamas-led
government. Bachar emphasized that, from a practical point
of view, the GOI has no partner now in the PA, and is
therefore engaged in an internal debate on how to proceed.
The key points at issue are how to help the Palestinian
people avert a humanitarian crisis while not dealing with
Hamas, and preventing Hamas from getting the credit for any
aid that is eventually provided.

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Deduction for Gasoline Viewed as Funds Transfer to Hamas
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3. (C) Both Bachar and Loebenstein noted that if Hamas is
truly less corrupt than Fatah, given that a large percentage
of the PA's money had, in the past, been siphoned off by
corrupt officials, less money than last year's USD 1.1
billion in international aid is actually needed to keep the
PA running. Loebenstein said that the monthly cost of
spending on electricity, gasoline, and health for the PA
comes to about NIS 375 million (about USD 80 million),and
right now, it is not clear how it will be paid for. Bachar
said that the GOI could not simply take money from the
customs and other tax revenues collected by Israel on behalf
of the PA to pay a monthly bill of about NIS 300 million (USD
64 million) for fuel shipments supplied by a private Israeli
company. Firstly, there are legal problems making that
difficult to do. Taking deductions for water and electricity
is specifically allowed by the Paris Protocol, but this is
not the case with gasoline, which is sold to the PA by a
private company. Secondly, since the PA Ministry of Finance
has a monopoly on gasoline sales in the Palestinian
territories, and gets money for the sale of the product, any
deduction from Israeli-collected revenue for gasoline rather
than direct payment by the PA would be tantamount to a
transfer of funds to the Hamas-led PA -- and GOI policy
precludes that. (Note: The PA buys fuel products wholesale
from an Israeli supplier which it then distributes to private
retailers. The PA subsidizes a small portion of the sales
price, since retail prices are slightly lower in Palestinian
areas than in Israel, and does not make money off of those
sales. According to the IMF, during the first six months of
2005, the PA provided USD 40 million in subsidies for oil and
gas products. End note.) Bachar and Loebenstein both agreed
that there is a need to provide fuel to the PA, but figuring
out how to do so presents a very difficult practical problem.
Bachar stressed that final decisions on these types of
issues would be made at the political level. In addition, he
noted that now, in the run-up to the elections, every
decision would be very politically sensitive. Furthermore,
decisions related to any transfers to the Palestinians are
likely to be challenged in a variety of ways, including at
the Israeli Supreme Court. After the elections, he said that
the situation will be somewhat different, and the GOI will
likely take another look at many of the issues.
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Water, Electricity Will Not be Cut Off
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4. (C) Regarding electricity and water, Bachar agreed with
DAS Dibble that maintaining their continuous supply is a
humanitarian issue, and noted that the GOI had not cut them
off in the past, even when payment was delayed. In an off-
the-record aside, Bachar confided his personal view that he
could not conceive that a government led by Ehud Olmert would
cut off water or electricity due to lack of payment. He said
that Olmert had met with former PA Finance Minister Salam
Fayyad more than three times since he became Israel's
(Acting) Finance Minister last summer, and has a good
relationship with him. He added that he himself and his
staff had excellent relations with their previous Palestinian
counterparts, had become very friendly with many of them, and
had been able to work closely with them to solve many
difficult problems.

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Simple Mechanisms Needed for Assistance
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5. (C) Regarding health care provided by Israel to the
Palestinian population, Loebenstein elaborated on the
mechanism previously used to secure reimbursement from the PA
for costs incurred, and said that it would be possible to
work out a way to continue to provide the services, possibly
through use of a third party like the Red Cross. In response
to DAS Dibble's request to define the GOI view of what
constitutes humanitarian aid, he said that the government has
tasked a group led by FM Livni with working this out. The
results are expected to be presented to NEA A/S Welch at his
upcoming meetings in Israel. Dibble noted that salaries
constituted a large part of the expenses involved in paying
for health and education. Loebenstein said that the Saudis
or other Arabs would provide the money for salaries. Dibble
then suggested involving private NGOs in the efforts to
provide assistance and specifically mentioned UNRWA for food
assistance. Loebenstein and Bachar were open to the
suggestion, pointing out that most UNRWA money, in any case,
comes from the U.S. Loebenstein claimed, however, that
according to Israeli information, most UNRWA staff people on
the ground are affiliated in some fashion with Hamas. He
added that, regardless of the mechanism, it would not take a
lot of money to positively affect the lives of most ordinary
Palestinians. The most important thing is to establish a
simple mechanism for funneling aid to them, and especially to
make sure they know that the aid does not come from Hamas.


6. (U) DAS Dibble cleared this cable.




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