NORWAY NORMALIZING ECONOMIC RELATIONSHIP WITH

UNCLAS OSLO 000362

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EFIN IS KPAL PINS PREL ISPA NO
SUBJECT: NORWAY NORMALIZING ECONOMIC RELATIONSHIP WITH
PALESTINIANS



1. (U) Summary: Palestinian Finance Minister Fayyad's April
12 visit to Oslo highlighted the economic aspect of Norway's
March 17th decision to normalize relations with the
Palestinian National Unity Government (NUG). FM Stoere
stated that Norway is ready to resume direct, broad budgetary
support to the NUG when the time is right. In addition,
Norway will now resume direct and specific assistance to
three ministries, Culture, Education and Planning. Stoere
also stated that he expected the NUG to recognize Israel,
address security concerns and contribute to the release of
Cpl. Shalit and BBC journalist Alan Johnston. End Summary


2. (SBU) Fayyad visited Norway after meetings in Brussels and
before meetings in Washington. His conversations with the
Norwegians focused on the technical details of how to resume
Norwegian direct budget support for the Palestinian
government and how to improve donor countries relationship
with the NUG. Norway called upon donor countries to think
constructively on the changed political reality which the NUG
represents. MFA officials told emboff that once banking
restrictions are resolved and the Fayyad is able to establish
a single treasury account with appropriate accounting
standards Norway will resume direct budget support for the
NUG, as they did in the past with the Palestinian Authority.
The exact amount of this budgetary assistance has not yet
been determined but is expected to be similar to 2005 levels,
100 million kroner (17 million dollars). Total Norwegian
assistance to Palestine in 2007 is expected to be
approximately 650 million kroner (110 million dollars). The
resumption of direct assistance to the Culture, Education and
Planning Ministries is also a return to previous methods of
operation. Norwegian development assistance had not
completely stopped but had instead been funneled through
contractors or directly to the schools, museums, etc
themselves. The amount of this assistance is not large but
it is a symbolic step as it directly supplies money to
Hamas-controlled ministries. Norway also announced that it
will donate 75 million kroner (12.5 million dollars) to UN
humanitarian efforts in the Palestinian territories.


3. (U) Palestinians are the largest recipients of Norwegian
assistance and Norway is eager to resolve the international
banking restrictions on the NUG. Norway believes that only
through supporting the finance ministry with direct
assistance will it be possible to encourage direct, effective
and open use of assistance. Stoere's comments during the
press brief were primarily focused on economic aspects of the
normalization process with the exception of his call for the
NUG to recognize Israel, address security concerns and assist
in freeing captives.
WHITNEY