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Paying for Terrorism

by Rachel Ehrenfeld


October 23, 2002

Yasser Arafat's Palestinian Authority has systemically diverted funds donated for the development of the Palestinian state to fund terrorism. "Where is the Money Going?" an independent study by the New York-based Center for the Study of Corruption and the Rule of Law, to be released in Brussels today by B'nai Brith Europe, documents how this diversion works.

Since the signing of the Oslo Accords in 1993, the international community has donated approximately $5 billion to the Palestinian Authority. The European Union alone has donated approximately euro1.4 billion during that time, including grants to United Nations Relief and Work Agency. Since the start of the Palestinian Authority's campaign of violence against Israel in September 2000, the EU has transferred at least euro330 million to the Palestinian territories.

The ways in which the EU aid was disbursed by the PA is critical. The EU insists that its aid is subject to extremely stringent conditions. On June 19, External Relations Commissioner Chris Patten told the European Parliament Foreign Affairs Committee that he takes "any allegation regarding misuse of funds extremely seriously." Mr. Patten also maintained that "EU assistance has clear conditions attached to it and is closely monitored. In order to avoid any risk of possible misuse the monthly payments are monitored by the IMF at the Commission's request."

That last part at least has been thrown into doubt by a representative of the International Monetary Fund -- upon whom the EU relies to monitor the aid it gives and who stated categorically on April 8, at an IMF staff meeting, "The IMF does not monitor foreign assistance to the Palestinian Authority. It simply provides the EU with information about broad developments related to its budget. It does not monitor or control every item in the budget."

As the report we're releasing today, and which I authored, makes clear, PA documents themselves make clear that diversion takes place. Specifically, on Sept. 19, 2001 Arafat approved the payment of $600 to known terrorists, such as Ziad Muhammad Da'as, who commanded the Jan. 18 murderous attack during the Bat-Mitzvah party in Hadera. Another $2,500 was allocated to Hussein Al-Sheikh, a senior Fatah official in the West Bank to pay three Fatah/Tanzim members also involved in the Hadera murders.

Another PA document shows Arafat's comments on the margins of a Nov. 7 PA request allocating $350 dollars each to 24 Fatah members, including Atef Abayat, who headed the main terrorist cell in the Bethlehem area. Not only did Arafat fund Abayat's terrorism, but following his death, Arafat authorized a payment of $800 to his family.

Overall, the report shows there's little reason to believe that Arafat would have changed his position on monitoring from the one he set out in 1994. "I refused and I will never accept!" Arafat said then of conditions imposed for economic aid. "I completely refuse any controls by anybody on the Palestinian Autonomy, except the Palestinians themselves. We didn't finish military occupation to get economic occupation."

Since April 2001, the Arab states have been transferring $45 million a month to the PA, raising their contribution to $55 million per month in April 2002. The EU contribution seems paltry by comparison, but it is still hefty at euro10 million a month since June 2001 to cover PA salary expenses.

The PA gets around regulations by maintaining a double reporting system for its salaries. It also performs exchange rate fraud and keeps the difference. Even when EU money does go directly to pay for PA salaries, the PA deducts a "Fatah membership fee" of between 1.5% and 2% of salaries paid to its security forces. Let's not forget that the al Aqsa Martyrs Brigades and Tanzim are part of Fatah. The PA recruits and employs Fatah activists, including al Aqsa Martyrs Brigades and Tanzim members.

The EU denies especially this last part, claiming "there is no evidence that any person involved in terror attacks has actually been recruited into the PA security services." Yet, documents from the PA itself show that it pays $640,000 to $1 million per month in salaries to Fatah terrorists.

The PA documents identify some of them by name. There is a Jan. 20 letter by Marwan Barghouti, the former head of Fatah/Tanzim, and an April 5, 2001 letter by Fa'ak Kana'an, Head of Fatah in Tulkarm, requesting that Arafat approve putting Fatah activists and other persons known to be involved in terrorism on the PA security apparatus payroll, and to reward them for their attacks on Israelis. These letters are addressed to Arafat, and include his approval and his comments in his own handwriting.

Despite all the evidence, the EU seems to argue that it will only accept that euros fund terrorism if there are mechanisms to identify how each individual euro is spent. But money is fungible, and since the EU gave direct funding toward PA salaries, the EU is responsible for the money that the PA allocated to fund terrorism.

In light of this overwhelming evidence, there is currently an initiative in the European Parliament to form a committee of inquiry into EU aid to the PA. The proposal has not received enough signatures to go into effect. Only time will tell if the European Parliament as a whole will acknowledge the strong evidence of serious violations of EU law and misuse of European tax payers' money.

Ms. Ehrenfeld is the director of the New York-based Center for the Study of Corruption and the Rule of Law.


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