[[Jerusalem Times: Opinion]]


June 4, 2006


This week in Israel….. Behind the news with Gershon Baskin



Olmert continues making the rounds


Prime Minister Olmert is off this afternoon to meet with Egyptian President Husni Mubarak.  The Sharm el Sheikh meeting is Olmert’s opportunity to explain to the Egyptians what Olmert already explained in Washington. He will tell Mubarak that Israel is ready to open up a dialogue with Palestinian President Abbas, but only on issues concerning the Road Map.  Mubarak is well aware of the fact that Abbas has no ability to fulfill the obligations of the Road Map and therefore, he is likely to push Olmert to make it appear that Israel is coordinating the unilateral realignment plan with Abbas.


With the Palestinian National Dialogue coming to a close on Tuesday morning, after receiving an extension from Abbas, Olmert and Mubarak are aware that the Palestinian territories are nearing total chaos and perhaps civil war. The Palestinian Authority is about to pay some of the three months late salaries of some 40,000 civil servants (out of more than170,000) which will leave most of the Authority’s employees with no money whatsoever. Mubarak is likely to pressure Olmert to have Israel release some of the funds it is holding back from collected customs and VAT clearances.  Olmert’s answer to Mubarak will be plain and simple – if the Palestinians want their money, they must accept the international demands.  Israel will not compromise on this, but there is a chance that Israel will search for ways to legitimize payments to the Israeli private and governmental sector for electricity, water, fuel, hospital bills, etc.


What Olmert should about speak to the Egyptians is the expansion of the Rafah crossing into Egypt for Palestinian commercial goods. We have learned from Egyptian sources close to the decision makers in Cairo, that the Egyptians have no objection to the Palestinians using Rafah for imports and exports, making use of the Egyptians ports of Al Arish and Port Said.  If Israel agrees to this, a substitute outlet to the world would be opened for the Palestinians to use, especially during times when the Karni crossing into Israel is closed.  The Palestinians will need to develop new customs arrangements for Gaza which would move them away from the Paris protocol agreement of the customs union with Israel, which will still be relevant regarding the West Bank until the separation barrier is complete.  There will be opportunities for Egyptian, Paletsinian and perhaps international companies to take initiatives to provide shipping and forwarding services for Palestinian imports and exports through Egypt. Now that the President security force responsible to Abbas is fully in charge of the security of the Rafah crossing, both Israel and Egypt should move ahead with planning for the rapid expansion of Rafah to handle cargo as well as people.


Where is the EU?


Javier Solana, the EU’s roving Foreign Minister is expected to visit Israel and Palestine this week.  The EU is expected to present the mechanism that will enable the international community to renew its payments to the Palestinian Authority.  Arguments within the Quartet and within the EU member states has led to a delay in finalizing the mechanisms.  Some of the arguments included which of the PA employees should be paid with international funds, especially relevant to this discussion is the tens of thousands of Palestinian policemen and security forces.  Israel and the US are against having the international funds go to pay armed people who may be under the direct control of the Palestinian Authority Hamas-led Ministry if Interior.  Other arguments concern the salaries for teachers who are also employed by the Hamas-led Ministry of Education.  There have been rumors and stories in the Israeli media that the Hamas-led Ministry of Education is already changing curricula in the Palestinian schools to bring them closer to the Hamas ideology.  I have not seen or heard of any confirmation of this from any Palestinian or international sources.  Certainly, if the Hamas Minister of Education is working on changing the already problematic curricula for the worse, this will create even more problems for the Palestinian education system.


In meetings with Israeli officials Solana, like Mubarak before him, will try to pressure Israel to negotiate with Palestinian President Abbas.  The Europeans are likely to suggest that Olmert should move into permanent status negotiations.  That suggestion will not be accepted in Israel at this time. Olmert will tell Solana that there can be no negotiations with the Palestinians on anything concerning the future until it is clear who is in control in the present.


Olmert will present the basic lines of the realignment plan and request EU support.  Solana will undoubtedly state that the EU cannot accept a plan that seeks to annex, unilaterally, parts of the occupied West Bank. Solana will tell Olmert that the plan, without engaging Abbas, will strengthen Hamas.  At the same time, the EU cannot oppose any Israeli steps that bring about the withdrawal and removal of settlements. Both Olmert and Solana will get less than what they want from the meetings between them.


Coalition ailments


The Israeli coalition is looking very sick these days and it is not clear where the medication to cure the illness will come from.  Defense Minister Peretz is feeling pains of being kept out of key decisions taken by the Prime Minister and the Finance Minister.  He was taken by surprise with demands of huge cuts from the defense budget without being consulted. In the end the Government passed the 2006 budget but the Labour ministers, backing Peretz all abstained in the vote. Peretz’s problem is that for years he has been saying that the Defense budget should be cut to pay for social problems, now he is facing the generals who strongly oppose the cuts.


A new coalition of rebels is being organized within the Labour party against Peretz.  The rebels include Avishay Braverman, Ami Ayalon, Danny Yatom, Matan Vilnai, and Collette Avital.  Not surprising, all of these MK’s did not get ministerial positions and although their line of opposition is being painted in ideological terms, one cannot escape the feeling that if there were Ministers, their opposition would not be so sharp or would not be voiced at all.  Peretz is in trouble and it is not yet clear how he will deal with the rebellion.  The people working against him are formidable politicians and military people with a lot of experience.  The Labour party is famous for devouring its leaders and this seems to be only the first course.  More is yet to come.



Dirty tricks in the Foreign Ministry


It has been reported that Tzipi Livni, the Minister of Foreign Affairs has been holding up new appointments of diplomats in various embassies around the world.  Now it seems that the reason why everything is frozen is that the State Comptrollers Office is about to publish a report indicating improper and perhaps illegal appointments made by former Foreign Minister from the Likud Silvan Shalom. Once that report is published, Likud leader Bibi Netanyahu will have something real to celebrate.  Shalom is busy challenging Bibi for the leadership of the Likud, backed by others who would like to hold Bibi personally responsible for Likud’s failure in the elections.  If Shalom is incriminated in unfit behavior of a public servant, Bibi, who has been presenting himself as Mr. Clean, will have an easy road ahead of him in keeping the number 1 slot in the Likud.  Bibi indicated recently, that as Finance Minister, an attempt to bribe him was conducted by someone in the private sector.  Bibi refused to divulge the details, which in itself should be considered a criminal act. If, as Ministry of Finance, he was offered a bribe, why did he keep that information to himself and not go to the police?


No banks, no money, no economy


Several weeks ago Israel banking giant Bank Hapoalim notified the Palestinian banks with which it has a correspondence agreement that in the coming weeks those agreements will be unilaterally cancelled.  Bank Discount was quick to follow and it seems that all Israeli banks will soon cease their business with the Palestinian banks.  Palestinian banks have been dependent on Israeli banks for check clearances and for letters of credit and other services that banks provide for commerce.  As more than 80% of the Palestinian’s commerce is with Israel, the banks play a crucial role in enabling the Palestinian economy to function.  The Bank of Israel’s Governor, a former high ranking official in the IMF, Professor Stanley Fisher, has been working behind the scenes together with the Governor of the Palestinian Monetary Authority, Dr. George Abed, to find a solution to the crisis.  It appears that the Israeli banks have acted in response to their careful analysis of US banking laws on money laundering for terrorism.  The Israeli banks do not want to take any risks on transferring funds which may end up in accounts of terrorists of terror organizations.  For the Palestinians, this creates a devastating situation.  The economy in the 21st century cannot work without banks.  There is already a shortage on Israeli cash currency throughout the territories.  It is very unlikely that the solution can be found by using Jordanian banks, as they will be equally as cautious as the Israeli banks.  The only solution can be found in devising steps that would enable the Israeli banks to continue to work with the Palestinian banks.  The Government of Israel must step in to provide assurances to the Israeli banks for protection vis-à-vis the US Government and banks on this issue.  Israel is still the legal occupying power over the territories, and a banking crisis like the one that is impending is too dangerous and could bring about the total collapse of the Palestinian economy.  It should not be allowed to reach that far.


 Gershon Baskin is the Co-CEO of IPCRI, the Israel/Palestine Center for Research and Information  www.ipcri.org