It was revealed earlier this month that the Palestinian Authority has returned hundreds of millions of shekels that the Israeli government deposited into its accounts in recent months.
Israel traditionally collects tax revenues for the P.A. on Palestinian purchases, but when Israel began deducting monthly the sum of NIS 41.8 million, equivalent to the amount the P.A. pays in terrorists’ salaries and grants, the Palestinians declared they would refuse to accept any of their monthly payment. Israel’s unilateral deposit into the P.A. accounts was a response to growing concerns over the possible financial collapse of the Palestinian government.
In parallel to the P.A.’s rejection of the funds, it declared it would not cover medical costs for Palestinians sent to Israeli hospitals.
This hard P.A. line can be traced to the new P.A. prime minister, Muhammad Shtayyeh. (See “The Palestinian Authority’s New Prime Minister,” JCPA, April 16, 2019.)
Our previous report on the Shtayyeh government noted the encouragement of Hebron personnel to take a conspicuous role in the cabinet. But in the political agenda of the new government, we can discern problems with the Hebronite elements that may collide with the basic economic interests of Hebron.
Shtayyeh is the first Fatah-affiliated P.A. prime minister. He is committed to Fatah’s agenda and the decisions taken by Fatah’s supreme echelons, including the decisions to annul the Oslo Agreements and disconnect the P.A. economy from the Israeli one. In the security domain, Fatah has repeatedly called to end security coordination with the Israel Defense Forces.
Shtayyeh was among the leading Fatah figures calling for these measures, and in his inauguration interview he declared his intent to implement them “gradually.” He revealed that payments to Israeli hospitals were stopped not due to a lack of funds, but because Fatah wanted to end dependence on Israeli health facilities. He said that he had already begun talks with Jordan and Egypt on transferring Palestinian patients to those countries.
According to Ramallah sources, Shtayyeh stated he would have nothing to do with politics, and will be responsible only for the economy and services. The political agenda, he insisted, is the responsibility of the PLO.
In our previous report we pointed out that the (non-Fatah) PLO-affiliated organizations are aligned with Hamas, not Ramallah (a weak spot in Ramallah’s future political agenda). As for Shtayyeh’s economic program, it is completely politically oriented; what he means by “the economy” is its mobilization as part of the “struggle.” He defined his economic agenda as a “sumud economy”—“steadfastness economy”—and elaborated on the austerity measures he intends to implement.
For Ramallah, a city of intellectuals and service providers, this program poses no problems. Hebron, on the other hand, is a city of wealthy merchants and industrialists who work with Israel—for them, this “struggle economy” is a nonstarter.
According to Ramallah sources, the representative of this economic echelon, Khaled Asseile, has already created an axis with the P.A. Finance Minister Shukri Bishara to block this policy.
As Asseileh has many economic connections with Israel, Bishara is conducting a series of meetings with his Israeli counterpart, Finance Minister Moshe Kahlon, to solve the current problems of the P.A. economy. For example, a major achievement they have already attained is regulating payments to the Israel Electric Corporation that the Palestinian municipalities were unable to pay.
In the convoluted procedure, the P.A. does not pay for the electricity, with the payments instead coming out of the Israeli Finance Ministry. If Fatah were to compel Bishara to end his meetings with Kahlon, the P.A. would indeed find itself in a financial deadlock.
To overcome the looming crisis, P.A. Foreign Minister Riyad al-Maliki asked the Tunis Arab Summit to grant the P.A. an “economic safety net”—a steady flow of $100 million to $200 million to replace the Israeli funds.
According to our Ramallah sources, Maliki’s request was ignored. Abbas raised it again at the Arab foreign ministers’ meeting in Cairo on April 21, 2019, this time in the open, and the Arab League accepted the request—but that does not mean that they will comply.
As of today, there is no safety net to replace the Israeli payments, and the whole “economic struggle” is one large question mark.
Faced with this gloomy prospect, the PLO is preparing for its convention after Ramadan (May 5-June 4). U.S. President Donald Trump is also preparing to finally announce his “deal of the century” after Ramadan. The two events will be important milestones, but are they on the same road?
Pinhas Inbari is a veteran Arab affairs correspondent who formerly reported for Israel Radio and “Al Hamishmar” newspaper. He currently serves as an analyst for the Jerusalem Center for Public Affairs.