This record is a partial extract of the original cable. The full text of the original cable is not available.

271332Z Feb 06

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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